J&J SNACK FOODS CORP
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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[X]
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 25, 2010 |
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ |
Commission File No. 0-14616
J & J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
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New
Jersey
(State or other jurisdiction of incorporation or organization) |
22-1935537
(I.R.S. Employer Identification No.) |
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6000
Central Highway, Pennsauken, New Jersey
(Address of principal executive offices) |
08109
(Zip Code) |
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Registrant’s telephone number, including area code: (856) 665-9533
Securities Registered Pursuant to Section 12(b) of the Act:
Securities Registered Pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common
Stock, no par value
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The NASDAQ Global Select Exchange
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Securities Registered Pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes [ ] No [X]
Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act. Yes [ ] No [X]
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 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. Yes [X] No [ ]
Indicate by check mark whether
the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes [ ] No [ ]
Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to
the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act. (Check one):
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Large accelerated
filer [ ]
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Accelerated filer
[X]
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Non-accelerated
filer [ ]
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Smaller reporting
company [ ]
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(Do not check if
a smaller reporting company)
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Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of November 26, 2010, the
latest practicable date, 18,511,537 shares of the Registrant’s common stock were issued and outstanding. The aggregate market value of shares held
by non-affiliates of the Registrant on such date was $634,133,219 based on the last sale price on March 26, 2010 of $44.32 per share. March 26, 2010
was the last business day of the registrant’s most recently completed second fiscal quarter.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the
registrant’s definitive proxy statement for its Annual Meeting of Shareholders scheduled for February 9, 2011 are incorporated by reference into
Part III of this report.
J & J SNACK FOODS CORP.
2010 FORM 10-K ANNUAL REPORT
2010 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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Page
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PART I
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Item
1
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Business
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1 | |||||||||
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Item
1A
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Risk
Factors
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6 | |||||||||
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Item
1B
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Unresolved Staff Comments
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8 | |||||||||
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Item
2
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Properties
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8 | |||||||||
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Item
3
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Legal
Proceedings
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10 | |||||||||
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Item
4
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Submission Of Matters To A Vote Of Security Holders
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10 | |||||||||
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PART II
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Item
5
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Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities
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11 | |||||||||
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Item
6
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Selected Financial Data
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12 | |||||||||
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Item
7
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Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
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13 | |||||||||
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Item
7A
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Quantitative And Qualitative Disclosures About Market Risk
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23 | |||||||||
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Item
8
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Financial Statements And Supplementary Data
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23 | |||||||||
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Item
9
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Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
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24 | |||||||||
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Item
9A
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Controls and Procedures
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24 | |||||||||
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Item
9B
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Other
Information
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25 | |||||||||
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PART III
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Item
10
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Directors, Executive Officers and Corporate Governance
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25 | |||||||||
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Item
11
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Executive Compensation
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25 | |||||||||
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Item
12
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Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters
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26 | |||||||||
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Item
13
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Certain Relationships And Related Transactions, and Director Independence
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26 | |||||||||
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Item
14
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Principal Accountant Fees and Services
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26 | |||||||||
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PART IV
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Item
15
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Exhibits, Financial Statement Schedules
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26 | |||||||||
In addition to historical
information, this document and analysis contains forward-looking statements. The forward-looking statements contained herein are subject to certain
risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Important factors
that might cause such a difference include, but are not limited to, those discussed in the “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect
management’s analysis only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to
reflect events or circumstances that arise after the date hereof.
General
J & J Snack Foods Corp. (the
“Company” or “J & J”) manufactures nutritional snack foods and distributes frozen beverages which it markets nationally to the
food service and retail supermarket industries. The Company’s principal snack food products are soft pretzels marketed primarily under the brand
name SUPERPRETZEL and frozen juice treats and desserts marketed primarily under the LUIGI’S, FRUIT-A-FREEZE, WHOLE FRUIT, ICEE, BARQ’S* and
MINUTE MAID** brand names. J & J believes it is the largest manufacturer of soft pretzels in the United States, Mexico and Canada. Other snack food
products include churros (an Hispanic pastry), funnel cake and bakery products. The Company’s principal frozen beverage products are the ICEE
brand frozen carbonated beverage and the SLUSH PUPPIE brand frozen uncarbonated beverage.
The Company’s Food Service
and Frozen Beverages sales are made primarily to food service customers including snack bar and food stand locations in leading chain, department,
discount, warehouse club and convenience stores; malls and shopping centers; fast food outlets; stadiums and sports arenas; leisure and theme parks;
movie theatres; independent retailers; and schools, colleges and other institutions. The Company’s retail supermarket customers are primarily
supermarket chains. The Company’s restaurant group sells direct to the public through its specialty snack food retail outlets, BAVARIAN PRETZEL
BAKERY. At September 25, 2010, two outlets remained open.
The Company was incorporated in
1971 under the laws of the State of New Jersey.
The Company has made acquisitions
in 2010 and in prior years as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
our consolidated financial statements and related notes thereto.
The Company operates in four
business segments: Food Service, Retail Supermarkets, The Restaurant Group and Frozen Beverages. These segments are described below.
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
detailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales is
considered to be the one and only key variable monitored by the Chief Operating Decision Makers and management when determining each segment’s and
the company’s financial condition and operating performance. 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 (see Item 7 —
Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8 — Financial Statements and Supplementary
Data for financial information about segments).
Food Service
The primary products sold by the
food service segment are soft pretzels, frozen juice treats and desserts, churros and baked goods. Our customers in the food service segment 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.
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*
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BARQ’S is a registered trademark of Barq’s Inc. |
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**
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MINUTE MAID is a registered trademark of the Coca-Cola Company |
1
Retail Supermarkets
The primary products sold to the
retail supermarket channel are soft pretzel products — including SUPERPRETZEL, frozen juice treats and desserts including LUIGI’S Real
Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE FRUIT frozen fruit bars and sorbet, ICEE Squeeze-Up Tubes, TIO PEPE’S Churros
and CALIFORNIA CHURROS. Within the retail supermarket channel, our frozen and prepackaged products are purchased by the consumer for consumption at
home.
The Restaurant Group
We sell direct to the public
through our Restaurant Group, which operates BAVARIAN PRETZEL BAKERY. At September 25, 2010, we had two retail stores.
Frozen Beverages
We sell frozen beverages to the
food service industry primarily under the names ICEE, SLUSH PUPPIE, PARROT ICE and ARCTIC BLAST in the United States, Mexico and Canada. We also
provide repair and maintenance service to customers for customers’ owned equipment.
Products
Soft Pretzels
The Company’s soft pretzels
are sold under many brand names; some of which are: SUPERPRETZEL, PRETZEL FILLERS, PRETZELFILS, GOURMET TWISTS, MR. TWISTER, SOFT PRETZEL BITES,
SOFTSTIX, SOFT PRETZEL BUNS, HOT KNOTS, DUTCH TWIST, TEXAS TWIST, SANDWICH TWIST, CINNAPRETZEL* and SERIOUSLY TWISTED!; and, to a lesser extent, under
private labels. Soft pretzels are sold in the Food Service, Retail Supermarket and The Restaurant Group segments. Soft pretzel sales amounted to 19% of
the Company’s revenue in fiscal year 2010, 20% in 2009, and 20% in 2008.
The Company’s soft pretzels
qualify under USDA regulations as the nutritional equivalent of bread for purposes of the USDA school lunch program, thereby enabling a participating
school to obtain partial reimbursement of the cost of the Company’s soft pretzels from the USDA.
The Company’s soft pretzels
are manufactured according to a proprietary formula. Soft pretzels, ranging in size from one to ten ounces in weight, are shaped and formed by the
Company’s twister machines. These soft pretzel tying machines are automated, high-speed machines for twisting dough into the traditional pretzel
shape. Additionally, we make soft pretzels which are extruded or shaped by hand. Soft pretzels, after processing, are primarily quick-frozen in either
raw or baked form and packaged for delivery.
The Company’s principal
marketing program in the Food Service segment includes supplying ovens, mobile merchandisers, display cases, warmers and similar merchandising
equipment to the retailer to prepare and promote the sale of soft pretzels. Some of this equipment is proprietary, including combination warmer and
display cases that reconstitute frozen soft pretzels while displaying them, thus eliminating the need for an oven. The Company retains ownership of the
equipment placed in customer locations, and as a result, customers are not required to make an investment in equipment.
Frozen Juice Treats and Desserts
The
Company’s frozen juice treats and desserts are marketed primarily under the LUIGI’S, FRUIT-A-FREEZE, WHOLE FRUIT, ICEE, BARQ’S and
MINUTE MAID brand names. Frozen juice treats and desserts are sold in the Food Service and Retail Supermarkets segments. Frozen juice treats and
dessert sales were 14% of the Company’s revenue in 2010, 13% in fiscal year 2009 and 13% in 2008.
The Company’s school food
service MINUTE MAID and WHOLE FRUIT frozen juice fruit bars are manufactured from an apple or pear juice base to which water, sweeteners, coloring (in
some cases) and flavorings
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*
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CINNAPRETZEL is a registered trademark of Cinnabon, Inc. |
2
are added. The juice bars contain two to three ounces of
apple or pear juice and the minimum daily requirement of vitamin C, and qualify as reimbursable items under the USDA school lunch program. The juice
bars are produced in various flavors and are packaged in a sealed push-up paper container referred to as the Milliken M-pak, which the Company believes
has certain sanitary and safety advantages.
The balance of the Company’s
frozen juice treats and desserts products are manufactured from water, sweeteners and fruit juice concentrates in various flavors and packaging
including cups, tubes, sticks, M-paks, pints and tubs. Several of the products contain ice cream and FRUIT-A-FREEZE and WHOLE FRUIT contain pieces of
fruit.
Churros
The Company’s churros are
sold primarily under the LA CHURROS, TIO PEPE’S and CALIFORNIA CHURROS brand names. Churros are sold to the Food Service and Retail Supermarkets
segments. Churro sales were 5% of the Company’s sales in fiscal year 2010, 5% in 2009 and 4% in 2008. Churros are Hispanic pastries in stick form
which the Company produces in several sizes according to a proprietary formula. The churros are deep fried, frozen and packaged. At food service
point-of-sale they are reheated and topped with a cinnamon sugar mixture. The Company also sells fruit and crème-filled churros. The Company
supplies churro merchandising equipment similar to that used for its soft pretzels.
Bakery Products
The Company’s bakery
products are marketed under the MRS. GOODCOOKIE, CAMDEN CREEK BAKERY, READI-BAKE, COUNTRY HOME, MARY B’S, DADDY RAY’S and PRETZEL COOKIE
brand names, and under private labels. Bakery products include primarily biscuits, fig and fruit bars, cookies, muffins and donuts. Bakery products are
sold to the Food Service segment. Bakery products sales amounted to 34% of the Company’s sales in fiscal year 2010, 35% in 2009 and 35% in
2008.
Frozen Beverages
The Company markets frozen
beverages primarily under the names ICEE, SLUSH PUPPIE, PARROT ICE and ARCTIC BLAST in the United States, Mexico and Canada. Additional frozen
beverages are JAVA FREEZE and CALIFORNIA NATURAL. Frozen beverages are sold in The Restaurant Group and Frozen Beverages segments.
Frozen beverage sales amounted to
18% of revenue in fiscal 2010, 17% in 2009 and 18% in 2008.
Under the Company’s
principal marketing program for frozen carbonated beverages, it installs frozen beverage dispensers for its ICEE and ARCTIC BLAST brands at customer
locations and thereafter services the machines, arranges to supply customers with ingredients required for production of the frozen beverages, and
supports customer retail sales efforts with in-store promotions and point-of-sale materials. In most cases, the Company retains ownership of its
dispensers, and as a result, customers are not required to make an investment in equipment or arrange for the ingredients and supplies necessary to
produce and market the frozen beverages. The Company also provides repair and maintenance service to customers for customers’ owned equipment and
sells equipment in its Frozen Beverages segment, revenue from which amounted to 8% of sales in 2010, 8% of sales in 2009 and 9% of the Company’s
sales in fiscal year 2008. The Company sells frozen uncarbonated beverages under the SLUSH PUPPIE and PARROT ICE brands through a distributor network
and through its own distribution network.
Each new frozen carbonated
customer location requires a frozen beverage dispenser supplied by the Company or by the customer. Company-supplied frozen carbonated dispensers are
purchased from outside vendors, built new or rebuilt by the Company.
The Company provides managed
service and/or products to approximately 75,000 Company-owned and customer-owned dispensers.
The Company has the rights to
market and distribute frozen beverages under the name ICEE to the entire continental United States (except for portions of nine states) as well as
internationally.
3
Other Products
Other products sold by the
Company include soft drinks, funnel cakes sold under the FUNNEL CAKE FACTORY brand name and smaller amounts of various other food products. These
products are sold in the Food Service, The Restaurant Group and Frozen Beverages segments.
Customers
The Company sells its products to
two principal channels: food service and retail supermarkets. The primary products sold to the food service channel are soft pretzels, frozen
beverages, frozen juice treats and desserts, churros and baked goods. The primary products sold to the retail supermarket channel are soft pretzels and
frozen juice treats and desserts. Additionally, the Company sells soft pretzels, frozen beverages and various other food products direct to the public
through its Restaurant Group, which operates BAVARIAN PRETZEL BAKERY. At September 25, 2010, we had two retail stores.
We have several large customers
that account for a significant portion of our sales. Our top ten customers accounted for 42%, 43% and 42% of our sales during fiscal years 2010, 2009
and 2008, respectively, with our largest customer accounting for 8% of our sales in 2010, 9% in 2009 and 9% in 2008. Three of the ten customers are
food distributors who sell our product to many end users. The loss of one or more of our large customers could adversely affect our results of
operations. These customers typically do not enter into long-term contracts and make purchase decisions based on a combination of price, product
quality, consumer demand and customer service performance. If our sales to one or more of these customers are reduced, this reduction may adversely
affect our business. If receivables from one or more of these customers become uncollectible, our operating income would be adversely
impacted.
The Food Service and the Frozen
Beverages segments sell primarily to food service channels. The Retail Supermarkets segment sells to the retail supermarket channel.
The Company’s customers in
the food service segment include snack bars and food stands in chain, department and mass merchandising 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, and independent retailers. Machines and machine parts are sold to other food and beverage companies. Within the food service industry,
the Company’s products are purchased by the consumer primarily for consumption at the point-of-sale.
The Company sells its products to
an estimated 85-90% of supermarkets in the United States. Products sold to retail supermarket customers are primarily soft pretzel products, including
SUPERPRETZEL, frozen juice treats and desserts including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE FRUIT
frozen fruit bars, WHOLE FRUIT Sorbet, MARY B’S biscuits and dumplings, DADDY RAY’S fig and fruit bars, ICEE Squeeze-Up Tubes and TIO
PEPE’S Churros. Within the retail supermarket industry, the Company’s frozen and prepackaged products are purchased by the consumer for
consumption at home.
Marketing and Distribution
The Company has developed a
national marketing program for its products. For Food Service and Frozen Beverages segments’ customers, this marketing program includes providing
ovens, mobile merchandisers, display cases, warmers, frozen beverage dispensers and other merchandising equipment for the individual customer’s
requirements and point-of-sale materials as well as participating in trade shows and in-store demonstrations. The Company’s ongoing advertising
and promotional campaigns for its Retail Supermarket segment’s products include trade shows, newspaper advertisements with coupons, in-store
demonstrations and consumer advertising campaigns.
The Company develops and
introduces new products on a routine basis. The Company evaluates the success of new product introductions on the basis of sales levels, which are
reviewed no less frequently than monthly by the Company’s Chief Operating Decision Makers.
The Company’s products are
sold through a network of about 200 food brokers and over 1,000 independent sales distributors and the Company’s own direct sales force. For its
snack food products, the Company maintains
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warehouse and distribution facilities in Pennsauken, Bellmawr and Bridgeport, New Jersey; Vernon (Los Angeles) and Colton, California; Scranton, Pittsburgh, Hatfield and Lancaster, Pennsylvania; Carrollton (Dallas), Texas; Atlanta, Georgia; Moscow Mills (St. Louis), Missouri; Pensacola, Florida; and Solon, Ohio. Frozen beverages are distributed from 130 Company managed warehouse and distribution facilities located in 44 states, Mexico and Canada, which allow the Company to directly service its customers in the surrounding areas. The Company’s products are shipped in refrigerated and other vehicles from the Company’s manufacturing and warehouse facilities on a fleet of Company operated tractor-trailers, trucks and vans, as well as by independent carriers.
Seasonality
The Company’s sales are
seasonal because frozen beverage sales and frozen juice treats and desserts sales are generally higher during the warmer months.
Trademarks and Patents
The Company has numerous
trademarks, the most important of which are SUPERPRETZEL, DUTCH TWIST, TEXAS TWIST, MR. TWISTER, SOFT PRETZEL BITES, SOFTSTIX, PRETZEL FILLERS and
PRETZELFILS for its pretzel products; FROSTAR, SHAPE-UPS, MAMA TISH’S, FRUIT-A-FREEZE, WHOLE FRUIT and LUIGI’S for its frozen juice treats
and desserts; TIO PEPE’S and CALIFORNIA CHURROS for its churros; ARCTIC BLAST, SLUSH PUPPIE and PARROT ICE for its frozen beverages; FUNNEL CAKE
FACTORY for its funnel cake products, and MRS. GOODCOOKIE, READI-BAKE, COUNTRY HOME, CAMDEN CREEK, MARY B’S and DADDY RAY’S for its bakery
products.
The Company markets frozen
beverages under the trademark ICEE in all of the continental United States, except for portions of nine states, and in Mexico and Canada. Additionally,
the Company has the international rights to the trademark ICEE.
The trademarks, when renewed and
continuously used, have an indefinite term and are considered important to the Company as a means of identifying its products. The Company considers
its trademarks important to the success of its business.
The Company has numerous patents
related to the manufacturing and marketing of its product.
Supplies
The Company’s manufactured
products are produced from raw materials which are readily available from numerous sources. With the exception of the Company’s soft pretzel
twisting equipment and funnel cake production equipment, which are made for J & J by independent third parties, and certain specialized packaging
equipment, the Company’s manufacturing equipment is readily available from various sources. Syrup for frozen beverages is purchased primarily from
The Coca-Cola Company, Dr Pepper/Seven Up, Inc., the Pepsi Cola Company, and Jogue, Inc. Cups, straws and lids are readily available from various
suppliers. Parts for frozen beverage dispensing machines are purchased from several sources. Frozen beverage dispensers are purchased primarily from
IMI Cornelius, Inc. and FBD Partnership.
Competition
Snack food and bakery products
markets are highly competitive. The Company’s principal products compete against similar and different food products manufactured and sold by
numerous other companies, some of which are substantially larger and have greater resources than the Company. As the soft pretzel, frozen juice treat
and dessert, bakery products and related markets grow, additional competitors and new competing products may enter the markets. Competitive factors in
these markets include product quality, customer service, taste, price, identity and brand name awareness, method of distribution and sales
promotions.
The Company believes it is the
only national distributor of soft pretzels. However, there are numerous regional and local manufacturers of food service and retail supermarket soft
pretzels as well as several chains of retail pretzel stores.
In Frozen Beverages the Company
competes directly with other frozen beverage companies. These include several companies which have the right to use the ICEE name in portions of nine
states. There are many other
5
regional frozen beverage competitors throughout the country and one large retail chain which uses its own frozen beverage brand.
The Company competes with large
soft drink manufacturers for counter and floor space for its frozen beverage dispensing machines at retail locations and with products which are more
widely known than the ICEE, SLUSH PUPPIE, PARROT ICE and ARCTIC BLAST frozen beverages.
The Company competes with a
number of other companies in the frozen juice treat and dessert and bakery products markets.
Risks Associated with Foreign
Operations
Foreign operations generally
involve greater risk than doing business in the United States. Foreign economies differ favorably or unfavorably from the United States’ economy
in such respects as the level of inflation and debt, which may result in fluctuations in the value of the country’s currency and real property.
Sales of our foreign operations were $14,301,000, $11,658,000 and $11,078,000 in fiscal years 2010, 2009 and 2008, respectively. At September 25, 2010,
the total assets of our foreign operations were approximately $10.4 million or 2% of total assets.
Employees
The Company has approximately
2,700 full and part time employees as of September 25, 2010. Certain production and distribution employees at the Pennsauken and Bridgeport, New Jersey
plants are covered by a collective bargaining agreement which expires in September 2013.
The production employees at our
Atlanta, Georgia plant are covered by a collective bargaining agreement which expires in January 2011. The Company considers its employee relations to
be good.
Available Information
The Company’s internet
address is
www.jjsnack.com
. On the investor relations section of its website, the Company provides free access to its annual report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports, as soon as reasonably practicable after such
material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). The information on the website listed
above is not and should not be considered part of this annual report on Form 10-K and is not incorporated by reference in this
document.
You should carefully consider the
risks described below, together with all of the other information included in this report, in considering our business and prospects. The risks and
uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem
insignificant may also impair our business operations. Following is a discussion of known potentially significant risks which could result in harm to
our business, financial condition or results of operations.
Risks of Shortages or Increased Cost of Raw
Materials
We are exposed to the market
risks arising from adverse changes in commodity prices, affecting the cost of our raw materials and energy. The raw materials and energy which we use
for the production and distribution of our products are largely commodities that are subject to price volatility and fluctuations in availability
caused by changes in global supply and demand, weather conditions, agricultural uncertainty or governmental controls. We purchase these materials and
energy mainly in the open market. If commodity price changes result in increases in raw materials and energy costs, we may not be able to increase our
prices to offset these increased costs without suffering reduced volume, revenue and operating income.
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General Risks of the Food Industry
Food processors are subject to
the risks of adverse changes in general economic conditions; evolving consumer preferences and nutritional and health-related concerns; changes in food
distribution channels; federal, state and local food processing controls or other mandates; consumer product liability claims; and risks of product
tampering. The increased buying power of large supermarket chains, other retail outlets and wholesale food vendors could result in greater resistance
to price increases and could alter the pattern of customer inventory levels and access to shelf space.
Environmental Risks
The disposal of solid and liquid
waste material resulting from the preparation and processing of foods are subject to various federal, state and local laws and regulations relating to
the protection of the environment. Such laws and regulations have an important effect on the food processing industry as a whole, requiring
substantially all firms in the industry to incur material expenditures for modification of existing processing facilities and for construction of
upgraded or new waste treatment facilities.
We cannot predict what
environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted
or what environmental conditions may be found to exist. Enactment of more stringent laws or regulations or more strict interpretation of existing laws
and regulations may require additional expenditures by us, some of which could be material.
Risks Resulting from Several Large
Customers
We have several large customers
that account for a significant portion of our sales. Our top ten customers accounted for 42%, 43% and 42% of our sales during fiscal years 2010, 2009
and 2008, respectively, with our largest customer accounting for 8% of our sales in 2010, 9% in 2009 and 9% in 2008. Three of the ten customers are
food distributors who sell our product to many end users. The loss of one or more of our large customers could adversely affect our results of
operations. These customers typically do not enter into long-term contracts and make purchase decisions based on a combination of price, product
quality, consumer demand and customer service performance. If our sales to one or more of these customers are reduced, this reduction may adversely
affect our business. If receivables from one or more of these customers become uncollectible, our operating income would be adversely
impacted.
Competition
Our businesses operate in highly
competitive markets. We compete against national and regional manufacturers and distributors on the basis of price, quality, product variety and
effective distribution. Many of our major competitors in the market are larger and have greater financial and marketing resources than we do. Increased
competition and anticipated actions by our competitors could lead to downward pressure on prices and/or a decline in our market share, either of which
could adversely affect our results. See “Competition” in Item 1 for more information about our competitors.
Risks Relating to Manufacturing
Our ability to purchase,
manufacture and distribute products is critical to our success. Damage or disruption to our manufacturing or distribution capabilities due to weather,
natural disaster, fire or explosion, terrorism, pandemic, political upheaval, strikes or other reasons could impair our ability to manufacture or
distribute our products.
Our Certificate of Incorporation may inhibit a change in
control that you may favor
Our Certificate of Incorporation
contains provisions that may delay, deter or inhibit a future acquisition of J & J Snack Foods Corp. not approved by our Board of Directors. This
could occur even if our shareholders are offered an attractive value for their shares or if a substantial number or even a majority of our shareholders
believe the takeover is in their best interest. These provisions are intended to encourage any person interested in acquiring us
7
to negotiate with and obtain the approval of our Board of Directors in connection with the transaction. Provisions that could delay, deter or inhibit a future acquisition include the following:
|
—
|
a classified Board of Directors; |
|
—
|
the requirement that our shareholders may only remove Directors for cause; |
|
—
|
limitations on share holdings and voting of certain persons; |
|
—
|
special Director voting rights; and |
|
—
|
the ability of the Board of Directors to consider the interests of various constituencies, including our employees, customers, suppliers, creditors and the local communities in which we operate. |
Risks Relating to the Control by Gerald B.
Shreiber
Gerald B. Shreiber is the founder
of the Company and the current beneficial owner of 22% of its outstanding stock. Our Certificate of Incorporation provides that he has three votes on
the Board of Directors (subject to certain adjustments). Therefore, he and one other director have voting control of the Board. The performance of this
Company is greatly impacted by his leadership and decisions. His voting control reduces the restrictions on his actions. His retirement, disability or
death may have a significant impact on our future operations.
Risk Related to Product Changes
There are risks in the
marketplace related to trade and consumer acceptance of product improvements, packing initiatives and new product introductions.
Risks Related to Change in the
Business
Our ability to successfully
manage changes to our business processes, including selling, distribution, product capacity, information management systems and the integration of
acquisitions, will directly affect our results of operations.
Risks Associated with Foreign
Operations
Foreign operations generally
involve greater risk than doing business in the United States. Foreign economies differ favorably or unfavorably from the United States’ economy
in such respects as the level of inflation and debt, which may result in fluctuations in the value of the country’s currency and real property.
Further, there may be less government regulation in various countries, and difficulty in enforcing legal rights outside the United States.
Additionally, in some foreign countries, there is the possibility of expropriation or confiscatory taxation limitations on the removal of property or
other assets, political or social instability or diplomatic developments which could affect the operations and assets of U.S. companies doing business
in that country. Sales of our foreign operations were $14,301,000, $11,658,000, and $11,078,000 in fiscal years 2010, 2009 and 2008, respectively. At
September 25, 2010, the total assets of our foreign operations were approximately $10.4 million or 2% of total assets.
Seasonality and Quarterly
Fluctuations
Our sales are affected by the
seasonal demand for our products. Demand is greater during the summer months primarily as a result of the warm weather demand for our ICEE and frozen
juice treats and desserts products. Because of seasonal fluctuations, there can be no assurance that the results of any particular quarter will be
indicative of results for the full year or for future years.
We have no unresolved SEC staff
comments to report.
The Company’s primary east
coast manufacturing facility is located in Pennsauken, New Jersey in a 70,000 square foot building on a two-acre lot. Soft pretzels are manufactured at
this Company-owned facility which also serves as the Company’s corporate headquarters. This facility operates at approximately 65% of capacity.
The
8
Company owns a 128,000 square foot building adjacent to its manufacturing facility in Pennsauken, New Jersey. The Company has constructed a large freezer within this facility for warehousing and distribution purposes. The warehouse has a utilization rate of 80–90% depending on product demand. The Company also leases, through January 2022, 52,000 square feet of office and warehouse space located next to the Pennsauken, New Jersey plant.
The Company owns a 150,000 square
foot building on eight acres in Bellmawr, New Jersey. The facility is used by the Company to manufacture some of its products including funnel cake,
pretzels, churros and cookies. The facility operates at about 85% of capacity.
The Company’s primary west
coast manufacturing facility is located in Vernon (Los Angeles), California. It consists of a 137,000 square foot facility in which soft pretzels,
churros and various lines of baked goods are produced and warehoused. Included in the 137,000 square foot facility is a 30,000 square foot freezer used
for warehousing and distribution purposes which was constructed in 1996. The facility is leased through November 2030. The Company leases an additional
80,000 square feet of office and warehouse space, adjacent to its manufacturing facility, through November 2030. The manufacturing facility operates at
approximately 45% of capacity.
The Company leases through June
2015 a 45,000 square foot churros manufacturing facility located in Colton, California which operates at approximately 70% of
capacity.
The Company leases through
November 2017 a 25,000 square foot frozen juice treat and dessert manufacturing facility located in Norwalk (Los Angeles), California which operates at
approximately 40% of capacity.
The Company leases an 85,000
square foot bakery manufacturing facility located in Atlanta, Georgia. The lease runs through December 2020. The facility operates at about 50% of
capacity.
The Company owns a 46,000 square
foot frozen juice treat and dessert manufacturing facility and a 42,000 square foot dry storage warehouse located on six acres in Scranton,
Pennsylvania. The manufacturing facility, which was expanded from 26,000 square feet in 1998, operates at approximately 65% of
capacity.
The Company leases a 29,600
square foot soft pretzel manufacturing facility located in Hatfield, Pennsylvania. The lease runs through June 2017. The facility operates at
approximately 65% of capacity.
The Company leases a 19,200
square foot soft pretzel manufacturing facility located in Carrollton, Texas. The lease runs through April 2016. The facility operates at approximately
60% of capacity. The Company leases an additional property containing a 6,500 square foot storage freezer across the street from the manufacturing
facility, which lease expires May 2016.
The Company leases an 18,000
square foot soft pretzel manufacturing facility located in Chambersburg, Pennsylvania. The lease runs through September 2010 with options to extend the
term. The facility operates at approximately 45% of capacity.
The Company’s fresh bakery
products manufacturing facility and offices are located in Bridgeport, New Jersey in three buildings totaling 133,000 square feet. The buildings are
leased through December 2015. The manufacturing facility operates at approximately 45% of capacity.
The Company owns a 65,000 square
foot fig and fruit bar manufacturing facility located on 9-1/2 acres in Moscow Mills (St. Louis), Missouri. The facility operates at about 80% of
capacity.
The Company leases a building in
Pensacola, Florida for the manufacturing, packing and warehousing of dumplings. The building is approximately 14,000 square feet and the lease runs
through December 2013. The manufacturing facility operates at approximately 75% of capacity.
The Company’s Bavarian
Pretzel Bakery headquarters and warehouse and distribution facilities are owned and located in an 11,000 square foot building in Lancaster,
Pennsylvania.
The Company also leases
approximately 136 warehouse and distribution facilities in 44 states, Mexico and Canada.
9
The Company has no material
pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a
party or of which any of their property is subject.
There were no matters submitted
to a vote of the security holders during the quarter ended September 25, 2010.
10
|
Item 5.
|
Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities |
The Company’s common stock
is traded on the NASDAQ Global Select Market under the symbol “JJSF.” The following table sets forth the high and low sale price quotations
as reported by NASDAQ and dividend information for the common stock for each quarter of the years ended September 26, 2009 and September 25,
2010.
Common Stock Market Price
|
High
|
Low
|
Dividend
Declared |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Fiscal
2009
|
||||||||||||||
|
First quarter
|
$ | 34.50 | $ | 24.07 | $ | .0975 | ||||||||
|
Second
quarter
|
36.57 | 30.12 | .0975 | |||||||||||
|
Third quarter
|
40.14 | 32.10 | .0975 | |||||||||||
|
Fourth
quarter
|
44.75 | 35.17 | .0975 | |||||||||||
|
Fiscal
2010
|
||||||||||||||
|
First quarter
|
$ | 44.00 | $ | 35.19 | $ | .1075 | ||||||||
|
Second
quarter
|
44.90 | 36.80 | .1075 | |||||||||||
|
Third quarter
|
48.51 | 42.56 | .1075 | |||||||||||
|
Fourth
quarter
|
45.22 | 37.00 | .1075 | |||||||||||
As of November 26, 2010, there
were about 7,700 beneficial shareholders.
In our fiscal year ended
September 25, 2010, we purchased and retired 203,507 shares of our common stock at a cost of $7,768,000 under a million share buyback authorization
approved by the Company’s Board of Directors in February 2008. 49,804 shares were purchased in the fourth quarter of 2010 at a cost of $1,874,000.
There remains 210,772 shares that can be purchased under the existing authorization.
In our fiscal year ended
September 26, 2009, we purchased and retired 450,597 shares of our common stock at a cost of $12,510,000. Of the shares purchased and retired in 2009,
400,000 shares were purchased at the purchase price of $27.90 per share from Gerald B. Shreiber, Chairman of the Board, Chief Executive Officer and
Director of the Company.
In our 2008 fiscal year ended
September 27, 2008, we purchased and retired 135,124 shares of our common stock at a cost of $3,539,000.
For information on the
Company’s Equity Compensation Plans, please see Item 12 herein.
11
Stock Performance Graph
The selected financial data for
the last five years was derived from our audited consolidated financial statements. The following selected financial data should be read in conjunction
with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements
and related notes thereto, especially as the information pertains to fiscal 2008, 2009 and 2010.
|
Fiscal year ended in September
(In thousands except per share data) |
|||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2010
|
2009
|
2008
|
2007
|
2006
|
|||||||||||||||||||
|
Net Sales
|
$ | 696,703 | $ | 653,047 | $ | 629,359 | $ | 568,901 | $ | 514,831 | |||||||||||||
|
Net Earnings
|
$ | 48,409 | $ | 41,312 | $ | 27,908 | $ | 32,112 | $ | 29,450 | |||||||||||||
|
Total Assets
|
$ | 483,994 | $ | 439,827 | $ | 408,408 | $ | 380,288 | $ | 340,808 | |||||||||||||
|
Long-Term
Debt
|
$ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||
|
Capital Lease
Obligations
|
$ | 863 | $ | 381 | $ | 474 | $ | 565 | $ | — | |||||||||||||
|
Stockholders’ Equity
|
$ | 380,575 | $ | 342,844 | $ | 316,778 | $ | 295,582 | $ | 263,656 | |||||||||||||
|
Common Share
Data
|
|||||||||||||||||||||||
|
Earnings Per
Diluted Share
|
$ | 2.59 | $ | 2.21 | $ | 1.47 | $ | 1.69 | $ | 1.57 | |||||||||||||
|
Earnings Per
Basic Share
|
$ | 2.61 | $ | 2.23 | $ | 1.49 | $ | 1.72 | $ | 1.60 | |||||||||||||
|
Book Value
Per Share
|
$ | 20.58 | $ | 18.51 | $ | 16.90 | $ | 15.80 | $ | 14.28 | |||||||||||||
|
Common Shares
Outstanding At Year End
|
18,491 | 18,526 | 18,748 | 18,702 | 18,468 | ||||||||||||||||||
|
Cash
Dividends Declared Per Common Share
|
$ | .43 | $ | .39 | $ | .37 | $ | .34 | $ | .30 | |||||||||||||
12
In addition to historical
information, this document and analysis contains forward-looking statements. The forward-looking statements contained herein are subject to certain
risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Important factors
that might cause such a difference include, but are not limited to, those discussed in the “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect
management’s analysis only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to
reflect events or circumstances that arise after the date hereof.
Critical Accounting Policies, Judgments and
Estimates
We prepare our financial
statements in conformity with accounting principles generally accepted in the United States of America. The preparation of such financial statements
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of those financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
The Company discloses its
significant accounting policies in the accompanying notes to its audited consolidated financial statements.
Judgments and estimates of
uncertainties are required in applying the Company’s accounting policies in certain areas. Following are some of the areas requiring significant
judgments and estimates: revenue recognition, accounts receivable, cash flow and valuation assumptions in performing asset impairment tests of
long-lived assets, estimates of the useful lives of intangible assets and insurance reserves.
There are numerous critical
assumptions that may influence accounting estimates in these and other areas. We base our critical assumptions on historical experience, third-party
data and various other estimates we believe to be reasonable. A description of the aforementioned policies follows:
Revenue Recognition
—
We recognize revenue from our products when the products are shipped to our customers. Repair and maintenance equipment service revenue is recorded
when it is performed provided the customer terms are that the customer is to be charged on a time and material basis or on a straight-line basis over
the term of the contract when the customer has signed a service contract. Revenue is recognized only where persuasive evidence of an arrangement
exists, our price is fixed or estimable and collectability is reasonably assured. We record offsets to revenue for allowances, end-user pricing
adjustments, trade spending, coupon redemption costs and returned product. Customers generally do not have the right to return product unless it is
damaged or defective. Off-invoice allowances are deducted directly from the amount invoiced to our customer when our products are shipped to the
customer. Offsets to revenue for allowances, end-user pricing adjustments and trade spending are recorded primarily as a reduction of accounts
receivable based on our estimates of liability which are based on customer programs and historical experience. These offsets to revenue are based
primarily on the quantity of product purchased over specific time periods. For our Retail Supermarket and Frozen Beverages segments, we accrue for the
liability based on products sold multiplied by per product offsets. Offsets to revenue for our Food Service segment are calculated in a similar manner
for offsets owed to our direct customers; however, because shipments to end-users are unknown to us until reported by our direct customers or by the
end-users, there is a greater degree of uncertainty as to the accuracy of the amounts accrued for end-user offsets. Additional uncertainty may occur as
customers take deductions when they make payments to us. This creates complexities because our customers do not always provide reasons for the
deductions taken. Additionally, customers may take deductions to which they are not entitled and the length of time customers take deductions to which
they are entitled can vary from two weeks to well over a year. Because of the aforementioned uncertainties, the process to determine these estimates
requires judgment. We feel that due to constant monitoring of the process, including but not limited to comparing actual results to estimates made on a
monthly basis, these estimates are reasonable in all material respects. Our recorded liability for allowances, end-user pricing adjustments and trade
spending was approximately $13 million and $14 million at September 25, 2010 and September 26, 2009, respectively.
Accounts Receivable
—
We record accounts receivable at the time revenue is recognized. Bad debt expense is recorded in marketing and administrative expenses. The amount of
the allowance for doubtful accounts is based
13
on our estimate of the accounts receivable amount that is uncollectable. It is comprised of a general reserve based on historical experience and amounts for specific customers’ accounts receivable balances that we believe are at risk due to our knowledge of facts regarding the customer(s). We continually monitor our estimate of the allowance for doubtful accounts and adjust it monthly. We usually have approximately 10 customers with accounts receivable balances of between $1 million to $7 million. Failure of these customers, and others with lesser balances, to pay us the amounts owed, could have a material impact on our consolidated financial statements.
Accounts receivable due from any
of our customers is subject to risk. Our total bad debt expense was $493,000, $492,000 and $502,000 for the fiscal years 2010, 2009 and 2008,
respectively. At September 25, 2010 and September 26, 2009, our accounts receivables were $68,183,000 and $59,734,000, net of an allowance for doubtful
accounts of $591,000 and $623,000.
Asset Impairment
— We
have three reporting units with goodwill totaling $70,070,000 as of September 25, 2010. We utilize historical reporting unit cash flows (defined as
reporting unit operating income plus depreciation and amortization) as a proxy for expected future reporting unit cash flows to evaluate the fair value
of these reporting units. If the fair value estimated substantially exceeds the carrying value of the reporting unit, including the goodwill, if any,
associated with that unit, we do not recognize any impairment loss. We generally do not engage a third party to assist in this analysis as we believe
that our in-house expertise is adequate to perform the analysis.
Licenses and rights, customer
relationships and non compete agreements are being amortized by the straight-line method over periods ranging from 3 to 20 years and amortization
expense is reflected throughout operating expenses. Long-lived assets, including fixed assets and intangibles, are reviewed for impairment as events or
changes in circumstances occur indicating that the carrying amount of the asset may not be recoverable. Cash flow analyses are used to assess
impairment. The estimates of future cash flows involve considerable management judgment and are based upon assumptions about expected future operating
performance. Assumptions used in these forecasts are consistent with internal planning. The actual cash flows could differ from management’s
estimates due to changes in business conditions, operating performance, economic conditions, competition and consumer preferences.
Useful Lives of Intangible
Assets
— Most of our trade names which have carrying value have been assigned an indefinite life and are not amortized because we plan to
receive the benefit from them indefinitely. If we decide to curtail or eliminate the use of any of the trade names or if sales that are generated from
any particular trade name do not support the carrying value of the trade name, then we would record an impairment or assign an estimated useful life
and amortize over the remaining useful life. Rights such as prepaid licenses and non compete agreements are amortized over contractual periods. The
useful lives of customer relationships are based on the discounted cash flows expected to be received from sales to the customers adjusted for an
attrition rate. The loss of a major customer or declining sales in general could create an impairment charge.
Insurance Reserves
—
We have a self-insured medical plan which covers approximately 1,200 of our employees. We record a liability for incurred but not yet reported or paid
claims based on our historical experience of claims payments and a calculated lag time period. We maintain a spreadsheet that includes claims payments
made each month according to the date the claim was incurred. This enables us to have an historical record of claims incurred but not yet paid at any
point in the past. We then compare our accrued liability to the more recent claims incurred but not yet paid amounts and adjust our recorded liability
up or down accordingly. Our recorded liability at September 25, 2010 and September 26, 2009 was $1,106,000 and $1,157,000, respectively. Considering
that we have stop loss coverage of $175,000 for each individual plan subscriber, the general consistency of claims payments and the short time lag, we
believe that there is not a material exposure for this liability. Because of the foregoing, we do not engage a third party actuary to assist in this
analysis.
We self-insure, up to loss
limits, worker’s compensation and automobile liability claims. Accruals for claims under our self-insurance program are recorded on a
claims-incurred basis. Under this program, the estimated liability for claims incurred but unpaid in fiscal years 2010 and 2009 was $2,200,000 and
$2,300,000, respectively. Our total recorded liability for all years’ claims incurred but not yet paid was $7,300,000 and $7,100,000 at September
25, 2010 and September 26, 2009, respectively. We estimate the liability based on total incurred claims and paid claims adjusting for loss development
factors which account for the development of open claims over time. We estimate the amounts we expect to pay for some insurance years by multiplying
incurred losses by a loss
14
development factor which is based on insurance industry averages and the age of the incurred claims; our estimated liability is then the difference between the amounts we expect to pay and the amounts we have already paid for those years. Loss development factors that we use range from 1.0 to 2.0. However, for some years, the estimated liability is the difference between the amounts we have already paid for that year and the maximum we could pay under the program in effect for that particular year because the calculated amount we expect to pay is higher than the maximum. For other years, where there are few claims open, the estimated liability we record is the amount the insurance company has reserved for those claims. We evaluate our estimated liability on a continuing basis and adjust it accordingly. Due to the multi-year length of these insurance programs, there is exposure to claims coming in lower or higher than anticipated; however, due to constant monitoring and stop loss coverage of $350,000 on individual claims, we believe our exposure is not material. Because of the foregoing, we do not engage a third party actuary to assist in this analysis. In connection with these self-insurance agreements, we customarily enter into letters of credit arrangements with our insurers. At September 25, 2010 and September 26, 2009, we had outstanding letters of credit totaling $8,175,000 and $8,675,000, respectively.
Refer to Note A to the
accompanying consolidated financial statements for additional information on our accounting policies.
RESULTS OF OPERATIONS
Fiscal 2010 (52 weeks) Compared to Fiscal 2009 (52
weeks)
Net sales increased $43,656,000,
or 7%, to $696,703,000 in fiscal 2010 from $653,047,000 in fiscal 2009.
Excluding sales from the
acquisition of Parrot Ice in February 2010 and California Churros in June 2010, sales increased 6% for the year.
Approximately $12.7 million, or
29%, of the increased sales were sales of funnel cake fries to one customer, which is carrying the product in virtually all of its
domestic locations. Although we are not able to provide an estimate of the sales going forward, we anticipate that these sales will be significantly
less in fiscal year 2011.
We have four reportable segments,
as disclosed in the accompanying notes to the consolidated financial statements: Food Service, Retail Supermarkets, The Restaurant Group and Frozen
Beverages.
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
detailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales is
considered to be the one and only key variable monitored by the Chief Operating Decision Makers and management when determining each segment’s and
the company’s financial condition and operating performance. 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.
Food Service
Sales to food service customers
increased $19,206,000, or 5%, to $436,959,000 in fiscal 2010. Excluding sales from the acquisition of California Churros, food service sales would have
increased 4% for the year. Sales of funnel cake fries to one customer accounted for over 66% of the food service sales increase. Soft pretzel sales to
the food service market increased 1% to $100,694,000 for the year. Frozen juice bar and ices sales decreased $2,999,000, or 6%, to $47,273,000 for the
year primarily as the result of lower sales to one contract packing customer and to school food service accounts. Churro sales to food service
customers increased 8% to $31,732,000 in 2010. Without sales from California Churros, churro sales for the year would have been down about 1/2 of one
percent. Sales of bakery products, excluding biscuit and dumpling sales and fruit and fig bar sales, increased $5,606,000, or 3%, for the year due
primarily to increased sales to private label customers. Biscuit and dumpling sales increased 1% to $33,326,000. Sales of fig and fruit bars decreased
4% to $31,715,000 due primarily to lower sales to one customer who discontinued a particular product. Funnel cake and related funnel cake product sales
increased by $14,083,000 to $22,804,000 primarily due to sales to one customer. Sales of new products in the first twelve months
since their
15
introduction were approximately $29 million in fiscal year 2010. Net volume increases, including new product sales as defined above and sales resulting from the acquisition of California Churros, accounted for all but approximately $1,500,000 of the sales increases this year. Price increases accounted for the remaining $1,500,000. Operating income in our Food Service segment increased from $45,024,000 in 2009 to $50,255,000 in 2010 primarily as a result of increased volume as discussed above and lower ingredients and packaging costs of about $2 million.
Retail Supermarkets
Sales of products to retail
supermarkets increased $10,961,000 or 17% to $76,119,000 in fiscal year 2010. Soft pretzel sales to retail supermarkets were $30,463,000 compared to
$30,506,000 in 2009 on a unit volume decrease of less than 1%. This makes the third consecutive year of flat or modestly up or down unit sales. Sales
of frozen juices and ices increased $10,469,000 or 28% to $48,288,000 on a unit volume increase of 24%. Reduced trade spending of $1.5 million for the
introduction of new frozen novelty items and a shift in product mix increased sales dollars in relation to the overall unit volume increases. Coupon
redemption costs, a reduction of sales, decreased 9% or about $354,000 for the year. Sales of products in the first twelve months since their
introduction were approximately $4.2 million in fiscal year 2010. Net volume increases, including new product sales as defined above and net of
decreased coupon costs and reduced trade spending for new product introductions, accounted for virtually all of the sales increases in 2010. Operating
income in our Retail Supermarkets segment increased from $7,442,000 in 2009 to $11,281,000 in 2010 primarily as a result of volume increases and
reduced trade spending for the introduction of new frozen novelty items.
The Restaurant Group
Sales of our Restaurant Group
decreased 33% to $847,000 primarily due to the closing of stores in fiscal years 2009 and 2010 and by lower sales in general. Sales of our two stores
open for both years were down about 7% from last year. Operating loss in our Restaurant Group segment decreased from $64,000 in 2009 to $35,000 in
2010.
Frozen Beverages
Frozen beverage and related
product sales increased 8% to $182,778,000 in fiscal 2010. Excluding sales from the acquisition of Parrot Ice, sales would have increased 7% for the
year. Beverage sales alone increased 13% to $128,125,000 for the year with increased sales to two new customers and one existing customer, sales from
Parrot Ice and a 26% increase in sales in Mexico accounting for over 80% of the increase. Gallon sales were up 10% in our base ICEE business with sales
to three customers accounting for almost all of the increase. Service revenue decreased 4% to $40,410,000 for the year with declines spread across our
customer base. Sales of beverage machines, which tend to fluctuate from year to year while following no specific trend, increased from $11,729,000 in
2009 to $11,964,000 in 2010. The estimated number of Company owned frozen beverage dispensers was 38,600 and 35,700 at September 25, 2010 and September
26, 2009, respectively. Operating income in our Frozen Beverage segment increased from $14,536,000 in 2009 to $15,661,000 in 2010 as a result of
increased volume as discussed above. Higher gasoline costs of approximately $867,000 impacted the year’s operating income.
Consolidated
Other than as commented upon
above by segment, there are no material specific reasons for the reported sales increases or decreases. Sales levels can be impacted by the appeal of
our products to our customers and consumers and their changing tastes, competitive and pricing pressures, sales execution, marketing programs, seasonal
weather, customer stability and general economic conditions.
Gross profit as a percentage of
sales increased to 32.69% in 2010 from 31.98% in 2009. Lower ingredient and packaging costs compared to last year of approximately $2.2 million, the
benefit of higher volumes leveraging our fixed manufacturing costs and reduced trade spending for new product introductions in our Retail Supermarket
segment were primarily responsible for the increased gross profit percentage. Ingredient and packaging costs can be extremely volatile and may be
significantly different from what we are presently expecting and therefore we cannot project the impact of ingredient and packaging costs on our
business going forward; however, there has been a very significant increase in the market cost of flour and other commodities over the past six months
which we
16
anticipate will result in higher costs over some portions of our fiscal year 2011. The impact of these higher costs and increased costs in operational areas may result in lower net earnings in 2011 than in 2010.
Total operating expenses
increased $8,712,000 to $150,618,000 in fiscal 2010 and as a percentage of sales decreased .11 of a percentage point and remained at 22% of sales.
Marketing expenses decreased .29 percentage points to 10% of sales. Distribution expenses decreased .13 percentage points to 7% of sales.
Administrative expenses were about 3-1/2% of sales in both years. Other general expense of $2,087,000 this year compared to other general income of
$5,000 in 2009. Included in other general expense this year is $1.6 million for an unclaimed property assessment and $577,000 of acquisition
costs.
Operating income increased
$10,224,000 or 15% to $77,162,000 in fiscal year 2010 as a result of the aforementioned items.
Investment income decreased by
$272,000 to $1,114,000 due to the general decline in the level of interest rates.
The effective income tax rate
decreased 1.42 percentage points to 38% from 39% last year. About 2/3 of this decrease was from the reduction of $750,000 of unrecognized tax
benefits.
Net earnings increased
$7,097,000, or 17%, in fiscal 2010 to $48,409,000, or $2.59 per diluted share as a result of the aforementioned items.
There are many factors which can
impact our net earnings from year to year and in the long run, among which are the supply and cost of raw materials and labor, insurance costs, factors
impacting sales as noted above, the continuing consolidation of our customers, our ability to manage our manufacturing, marketing and distribution
activities, our ability to make and integrate acquisitions and changes in tax laws and interest rates.
RESULTS OF OPERATIONS
Fiscal 2009 (52 weeks) Compared to Fiscal 2008 (52
weeks)
Net sales increased $23,688,000,
or 4%, to $653,047,000 in fiscal 2009 from $629,359,000 in fiscal 2008.
We have four reportable segments,
as disclosed in the accompanying notes to the consolidated financial statements: Food Service, Retail Supermarkets, The Restaurant Group and Frozen
Beverages.
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
detailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales is
considered to be the one and only key variable monitored by the Chief Operating Decision Makers and management when determining each segment’s and
the company’s financial condition and operating performance. 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.
Food Service
Sales to food service customers
increased $17,559,000, or 4%, to $417,753,000 in fiscal 2009. Soft pretzel sales to the food service market decreased $313,000, or about 1/3 of one
percent, to $99,471,000 for the year. Unit sales of soft pretzels were down 3% for the year which is a continuation of a multi-year trend of flat or
modestly up or down sales. Sales of bakery products excluding biscuit and dumpling sales and fruit and fig bar sales, increased $6,607,000, or 4%, for
the year. Biscuit and dumpling sales were up 8% to $32,845,000 due to increased distribution and new product offerings. Sales of fig and fruit bars
increased 11% to $29,497,000 due to strong volume growth spread across our customer base. Churro sales were up 16% for the year with $29,404,000 of
sales in 2009 with over 80% of the sales increase coming from sales to one customer who previously had not been a purchaser of churros. Frozen juice
bar and ices sales decreased $934,000 or 2% to $50,272,000 for the year. Our sales of frozen juice bar and ices to school food service have been
impacted and we expect them to continue to be impacted by nutritional concerns. Sales of our funnel cake products were up $2,872,000, or 49%, with
sales to one customer who previously had not been a purchaser of funnel cake products accounting for about one-half of the increase
17
and sales of funnel cake fries, a product introduced in the fourth quarter of fiscal 2008, accounting for the balance. Sales of new products in the first twelve months since their introduction were approximately $12,600,000 in fiscal year 2009. Price increases accounted for estimated sales of $13,700,000 in fiscal year 2009 and net volume increases, including new product sales as defined above, accounted for approximately $3,900,000 of sales in fiscal 2009. Operating Income in our Food Service segment increased from $24,784,000 in 2008 to $45,024,000 in 2009 primarily as a result of price increases and increased volume as discussed above and lower commodity costs of approximately $10,000,000.
Retail Supermarkets
Sales of products to retail
supermarkets increased $8,046,000 or 14% to $65,158,000 in fiscal 2009. Total soft pretzel sales to retail supermarkets were $30,506,000, an increase
of 11% from fiscal 2008, on a unit volume decrease of 2%. Sales of frozen juice bars and ices increased 19% to $37,819,000 in 2009 on a case volume
increase of 25%. Increased trade spending of $1.3 million for the introduction of new frozen novelty items and a shift in product mix reduced sales
dollars in relation to the unit volume increases. Coupon redemption costs, a reduction of sales, increased 38% or about $1,029,000 for the year as we
increased couponing in light of a trend toward increased use of coupons by shoppers. Sales of products in the first twelve months since their
introduction were approximately $6,300,000 in fiscal year 2009. Price increases accounted for estimated sales of $2,400,000 in fiscal year 2009 and net
volume increases, including new product sales as defined above and net of increased coupon costs, accounted for approximately $5,600,000 of sales in
fiscal 2009. Operating Income in our Retail Supermarkets segment increased from $4,665,000 in 2008 to $7,442,000 in 2009 primarily as a result of price
and volume increases.
The Restaurant Group
Sales of our Restaurant Group,
which operates BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET retail stores in the Mid-Atlantic region, declined by 23% primarily due to closings or
licensings of stores in the past year. At September 26, 2009, we had 4 stores open. Sales of stores open for both years were down 7% for the year.
Operating Loss in our Restaurant Group segment decreased from $140,000 in 2008 to $64,000 in 2009 primarily resulting from a decline in store closing
costs.
Frozen Beverages
Frozen beverage and related
product sales decreased $1,539,000 or 1% to $168,879,000 in fiscal 2009. Beverage sales alone were down 1% for the year. Gallon sales were down 2% for
the year in our base ICEE business which is a continuation of a multi-year trend. Service revenue increased $3,210,000, or 8%, to $42,013,000 for the
year as we continue to grow this part of our business to new and existing customers. Sales of beverage machines, which tend to fluctuate from year to
year while following no specific trend, decreased $3,065,000 to $11,729,000 for the year. The estimated number of company owned frozen beverage
dispensers was 35,700 and 33,400 at September 26, 2009 and September 27, 2008, respectively. Operating Income in our Frozen Beverages segment increased
from $14,027,000 in 2008 to $14,536,000 in 2009.
Consolidated
Other than as commented upon
above by segment, there are no material specific reasons for the reported sales increases or decreases. Sales levels can be impacted by the appeal of
our products to our customers and consumers and their changing tastes, competitive and pricing pressures, sales execution, marketing programs, seasonal
weather, customer stability and general economic conditions.
Gross profit as a percent of
sales increased 2.28 percentage points in 2009 from 2008 to 32%.
Lower commodity costs in excess
of $11,000,000, higher pricing and increased efficiencies due to volume in some of our product lines partially offset by higher workers’
compensation and group health benefit expense were the primary drivers causing the gross profit percentage increase. We presently expect commodity
costs to be lower on a year to year comparison basis over the next several quarters; however, commodity costs can be extremely volatile and may be
significantly different from what we are presently expecting. As we are self incurred for most of our workers compensation costs and group health
benefit costs, they may go up or down without notice.
18
Total operating expenses
decreased $1,665,000 to $141,906,000 in fiscal 2009 and as a percentage of sales decreased 1.08 percentage points to 22% of sales in 2009. Other
general income was $5,000 this year. Other general income of $375,000 last year primarily consisted of gains on the disposition of assets and insurance
gains in our Food Service and Frozen Beverages segments offset by store closing costs in our Restaurant Group segment of $102,000. Marketing expenses
decreased .45 percentage points and remained at 11% of sales. Controlled spending in our Food Service and Frozen Beverages segments accounted for the
overall decline. Distribution expenses decreased .75 of a percentage point and remained at 8% of sales due to lower freight and fuel costs.
Administrative expenses were about 3-1/2% of sales in both years.
Operating income increased
$23,602,000, or 54%, to $66,938,000 in fiscal 2009 as a result of the aforementioned items.
Investment income decreased by
$1,279,000 to $1,386,000 due to the general decline in the level of interest rates.
The effective income tax rate was
39% in both fiscal years.
Net earnings increased
$13,404,000, or 48%, in fiscal 2009 to $41,312,000, or $2.21 per diluted share as a result of the aforementioned items.
There are many factors which can
impact our net earnings from year to year and in the long run, among which are the supply and cost of raw materials and labor, insurance costs, factors
impacting sales as noted above, the continuing consolidation of our customers, our ability to manage our manufacturing, marketing and distribution
activities, our ability to make and integrate acquisitions and changes in tax laws and interest rates.
ACQUISITIONS
On January 31, 2006, we acquired
the stock of ICEE of Hawaii. ICEE of Hawaii, headquartered in Waipahu, Hawaii, distributes ICEE frozen beverages and related products throughout the
Hawaiian islands.
On May 26, 2006, The ICEE
Company, our frozen carbonated beverage distribution company, acquired the SLUSH PUPPIE branded business from Dr. Pepper/Seven Up, Inc., a Cadbury
Schweppes Americas Beverages Company for $18.1 million plus approximately $4.3 million in working capital. SLUSH PUPPIE, North America’s leading
brand for frozen non-carbonated beverages, is sold through an existing established distributor network to over 20,000 locations in the United States
and Canada as well as to certain international markets.
On January 9, 2007, we acquired
the assets of Hom/Ade Foods, Inc. Hom/Ade Foods, Inc., based in Pensacola, Florida is a manufacturer and distributor of biscuits and dumplings sold
under the MARY B’s and private label store brands predominantly to the retail supermarket trade. Annual sales of the business were approximately
$30 million for the year ended December 2006.
On January 31, 2007, we acquired
the assets of Radar, Inc. Radar, Inc. is a manufacturer and seller of fig and fruit bars selling its products under the brand DADDY RAY’S.
Headquartered and with its manufacturing facility in Moscow Mills, Missouri (outside of St. Louis), Radar, Inc. had annual sales of approximately $23
million dollars selling to the retail grocery segment and mass merchandisers, both branded and private label.
On April 2, 2007, we acquired the
WHOLE FRUIT Sorbet and FRUIT-A-FREEZE Frozen Fruit Bar brands, along with related assets including a manufacturing facility located in Norwalk,
California, selling primarily to the supermarket industry. Sales for 2007 were $2,429,000.
On June 25, 2007, we acquired the
assets of an ICEE distributor in Kansas with annual sales of less than $1 million.
In February 2010, we acquired the
assets of Parrot Ice, a manufacturer and distributor of a premium brand frozen beverage sold primarily in convenience stores. Revenues from Parrot Ice
were approximately $1.5 million for our 2010 fiscal year.
On June 10, 2010 we acquired the
assets of California Churros, Inc., a manufacturer and seller of premium brand churros selling its products under the brand CALIFORNIA CHURROS.
Headquartered and with its
19
manufacturing facility in Colton, CA, California Churros had sales of approximately $2.5 million in our 2010 fiscal year.
These acquisitions were accounted
for under the purchase method of accounting, and their operations are included in the accompanying consolidated financial statements from their
respective acquisition dates.
LIQUIDITY AND CAPITAL RESOURCES
Although there are many factors
that could impact our operating cash flow, most notably net earnings, we believe that our future operating cash flow, along with our borrowing
capacity, our current cash and cash equivalent balances and our investment securities is sufficient to fund future growth and expansion. See Note C to
these financial statements for a discussion of our investment securities.
Fluctuations in the value of the
Mexican and Canadian currencies and the resulting translation of the net assets of our Mexican and Canadian subsidiaries caused a decrease of $577,000
in accumulated other comprehensive loss in 2010 and an increase of $1,428,000 in 2009 and a decrease of $3,000 in 2008. In 2010, sales of the two
subsidiaries were $14,301,000 as compared to $11,658,000 in 2009 and $11,078,000 in 2008.
In our fiscal year ended
September 25, 2010, we purchased and retired 203,507 shares of our common stock at a cost of $7,768,000 under a million share buyback authorization
approved by the Company’s Board of Directors in February 2008. 49,804 shares were purchased in the fourth quarter of 2010 at a cost of $1,874,000.
There remains 210,772 shares that can be purchased under the existing authorization.
In our fiscal year ended
September 26, 2009, we purchased and retired 450,597 shares of our common stock at a cost of $12,510,000. Of the shares purchased and retired in 2009,
400,000 shares were purchased at the purchase price of $27.90 per share from Gerald B. Shreiber, Chairman of the Board, Chief Executive Officer and
Director of the Company.
In our 2008 fiscal year ended
September 27, 2008, we purchased and retired 135,124 shares of our common stock at a cost of $3,539,000.
In December 2006, we entered into
an amended and restated loan agreement with our existing banks which provides for up to a $50,000,000 revolving credit facility repayable in December
2011. The agreement contains restrictive covenants and requires commitment fees in accordance with standard banking practice. There were no outstanding
balances under the facility at September 25, 2010 and September 26, 2009. The significant financial covenants are:
|
•
|
Earnings before interest expense and income taxes divided by interest expense shall not be less than 1.5 to 1. |
|
•
|
Tangible net worth must initially be more than $170 million. |
|
•
|
Total funded indebtedness divided by earnings before interest expense, income taxes, depreciation and amortization shall not be greater than 2.25 to 1. |
|
•
|
Total liabilities divided by tangible net worth shall not be more than 2.0 to 1. |
We were in compliance with the
financial covenants described above at September 25, 2010.
We self-insure, up to loss
limits, certain insurable risks such as worker’s compensation and automobile liability claims. Accruals for claims under our self-insurance
program are recorded on a claims-incurred basis. Under this program, the estimated liability for claims incurred but unpaid in fiscal years 2010 and
2009 was $2,200,000 and $2,300,000, respectively. In connection with certain self-insurance agreements, we customarily enter into letters of credit
arrangements with our insurers. At September 25, 2010 and September 26, 2009, we had outstanding letters of credit totaling $8,175,000 and $8,675,000,
respectively.
20
The following table presents our
contractual cash flow commitments on long-term debt, operating leases and purchase commitments for raw materials and packaging. See Notes to the
consolidated financial statements for additional information on our long-term debt and operating leases.
|
Payments Due by Period
(in thousands) |
|||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Total
|
Less
Than 1 Year |
1–3
Years |
4–5
Years |
After
5 Years |
|||||||||||||||||||
|
Long-term
debt,
including current maturities |
$ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||
|
Capitalized
lease obligations
|
863 | 244 | 491 | 128 | — | ||||||||||||||||||
|
Purchase
commitments
|
44,000 | 44,000 | — | — | — | ||||||||||||||||||
|
Operating
leases
|
52,272 | 8,913 | 12,892 | 8,134 | 22,333 | ||||||||||||||||||
|
Total
|
$ | 97,135 | $ | 53,157 | $ | 13,383 | $ | 8,262 | $ | 22,333 | |||||||||||||
The purchase commitments do not
exceed our projected requirements over the related terms and are in the normal course of business.
Fiscal 2010 Compared to Fiscal 2009
Cash and cash equivalents and
marketable securities held to maturity decreased $2,544,000, or 2%, to $116,446,000 from a year ago.
Trade receivables increased
$8,449,000, or 14%, to $68,183,000 in 2010 due primarily to increased sales levels in our fourth quarter. Inventories increased $4,626,000 or 10% to
$50,630,000 in 2010 due to increased sales levels and an increase in equipment parts needed to support our frozen beverage business.
Prepaid expenses and other
increased to $6,067,000 from $1,910,000 last year because of estimated federal income tax payments made prior to the enactment of the law extending
bonus depreciation.
Net property, plant and equipment
increased $12,919,000 to $110,092,000 because purchases of fixed assets for the improvement and expansion of our manufacturing capabilities and frozen
carbonated beverage business exceeded depreciation on existing assets, and because of the addition of $3,508,000 in fixed assets acquired in
acquisitions and the purchase of a distribution freezer warehouse building which had previously been leased, for a purchase price of
$5,794,000.
Other intangible assets, less
accumulated amortization increased $6,159,000 to $55,284,000 due to intangible assets of $10,846,000 acquired in acquisitions net of amortization of
$4,687,000.
Goodwill increased $9,756,000 to
$70,070,000 from September 26, 2009 to September 25, 2010 as a result of the acquisition of California Churros.
Accounts payable and accrued
liabilities increased $2,484,000 due to increased levels of business.
Accrued compensation expense
increased 5% to $12,244,000 due to an increase in our employee base, a general increase in the level of pay rates and higher bonuses due to be
paid.
Deferred income tax liabilities
increased by $3,368,000 to $30,401,000 which related primarily to amortization of goodwill and other intangible assets and depreciation of property,
plant and equipment.
Other long-term liabilities at
September 25, 2010 include $1,249,000 of gross unrecognized tax benefits which decreased from $1,895,000 a year ago due to reductions for tax positions
of prior years.
Common stock decreased $3,324,000
to $38,453,000 in 2010 because increases totalling $4,444,000 from the exercise of incentive and nonqualified stock options, stock issued under our
stock purchase plan for employees, stock issued under our deferred stock plan and share-based compensation expense were less than the repurchase of
common stock of $7,768,000 by $3,324,000.
Net cash provided by operating
activities decreased $12,625,000 to $68,008,000 in 2010 primarily because of increases in accounts receivable, inventories and prepaid expenses and
other of $8,629,000, $4,422,000 and
21
$4,101,000, respectively, compared to decreases in accounts receivable, inventories and prepaid expenses and other in 2009 of $1,144,000, $2,993,000 and $37,000, respectively. The net change in accounts receivable and inventories of $21,326,000 was partially offset by higher net earnings of $7,097,000 and higher depreciation and amortization of fixed assets of $1,835,000.
Net cash used in investing
activities decreased $6,370,000 to $41,455,000 in 2010 from $47,825,000 in 2009 primarily because of increased proceeds from marketable securities, net
of purchases, which netted $16,866,000 compared to net purchases of marketable securities of $20,976,000 in 2009; which were partially offset by
payments for purchases of companies, net of cash acquired in 2010, of $25,185,000 and by increased purchases of property, plant and equipment of
$6,341,000 in 2010 compared to 2009.
Net cash used in financing
activities of $12,609,000 in 2010 compared to net cash used by financing activities of $15,740,000 in 2009. The decrease was caused by a decrease of
$4,742,000 in payments to repurchase common stock.
In 2010, the major variables in
determining our net increase in cash and cash equivalents and marketable securities were our net earnings, depreciation and amortization of fixed
assets, purchases of property, plant and equipment, purchases of companies, payments of cash dividend and the repurchase of common stock. Other
variables which in the past have had a significant impact on our change in cash and cash equivalents are proceeds from borrowings and payments of
long-term debt. As discussed in results of operations, our net earnings may be influenced by many factors. Depreciation and amortization of fixed
assets is primarily determined by past purchases of property, plant and equipment although it could be impacted by a significant acquisition. Purchases
of property, plant and equipment are primarily determined by our ongoing normal manufacturing and marketing requirements but could be increased
significantly for manufacturing expansion requirements or large frozen beverage customer needs. From time to time, we have repurchased common stock and
we anticipate that we will do so again in the future. We are actively seeking acquisitions that could be a significant use of cash. Although the
balance of our long-term debt is $0 at September 25, 2010, we may borrow in the future depending on our needs.
Fiscal 2009 Compared to Fiscal 2008
Cash and cash equivalents and
marketable securities held to maturity net of a decline in auction market preferred stock increased $37,055,000, or 45%, to $118,990,000 from a year
ago primarily because net cash provided by operating activities of $80,633,000 was more than cash used for purchases of property, plant and equipment
by $53,443,000, which was partially offset by cash used in financing activities of $15,740,000.
Trade receivables decreased
$1,442,000, or 2%, to $59,734,000 in 2009 due primarily to better management of receivables. Inventories decreased $3,091,000 or 6% to $46,004,000 in
2009 due to lower unit costs of inventories, improved management and timing.
Net property, plant and equipment
increased $4,109,000 to $97,173,000 because purchases of fixed assets for the improvement and expansion of our manufacturing capabilities and frozen
carbonated beverage business exceeded depreciation on existing assets.
Other intangible assets, less
accumulated amortization decreased $4,508,000 to $49,125,000 due completely to amortization.
Goodwill was unchanged at
$60,314,000 from September 27, 2008 to September 26, 2009.
Accounts payable and accrued
liabilities decreased $14,000.
Accrued compensation expense
increased 14% to $11,656,000 due to an increase in our employee base, a general increase in the level of pay rates and higher bonuses due to be
paid.
Deferred income tax liabilities
increased by $3,977,000 to $27,033,000 which related primarily to amortization of goodwill and other intangible assets and depreciation of property,
plant and equipment.
Other long-term liabilities at
September 26, 2009 include $1,895,000 of gross unrecognized tax benefits.
22
Common stock decreased $6,638,000
to $41,777,000 in 2009 because increases totalling $4,923,000 from the exercise of incentive and nonqualified stock options, stock issued under our
stock purchase plan for employees and share-based compensation expense were less than the repurchase of common stock of $12,510,000 by
$6,638,000.
Net cash provided by operating
activities increased $25,736,000 to $80,633,000 in 2009 primarily because of the increase to net earnings of $13,404,000 and decreases in accounts
receivable, inventories and prepaid expenses totalling $4,174,000 compared to increases in those assets totalling $7,686,000 last
year.
Net cash used in investing
activities increased $28,971,000 to $47,825,000 in 2009 from $18,854,000 in 2008 primarily because of increased purchases of marketable securities, net
of proceeds.
Net cash used in financing
activities of $15,740,000 in 2009 compared to net cash used by financing activities of $7,600,000 in 2008. The increase was caused primarily by an
increase of $8,971,000 in payments to repurchase common stock.
In 2009, the major variables in
determining our net increase in cash and cash equivalents and marketable securities were our net earnings, depreciation and amortization of fixed
assets, purchases of property, plant and equipment and the repurchase of common stock. Other variables which in the past have had a significant impact
on our change in cash and cash equivalents are payments for the purchase of companies, proceeds from borrowings and payments of long-term debt. As
discussed in results of operations, our net earnings may be influenced by many factors. Depreciation and amortization of fixed assets is primarily
determined by past purchases of property, plant and equipment although it could be impacted by a significant acquisition. Purchases of property, plant
and equipment are primarily determined by our ongoing normal manufacturing and marketing requirements but could be increased significantly for
manufacturing expansion requirements or large frozen beverage customer needs. From time to time, we have repurchased common stock and we anticipate
that we will do so again in the future. We are actively seeking acquisitions that could be a significant use of cash. Although the balance of our
long-term debt is $0 at September 26, 2009, we may borrow in the future depending on our needs.
The following is the
Company’s quantitative and qualitative analysis of its financial market risk:
Interest Rate Sensitivity
The Company has in the past
entered into interest rate swaps to limit its exposure to interest rate risk and may do so in the future if the Board of Directors feels that such
non-trading purpose is in the best interest of the Company and its shareholders. As of September 25, 2010, the Company had no interest rate swap
contracts.
Interest Rate Risk
At September 25, 2010, the
Company had no long-term debt obligations.
Purchasing Risk
The Company’s most
significant raw material requirements include flour, shortening, corn syrup, sugar, juice, cheese, chocolate, and a variety of nuts. The Company
attempts to minimize the effect of future price fluctuations related to the purchase of raw materials primarily through forward purchasing to cover
future manufacturing requirements, generally for periods from 1 to 12 months. Future contracts are not used in combination with forward purchasing of
these raw materials. The Company’s procurement practices are intended to reduce the risk of future price increases, but also may potentially limit
the ability to benefit from possible price decreases.
Foreign Exchange Rate Risk
The Company has not entered into
any forward exchange contracts to hedge its foreign currency rate risk as of September 25, 2010 because it does not believe its foreign exchange
exposure is significant.
The financial statements of the
Company are filed under this Item 8, beginning on page F-1 of this report.
23
None.
Disclosure Controls and Procedures
We carried out an evaluation
under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the
effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934 (the “Exchange Act”), as amended for financial reporting, as of September 25, 2010. Based on that evaluation,
our chief executive officer and chief financial officer concluded that these controls and procedures are effective to ensure that information required
to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported as specified
in Securities and Exchange Commission rules and forms. There were no changes in these controls or procedures identified in connection with the
evaluation of such controls or procedures that occurred during our last fiscal quarter, or in other factors that have materially affected, or are
reasonably likely to materially affect these controls or procedures. There were no changes in the Company’s internal controls over financial
reporting that occurred during our last fiscal quarter.
Our disclosure controls and
procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the rules and forms of the Securities and Exchange
Commission. These disclosure controls and procedures include, among other things, controls and procedures designed to provide reasonable assurance that
information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required
disclosure.
Management’s Report on Internal Control over
Financial Reporting
Our management is responsible for
establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f)
and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the chief executive officer and chief financial officer and
effected by the board of directors and management 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 and includes those policies and procedures
that:
|
•
|
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
|
•
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and board of directors; |
|
•
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to
future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Our management assessed the
effectiveness of our internal control over financial reporting as of September 25, 2010. In making this assessment, our management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on our assessment, our
management believes that, as of September 25, 2010, our internal control over financial reporting is effective. There have been no changes that
occurred during our fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
24
Our independent registered public
accounting firm, Grant Thornton LLP, audited our internal control over financial reporting as of September 25, 2010. Their report, dated December 7,
2010, expressed an unqualified opinion on our internal control over financial reporting. That report appears in Item 15 of Part IV of this Annual
Report on Form 10-K and is incorporated by reference to this Item 9A.
There was no information required
on Form 8-K during the quarter that was not reported.
Portions of the information
concerning directors and executive officers, appearing under the captions “Information Concerning Nominees For Election To Board” and
“Information Concerning Continuing Directors And Executive Officers” and information concerning Section 16(a) Compliance appearing under the
caption “Compliance with Section 16(a) of the Securities Exchange Act of 1934” in the Company’s Proxy Statement filed with the
Securities and Exchange Commission in connection with the Annual Meeting of Shareholders to be held on February 9, 2011 (“2010 Proxy
Statement”) is incorporated herein by reference.
Portions of the information
concerning the Audit Committee, the requirement for an Audit Committee Financial Expert and the Nominating Committee in the Company’s 2010 Proxy
Statement filed with the Securities and Exchange Commission in connection with the Annual Meeting of Shareholders to be held on February 9, 2011, is
incorporated herein by reference.
The Company has adopted a Code of
Ethics pursuant to Section 406 of the Sarbanes-Oxley Act of 2002, which applies to the Company’s principal executive officer and senior financial
officers. The Company has also adopted a Code of Business Conduct and Ethics which applies to all employees. The Company will furnish any person,
without charge, a copy of the Code of Ethics upon written request to J & J Snack Foods Corp., 6000 Central Highway, Pennsauken, New Jersey 08109,
Attn: Dennis Moore. A copy of the Code of Ethics can also be found on our website at
www.jjsnack.com
. Any waiver of any provision of the Code of
Ethics granted to the principal executive officer or senior financial officer may only be granted by a majority of the Company’s disinterested
directors. If a waiver is granted, information concerning the waiver will be posted on our website
www.jjsnack.com
for a period of 12
months.
Information concerning executive
compensation appearing in the Company’s 2010 Proxy Statement under the caption “Management Remuneration” is incorporated herein by
reference.
The following is a list of the
executive officers of the Company and their principal past occupations or employment. All such persons serve at the pleasure of the Board of Directors
and have been elected to serve until the Annual Meeting of Shareholders on February 9, 2011 or until their successors are duly
elected.
|
Name
|
Age
|
Position
|
||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
Gerald B.
Shreiber
|
69 |
Chairman of the Board, President, Chief Executive Officer and Director
|
||||||||
|
Dennis G.
Moore
|
55 |
Senior Vice President, Chief Financial Officer, Secretary, Treasurer and Director
|
||||||||
|
Robert M.
Radano
|
61 |
Senior Vice President, Sales and Chief Operating Officer
|
||||||||
|
Dan
Fachner
|
50 |
President of The ICEE Company Subsidiary
|
||||||||
|
Gerard G.
Law
|
36 |
Senior Vice President, Western Operations
|
||||||||
|
Robert J.
Pape
|
53 |
Senior Vice President, Sales and Marketing
|
||||||||
25
Gerald B.
Shreiber is the founder of the Company and has served as its Chairman of the Board, President, and Chief Executive Officer since its inception in 1971.
His term as a director expires in 2015.
Dennis G. Moore joined the
Company in 1984. He served in various controllership functions prior to becoming the Chief Financial Officer in June 1992. His term as a director
expires in 2012.
Robert M. Radano joined the
Company in 1972 and in May 1996 was named Chief Operating Officer of the Company. Prior to becoming Chief Operating Officer, he was Senior Vice
President, Sales responsible for national food service sales of J & J.
Dan Fachner has been an employee
of ICEE-USA Corp., which was acquired by the Company in May 1987, since 1979. He was named Senior Vice President of The ICEE Company in April 1994 and
became President in May 1997.
Gerard G. Law joined the Company
in 1992. He served in various manufacturing and sales management capacities prior to becoming Senior Vice President, Western Operations in
2009.
Robert J. Pape joined the Company
in 1998. He served in various sales and sales management capacities prior to becoming Senior Vice President, Sales and Marketing in
2010.
|
Item 12.
|
Security Ownership Of Certain Beneficial Owners And
Management And Related
Stockholder Matters |
Information concerning the
security ownership of certain beneficial owners and management appearing in the Company’s 2010 Proxy Statement under the caption “Security
Ownership of Certain Beneficial Owners and Management” is incorporated herein by reference.
The following table details
information regarding the Company’s existing equity compensation plans as of September 25, 2010.
| (a) | (b) | (c) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Plan Category
|
Number of
securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted-average
exercise price of outstanding options, warrants and rights |
Number of
securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|||||||||||
|
Equity
compensation plans approved
by security holders |
672,000 | $ | 28.22 | 1,207,000 | ||||||||||
|
Equity
compensation plans not approved
by security holders |
— | — | — | |||||||||||
|
Total
|
672,000 | $ | 28.22 | 1,207,000 | ||||||||||
Information concerning the
Certain Relationships and Related Transactions, and Director Independence in the Company’s 2010 Proxy Statement is incorporated herein by
reference.
Information concerning the
Principal Accountant Fees and Services in the Company’s 2010 Proxy Statement is incorporated herein by reference.
|
(a)
|
The following documents are filed as part of this Report: |
|
(1)
|
Financial Statements |
26
The financial statements filed as
part of this report are listed on the Index to Consolidated Financial Statements and Financial Statements Schedule on page F-1.
|
(2)
|
Financial Statement Schedule — Page S-1 |
Schedule II — Valuation and
Qualifying Accounts
All other schedules are omitted
either because they are not applicable or because the information required is contained in the financial statements or notes thereto.
|
(b)
|
Exhibits |
|
3.1
|
Amended and Restated Certificate of Incorporation filed February 28, 1990 (Incorporated by reference from the Company’s Form 10-Q dated May 4, 1990). |
|
3.2
|
Revised Bylaws adopted May 17, 2006 (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006). |
|
4.3
|
Amended and Restated Loan Agreement dated December 1, 2006 by and among J & J Snack Foods Corp. and Certain of its Subsidiaries and Citizens Bank of Pennsylvania, as Agent (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006). |
|
10.1
|
Proprietary Exclusive Manufacturing Agreement dated July 17, 1984 between J & J Snack Foods Corp. and Wisco Industries, Inc. (Incorporated by reference from the Company’s Form S-1 dated February 4, 1986, file no. 33-2296). |
|
10.2*
|
J & J Snack Foods Corp. Stock Option Plan (Incorporated by reference from the Company’s Definitive Proxy Statement dated December 19, 2002). |
|
10.3*
|
Adoption Agreement for MFS Retirement Services, Inc. Non-Standardized 401(K) Profit Sharing Plan and Trust, effective September 1, 2004 (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006). |
|
10.4*
|
J & J Snack Foods Corp. Directors’ and Consultants’ Deferred Compensation Plan adopted November 21, 2005 (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006). |
|
10.7
|
Lease dated August 29, 1995 between J & J Snack Foods Corp. and 5353 Downey Associated Ltd. for the lease of the Vernon, CA facility (Incorporated by reference from the Company’s Form 10-K dated December 21, 1995). |
|
10.8*
|
J & J Snack Foods Corp. Employee Stock Purchase Plan (Incorporated by reference from the Company’s Form S-8 dated May 16, 1996). |
|
10.11
|
Amendment No. 1 to Lease dated August 29, 1995 between J & J Snack Foods Corp. and 5353 Downey Associated Ltd. for the lease of the Vernon, CA facility (Incorporated by reference from the Company’s Form 10-K dated December 18, 2002). |
|
10.14
|
Leases and amendments to leases between Liberty Venture I, LP and J & J Snack Foods Corp. for the three buildings located in Bridgeport, New Jersey (Incorporated by reference from the Company’s Form 10-K dated December 8, 2009). |
|
10.15**
|
Amendment No. 2 to Lease dated August 29, 1995 between J & J Snack Foods Corp. and 5353 Downey Associated Ltd. for the lease of the Vernon, CA facility. |
|
10.16**
|
Amendment to Lease dated January 1, 1996 between Country Home Bakers, LLC and Borck Associates Limited Partnership for the lease of the Atlanta, GA facility. |
|
14.1
|
Code of Ethics Pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 (Incorporated by reference from the Company’s 10-Q dated July 20, 2004). |
|
21.1**
|
Subsidiaries of J & J Snack Foods Corp. |
27
|
23.1**
|
Consent of Independent Registered Public Accounting Firm. |
|
31.1**
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
31.2**
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
32.1**
|
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002. |
|
32.2**
|
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002. |
|
*
|
Compensatory Plan | |
|
**
|
Filed Herewith |
28
SIGNATURES
Pursuant to the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
|
J
& J SNACK FOODS CORP.
|
|||||||||
|
December 7,
2010
|
By
|
/s/ Gerald B. Shreiber
|
||||||||
|
|
|
Gerald B. Shreiber,
Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer) |
||||||||
Pursuant to the requirements of
the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
|
December 7,
2010
|
|
/s/ Gerald B. Shreiber
|
||||||||
|
|
|
Gerald B. Shreiber,
Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer) |
||||||||
|
December 7,
2010
|
|
/s/ Dennis G. Moore
|
||||||||
|
|
|
Dennis G. Moore, Senior Vice
President, Chief Financial Officer and Director (Principal Financial Officer) (Principal Accounting Officer) |
||||||||
|
December 7,
2010
|
|
/s/ Sidney R. Brown
|
||||||||
|
|
|
Sidney R. Brown, Director
|
||||||||
|
December 7,
2010
|
|
/s/ Peter G. Stanley
|
||||||||
|
|
|
Peter
G. Stanley, Director
|
||||||||
|
December 7,
2010
|
|
/s/ Leonard M. Lodish
|
||||||||
|
|
|
Leonard M. Lodish, Director
|
||||||||
29
J & J SNACK FOODS CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
|
Financial
Statements:
|
||||||
|
Report of
Independent Registered Public Accounting Firm
|
F-2 | |||||
|
Consolidated
Balance Sheets as of September 25, 2010 and September 26, 2009
|
F-3 | |||||
|
Consolidated
Statements of Earnings for fiscal years ended September 25, 2010, September 26, 2009 and September 27, 2008
|
F-4 | |||||
|
Consolidated
Statement of Changes in Stockholders’ Equity for the fiscal years ended September 25, 2010, September 26, 2009 and September 27, 2008
|
F-5 | |||||
|
Consolidated
Statements of Cash Flows for fiscal years ended September 25, 2010, September 26, 2009 and September 27, 2008
|
F-6 | |||||
|
Notes to
Consolidated Financial Statements
|
F-7 | |||||
|
Financial
Statement Schedule:
|
||||||
|
Schedule II
— Valuation and Qualifying Accounts
|
S-1 |
F-1
Report of Independent Registered Public Accounting
Firm
Shareholders and Board of Directors
J & J Snack Foods Corp. and Subsidiaries
J & J Snack Foods Corp. and Subsidiaries
We have audited the accompanying consolidated balance
sheets of J & J Snack Foods Corp. and Subsidiaries as of September 25, 2010 and September 26, 2009, and the related consolidated statements of
earnings, changes in stockholders’ equity, and cash flows for each of the three fiscal years in the period ended September 25, 2010 (52 weeks, 52
weeks, and 52 weeks, respectively). Our audits of the basic financial statements included the financial statement schedule listed in the index
appearing under Item 15. We have also audited J & J Snack Foods Corp. and Subsidiaries’ internal control over financial reporting as of
September 25, 2010, based on criteria established in
Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). J & J Snack Foods Corp. and Subsidiaries’ management is responsible for these financial statements and
financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on these financial statements and financial statement schedule and an opinion on J & J Snack Foods Corp.
and Subsidiaries’ internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting
is a process designed 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. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the consolidated financial position of J & J Snack Foods Corp. and Subsidiaries as of
September 25, 2010 and September 26, 2009, and the consolidated results of its operations and its consolidated cash flows for each of the three fiscal
years in the period ended September 25, 2010 (52 weeks, 52 weeks and 52 weeks) in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information set forth therein. In our opinion, J & J Snack Foods Corp. and
Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of September 25, 2010, based on criteria
established in
Internal Control-Integrated Framework
issued by COSO.
/s/ Grant Thornton LLP
Philadelphia, Pennsylvania
December 7, 2010
F-2
CONSOLIDATED BALANCE SHEETS
|
September 25,
2010 |
September 26,
2009 |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands, except share amounts) | |||||||||||
|
Assets
|
|||||||||||
|
Current
Assets
|
|||||||||||
|
Cash and cash
equivalents
|
$ | 74,665 | $ | 60,343 | |||||||
|
Marketable
securities held to maturity
|
15,481 | 38,653 | |||||||||
|
Receivables
|
|||||||||||
|
Trade, less
allowances of $591 and $623, respectively
|
68,183 | 59,734 | |||||||||
|
Other
|
1,692 | 808 | |||||||||
|
Inventories
|
50,630 | 46,004 | |||||||||
|
Prepaid
expenses and other
|
6,067 | 1,910 | |||||||||
|
Deferred
income taxes
|
3,813 | 3,659 | |||||||||
|
Total current
assets
|
220,531 | 211,111 | |||||||||
|
|
|||||||||||
|
Property, Plant
and Equipment, at cost
|
414,403 | 383,156 | |||||||||
|
Less
accumulated depreciation and amortization
|
304,311 | 285,983 | |||||||||
|
|
110,092 | 97,173 | |||||||||
|
Other
Assets
|
|||||||||||
|
Goodwill
|
70,070 | 60,314 | |||||||||
|
Other
intangible assets, net
|
55,284 | 49,125 | |||||||||
|
Marketable
securities held to maturity
|
26,300 | 19,994 | |||||||||
|
Other
|
1,717 | 2,110 | |||||||||
|
|
153,371 | 131,543 | |||||||||
|
|
$ | 483,994 | $ | 439,827 | |||||||
|
Liabilities
and Stockholders’ Equity
|
|||||||||||
|
Current
Liabilities
|
|||||||||||
|
Current
obligations under capital leases
|
$ | 244 | $ | 96 | |||||||
|
Accounts
payable
|
52,338 | 48,204 | |||||||||
|
Accrued
liabilities
|
4,269 | 5,919 | |||||||||
|
Accrued
compensation expense
|
12,244 | 11,656 | |||||||||
|
Dividends
payable
|
1,986 | 1,804 | |||||||||
|
Total current
liabilities
|
71,081 | 67,679 | |||||||||
|
|
|||||||||||
|
Long-term
obligations under capital leases
|
619 | 285 | |||||||||
|
Deferred income
taxes
|
30,401 | 27,033 | |||||||||
|
Other long-term
liabilities
|
1,318 | 1,986 | |||||||||
|
Stockholders’ Equity
|
|||||||||||
|
Preferred stock,
$1 par value; authorized, 10,000,000 shares; none issued
|
— | — | |||||||||
|
Common stock,
no par value; authorized, 50,000,000 shares; issued and outstanding
18,491,000 and 18,526,000 respectively |
38,453 | 41,777 | |||||||||
|
Accumulated
other comprehensive loss
|
(2,854 | ) | (3,431 | ) | |||||||
|
Retained
earnings
|
344,976 | 304,498 | |||||||||
|
|
380,575 | 342,844 | |||||||||
|
|
$ | 483,994 | $ | 439,827 | |||||||
The accompanying notes are an integral part of these
statements.
F-3
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share information)
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share information)
|
Fiscal year ended
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 25,
2010 (52 weeks) |
September 26,
2009 (52 weeks) |
September 27,
2008 (52 weeks) |
|||||||||||||
|
Net Sales
|
$ | 696,703 | $ | 653,047 | $ | 629,359 | |||||||||
|
Cost of goods
sold(1)
|
468,923 | 444,203 | 442,452 | ||||||||||||
|
Gross profit
|
227,780 | 208,844 | 186,907 | ||||||||||||
|
Operating
expenses
|
|||||||||||||||
|
Marketing(2)
|
72,103 | 69,493 | 69,792 | ||||||||||||
|
Distribution(3)
|
52,146 | 49,705 | 52,609 | ||||||||||||
|
Administrative(4)
|
24,282 | 22,713 | 21,545 | ||||||||||||
|
Other general
expense (income)
|
2,087 | (5 | ) | (375 | ) | ||||||||||
|
|
150,618 | 141,906 | 143,571 | ||||||||||||
|
Operating
income
|
77,162 | 66,938 | 43,336 | ||||||||||||
|
Other income
(expenses)
|
|||||||||||||||
|
Investment
income
|
1,114 | 1,386 | 2,665 | ||||||||||||
|
Interest
expense and other
|
(179 | ) | (115 | ) | (116 | ) | |||||||||
|
|
935 | 1,271 | 2,549 | ||||||||||||
|
|
|||||||||||||||
|
Earnings
before income taxes
|
78,097 | 68,209 | 45,885 | ||||||||||||
|
Income taxes
|
29,688 | 26,897 | 17,977 | ||||||||||||
|
NET EARNINGS
|
$ | 48,409 | $ | 41,312 | $ | 27,908 | |||||||||
|
Earnings per
diluted share
|
$ | 2.59 | $ | 2.21 | $ | 1.47 | |||||||||
|
Weighted
average number of diluted shares
|
18,703 | 18,713 | 19,008 | ||||||||||||
|
Earnings per
basic share
|
$ | 2.61 | $ | 2.23 | $ | 1.49 | |||||||||
|
Weighted
average number of basic shares
|
18,528 | 18,516 | 18,770 | ||||||||||||
|
(1)
|
Includes share-based compensation expense of $182 for the year ended September 25, 2010, $211 for the year ended September 26, 2009 and $229 for the year ended September 27, 2008. |
|
(2)
|
Includes share-based compensation expense of $448 for the year ended September 25, 2010, $729 for the year ended September 26, 2009 and $799 for the year ended September 27, 2008. |
|
(3)
|
Includes share-based compensation expense of $21 for the year ended September 25, 2010, $21 for the year ended September 26, 2009 and $23 for the year ended September 27, 2008. |
|
(4)
|
Includes share-based compensation expense of $597 for the year ended September 25, 2010, $755 for the year ended September 26, 2009 and $800 for the year ended September 27, 2008. |
The accompanying notes are an integral part of these
statements.
F-4
J & J Snack Foods Corp. and Subsidiaries
Consolidated Statement of Changes in Stockholders’ Equity
(in thousands)
Consolidated Statement of Changes in Stockholders’ Equity
(in thousands)
|
Common Stock
|
||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Shares
|
Amount
|
Accumulated
Other Comprehensive Loss |
Retained
Earnings |
Total
|
Comprehensive
Income |
|||||||||||||||||||||
|
Balance at
September 30, 2007
|
18,702 | $ | 47,280 | $ | (2,006 | ) | $ | 250,308 | $ | 295,582 | ||||||||||||||||
|
Cumulative
effective of change in accounting for income taxes
|
— | — | — | (925 | ) | (925 | ) | |||||||||||||||||||
|
Issuance of
common stock upon exercise of stock options
|
150 | 2,029 | — | — | 2,029 | |||||||||||||||||||||
|
Issuance of
common stock for employee stock purchase plan
|
31 | 782 | — | — | 782 | |||||||||||||||||||||
|
Foreign
currency translation adjustment
|
— | — | 3 | — | 3 | $ | 3 | |||||||||||||||||||
|
Issuance of
common stock under deferred stock plan
|
— | 388 | — | — | 388 | |||||||||||||||||||||
|
Dividends
declared
|
— | — | — | (6,925 | ) | (6,925 | ) | |||||||||||||||||||
|
Share-based
compensation
|
— | 1,475 | — | — | 1,475 | |||||||||||||||||||||
|
Repurchase of
common stock
|
(135 | ) | (3,539 | ) | — | — | (3,539 | ) | ||||||||||||||||||
|
Net earnings
|
— | — | — | 27,908 | 27,908 | 27,908 | ||||||||||||||||||||
|
Comprehensive
income
|
— | — | — | — | — | $ | 27,911 | |||||||||||||||||||
|
Balance at
September 27, 2008
|
18,748 | $ | 48,415 | $ | (2,003 | ) | $ | 270,366 | $ | 316,778 | ||||||||||||||||
|
Issuance of
common stock upon exercise of stock options
|
198 | 3,284 | — | — | 3,284 | |||||||||||||||||||||
|
Issuance of
common stock for employee stock purchase plan
|
26 | 687 | — | — | 687 | |||||||||||||||||||||
|
Foreign
currency translation adjustment
|
— | — | (1,428 | ) | — | (1,428 | ) | $ | (1,428 | ) | ||||||||||||||||
|
Issuance of
common stock under deferred stock plan
|
5 | 368 | — | — | 368 | |||||||||||||||||||||
|
Dividends
declared
|
— | — | — | (7,180 | ) | (7,180 | ) | |||||||||||||||||||
|
Share-based
compensation
|
— | 1,533 | — | — | 1,533 | |||||||||||||||||||||
|
Repurchase of
common stock
|
(451 | ) | (12,510 | ) | — | — | (12,510 | ) | ||||||||||||||||||
|
Net earnings
|
— | — | — | 41,312 | 41,312 | 41,312 | ||||||||||||||||||||
|
Comprehensive
income
|
— | — | — | — | — | $ | 39,884 | |||||||||||||||||||
|
Balance at
September 26, 2009
|
18,526 | $ | 41,777 | $ | (3,431 | ) | $ | 304,498 | $ | 342,844 | ||||||||||||||||
|
Issuance of
common stock upon exercise of stock options
|
142 | 2,325 | — | — | 2,325 | |||||||||||||||||||||
|
Issuance of
common stock for employee stock purchase plan
|
22 | 726 | — | — | 726 | |||||||||||||||||||||
|
Foreign
currency translation adjustment
|
— | — | 577 | — | 577 | $ | 577 | |||||||||||||||||||
|
Issuance of
common stock under deferred stock plan
|
5 | 280 | — | — | 280 | |||||||||||||||||||||
|
Dividends
declared
|
— | — | — | (7,931 | ) | (7,931 | ) | |||||||||||||||||||
|
Share-based
compensation
|
— | 1,113 | — | — | 1,113 | |||||||||||||||||||||
|
Repurchase of
common stock
|
(204 | ) | (7,768 | ) | — | — | (7,768 | ) | ||||||||||||||||||
|
Net earnings
|
— | — | — | 48,409 | 48,409 | 48,409 | ||||||||||||||||||||
|
Comprehensive
income
|
— | — | — | — | — | $ | 48,986 | |||||||||||||||||||
|
Balance at
September 25, 2010
|
18,491 | $ | 38,453 | $ | (2,854 | ) | $ | 344,976 | $ | 380,575 | ||||||||||||||||
The accompanying notes are an integral part of these
statements.
F-5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
Fiscal year ended
|
||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 25,
2010 (52 weeks) |
September 26,
2009 (52 weeks) |
September 27,
2008 (52 weeks) |
||||||||||||||||
|
Operating
activities:
|
||||||||||||||||||
|
Net earnings
|
$ | 48,409 | $ | 41,312 | $ | 27,908 | ||||||||||||
|
Adjustments
to reconcile net earnings to net cash provided by operating activities:
|
||||||||||||||||||
|
Depreciation
and amortization of fixed assets
|
24,498 | 22,663 | 22,181 | |||||||||||||||
|
Amortization
of intangibles and deferred costs
|
5,354 | 5,090 | 5,289 | |||||||||||||||
|
Gains from
disposals and impairment of property & equipment
|
(14 | ) | (31 | ) | (174 | ) | ||||||||||||
|
Share-based
compensation
|
1,248 | 1,716 | 1,851 | |||||||||||||||
|
Deferred
income taxes
|
3,219 | 3,839 | 3,446 | |||||||||||||||
|
Changes in
assets and liabilities, net of effects from purchase of companies:
|
||||||||||||||||||
|
(Increase)
decrease in accounts receivable
|
(8,629 | ) | 1,144 | (4,701 | ) |
|
||||||||||||
|
(Increase)
decrease in inventories
|
(4,422 | ) | 2,993 | (2,448 | ) | |||||||||||||
|
(Increase)
decrease in prepaid expenses and other
|
(4,101 | ) | 37 | (537 | ) | |||||||||||||
|
Increase in
accounts payable and accrued liabilities
|
2,446 | 1,870 | 2,082 | |||||||||||||||
|
Net cash
provided by operating activities
|
68,008 | 80,633 | 54,897 | |||||||||||||||
|
Investing
activities:
|
||||||||||||||||||
|
Purchases of
property, plant and equipment
|
(33,531 | ) | (27,190 | ) | (22,781 | ) | ||||||||||||
|
Payments for
purchases of companies, net of cash acquired
|
(25,185 | ) | — | — | ||||||||||||||
|
Purchase of
marketable securities
|
(50,496 | ) | (66,380 | ) | (2,470 | ) | ||||||||||||
|
Proceeds from
redemption and sales of marketable securities
|
67,362 | 10,204 | — | |||||||||||||||
|
Purchase of
auction market preferred stock
|
— | — | (10,500 | ) | ||||||||||||||
|
Proceeds from
redemption and sales of auction market preferred stock
|
— | 35,200 | 16,500 | |||||||||||||||
|
Proceeds from
disposal of property and equipment
|
407 | 326 | 932 | |||||||||||||||
|
Other
|
(12 | ) | 15 | (535 | ) | |||||||||||||
|
Net cash used
in investing activities
|
(41,455 | ) | (47,825 | ) | (18,854 | ) | ||||||||||||
|
Financing
activities:
|
||||||||||||||||||
|
Payments to
repurchase common stock
|
(7,768 | ) | (12,510 | ) | (3,539 | ) | ||||||||||||
|
Proceeds from
issuance of common stock
|
3,051 | 3,971 | 2,811 | |||||||||||||||
|
Payments of
cash dividend
|
(7,749 | ) | (7,108 | ) | (6,781 | ) | ||||||||||||
|
Payments on
capitalized lease obligations
|
(143 | ) | (93 | ) | (91 | ) | ||||||||||||
|
Net cash used
in financing activities
|
(12,609 | ) | (15,740 | ) | (7,600 | ) | ||||||||||||
|
Effect of
exchange rate on cash and cash equivalents
|
378 | (990 | ) | 3 | ||||||||||||||
|
Net increase
in cash and cash equivalents
|
14,322 | 16,078 | 28,446 | |||||||||||||||
|
Cash and cash
equivalents at beginning of year
|
60,343 | 44,265 | 15,819 | |||||||||||||||
|
Cash and cash
equivalents at end of year
|
$ | 74,665 | $ | 60,343 | $ | 44,265 | ||||||||||||
The accompanying notes are an integral part of these
statements.
F-6
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
J & J Snack Foods Corp. and
Subsidiaries (the Company) manufactures, markets and distributes a variety of nutritional snack foods and beverages to the food service and retail
supermarket industries. A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated
financial statements follows.
1. Principles of Consolidation
The consolidated financial
statements include the accounts of J & J Snack Foods Corp. and its wholly-owned subsidiaries. Intercompany balances and transactions have been
eliminated in the consolidated financial statements.
2. Revenue Recognition
We recognize revenue from our
products when the products are shipped to our customers. Repair and maintenance equipment service revenue is recorded when it is performed provided the
customer terms are that the customer is to be charged on a time and material basis or on a straight-line basis over the term of the contract when the
customer has signed a service contract. Revenue is recognized only where persuasive evidence of an arrangement exists, our price is fixed or estimable
and collectability is reasonably assured. We record offsets to revenue for allowances, end-user pricing adjustments, trade spending, coupon redemption
costs and returned product. Customers generally do not have the right to return product unless it is damaged or defective.
All amounts billed to customers
related to shipping and handling are classified as revenues. Our product costs include amounts for shipping and handling, therefore, we charge our
customers shipping and handling fees at the time the products are shipped or when services are performed. The cost of shipping products to the customer
is recognized at the time the products are shipped to the customer and our policy is to classify them as Distribution expenses. The cost of shipping
products to the customer classified as Distribution expenses was $52,146,000, $49,705,000 and $52,609,000 for the fiscal years ended 2010, 2009 and
2008, respectively.
During the years ended September
25, 2010, September 26, 2009 and September 27, 2008, we sold $16,185,000, $16,745,000 and $11,881,000, respectively, of repair and maintenance service
contracts related to frozen beverage machines. At September 25, 2010 and September 26, 2009, deferred income on repair and maintenance service
contracts was $1,416,000 and $1,424,000, respectively, of which $67,000 and $90,000 is included in other long-term liabilities as of September 25, 2010
and September 26, 2009, respectively and the balance is reflected as short-term and included in accrued liabilities on the consolidated balance sheet.
Repair and maintenance service contract income of $16,192,000, $16,451,000 and $11,911,000 was recognized for the fiscal years ended 2010, 2009 and
2008, respectively.
3. Foreign Currency
Assets and liabilities in foreign
currencies are translated into U.S. dollars at the rate of exchange prevailing at the balance sheet date. Revenues and expenses are translated at the
average rate of exchange for the period. The cumulative translation adjustment is recorded as a separate component of stockholders’ equity and
changes to such are included in comprehensive income.
4. Use of Estimates
In preparing financial statements
in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
5. Cash Equivalents
Cash equivalents are short-term,
highly liquid investments with original maturities of three months or less.
F-7
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
6. Concentrations of Credit Risk and Accounts
Receivable
We maintain cash balances at
financial institutions located in various states. Some of our accounts are insured by the Federal Deposit Insurance Corporation up to $250,000. We
customarily maintain cash balances in excess of these insurance limits. Some of our cash is in bank accounts which are insured by the Federal Deposit
Insurance Corporation with no limit.
Other financial instruments that
could potentially subject us to concentrations of credit risk are trade accounts receivable; however, such risks are limited due to the large number of
customers comprising our customer base and their dispersion across geographic regions. We usually have approximately 10 customers with accounts
receivable balances of between $1 million and $7 million.
We have several large customers
that account for a significant portion of our sales. Our top ten customers accounted for 42%, 43% and 42% of our sales during fiscal years 2010, 2009
and 2008, respectively, with our largest customer accounting for 8% of our sales in 2010, 9% in 2009 and 9% in 2008. Three of the ten customers are
food distributors who sell our product to many end users.
The majority of our accounts
receivable are due from trade customers. Credit is extended based on evaluation of our customers’ financial condition and collateral is not
required. Accounts receivable payment terms vary and are stated in the financial statements at amounts due from customers net of an allowance for
doubtful accounts. Accounts outstanding longer than the payment terms are considered past due. We determine our allowance by considering a number of
factors, including the length of time trade accounts receivable are past due, our previous loss history, customers’ current ability to pay their
obligations to us, and the condition of the general economy and the industry as a whole. We write off accounts receivable when they become
uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts.
7. Inventories
Inventories are valued at the
lower of cost (determined by the first-in, first-out or weighted-average method) or market. We recognize abnormal amounts of idle facilities, freight,
handling costs, and spoilage as charges of the current period. Additionally, we allocate fixed production overheads to inventories based on the normal
capacity of our production facilities. We calculate 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. This requires us 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 is not 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.
We review for slow moving and
obsolete inventory and a reserve is established for the value of inventory that we estimate will not be used. At September 25, 2010 and September 26,
2009, our reserve for inventory was $4,189,000 and $4,209,000, respectively.
8. Investment Securities
We classify our investment
securities in one of three categories: held to maturity, trading, or available for sale; however, we have classified our auction market preferred stock
separately in our statement of cash flows because of the failure of the auction market beginning in February 2008. The balance of our investment
portfolio consists solely of investments classified as held to maturity. See Note C for further information on our holdings of investment
securities.
F-8
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
9. Depreciation and Amortization
Depreciation of equipment and
buildings is provided for by the straight-line method over the assets’ estimated useful lives. We review our equipment and buildings to ensure
that they provide economic benefit and are not impaired.
Amortization of improvements is
provided for by the straight-line method over the 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 3 to 20 years.
We use market value tests and
discounted cash flow models to test goodwill and other intangible assets for impairment. These assets are reviewed for impairment annually or more
frequently as a triggering event, such as the loss of a major customer, might occur.
10. Fair Value of Financial Instruments
The carrying value of our
short-term financial instruments, such as accounts receivables and accounts payable, approximate their fair values, based on the short-term maturities
of these instruments.
11. Income Taxes
We account for our income taxes
under the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse.
Deferred tax expense is the result of changes in deferred tax assets and liabilities.
Additionally, we recognize a
liability for income taxes and associated penalties and interest for tax positions taken or expected to be taken in a tax return which are more likely
than not to be overturned by taxing authorities (“uncertain tax positions”). We have not recognized a tax benefit in our financial statements
for these uncertain tax positions.
On September 30, 2007, the first
day of the 2008 fiscal year, we recognized a $925,000 decrease to opening retained earnings from the cumulative effect of recognizing a liability for
uncertain tax positions. As of September 25, 2010 and September 26, 2009, the total amount of gross unrecognized tax benefits is $1,249,000 and
$1,895,000, respectively, all of which would impact our effective tax rate over time, if recognized. We recognize interest and penalties related to
income tax matters as a part of the provision for income taxes. The Company had $429,000 and $742,000 of accrued interest and penalties as of September
25, 2010 and September 26, 2009, respectively. We recognized $7,000 and $3,000 of penalties and interest in the years ended September 25, 2010 and
September 26, 2009, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| (in thousands) | ||||||
|---|---|---|---|---|---|---|
|
Balance at September 26, 2009
|
$ | 1,895 | ||||
|
Additions based on tax positions related to the current year
|
158 | |||||
|
Reductions for tax positions of prior years
|
(750 | ) | ||||
|
Settlements
|
(54 | ) | ||||
|
Balance at September 25, 2010
|
$ | 1,249 | ||||
In addition to our federal tax
return and tax returns for Mexico and Canada, we file tax returns in all states that have a corporate income tax. Virtually all the returns noted above
are open for examination for three to four years.
F-9
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
12. Earnings Per Common Share
Basic earnings per common share
(EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during
the period. Diluted EPS takes into consideration the potential dilution that could occur if securities (stock options) or other contracts to issue
common stock were exercised and converted into common stock.
Our calculation of EPS is as
follows:
|
Fiscal Year Ended September 25, 2010
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Income
(Numerator) |
Shares
(Denominator) |
Per Share
Amount |
|||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||
|
Earnings
Per Basic Share
|
|||||||||||||||
|
Net Income
available to common stockholders
|
$ | 48,409 | 18,528 | $ | 2.61 | ||||||||||
|
Effect of
Dilutive Securities
|
|||||||||||||||
|
Options
|
— | 175 | (.02 | ) | |||||||||||
|
Earnings
Per Diluted Share
|
|||||||||||||||
|
Net Income
available to common stockholders plus assumed conversions
|
$ | 48,409 | 18,703 | $ | 2.59 | ||||||||||
110,900 anti-dilutive shares have been excluded in the
computation of 2010 diluted EPS because the options’ exercise price is greater than the average market price of the common stock.
|
Fiscal Year Ended September 26, 2009
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Income
(Numerator) |
Shares
(Denominator) |
Per Share
Amount |
|||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||
|
Earnings
Per Basic Share
|
|||||||||||||||
|
Net Income
available to common stockholders
|
$ | 41,312 | 18,516 | $ | 2.23 | ||||||||||
|
Effect of
Dilutive Securities
|
|||||||||||||||
|
Options
|
— | 197 | (.02 | ) | |||||||||||
|
Earnings
Per Diluted Share
|
|||||||||||||||
|
Net Income
available to common stockholders plus assumed conversions
|
$ | 41,312 | 18,713 | $ | 2.21 | ||||||||||
114,236 anti-dilutive shares have been excluded in the
computation of 2009 diluted EPS because the options’ exercise price is greater than the average market price of the common stock.
|
Fiscal Year Ended September 27, 2008
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Income
(Numerator) |
Shares
(Denominator) |
Per Share
Amount |
|||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||
|
Earnings
Per Basic Share
|
|||||||||||||||
|
Net Income
available to common stockholders
|
$ | 27,908 | 18,770 | $ | 1.49 | ||||||||||
|
Effect of
Dilutive Securities
|
|||||||||||||||
|
Options
|
— | 238 | (.02 | ) | |||||||||||
|
Earnings
Per Diluted Share
|
|||||||||||||||
|
Net Income
available to common stockholders plus assumed conversions
|
$ | 27,908 | 19,008 | $ | 1.47 | ||||||||||
273,471 anti-dilutive shares have been excluded in the
computation of 2008 diluted EPS because the options’ exercise price is greater than the average market price of the common stock.
F-10
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
13. Accounting for Stock-Based
Compensation
At September 25, 2010, the
Company has three stock-based employee compensation plans. Share-based compensation was recognized as follows:
|
Fiscal year ended
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 25,
2010 |
September 26,
2009 |
September 27,
2008 |
|||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||
|
Stock options
|
$ | 592 | $ | 508 | $ | 1,019 | |||||||||
|
Stock
purchase plan
|
184 | 237 | 137 | ||||||||||||
|
Deferred
stock issued to outside directors
|
138 | 138 | 138 | ||||||||||||
|
Restricted
stock issued to an employee
|
28 | 87 | 100 | ||||||||||||
|
|
$ | 942 | $ | 970 | $ | 1,394 | |||||||||
|
Per diluted
share
|
$ | .05 | $ | .05 | $ | .07 | |||||||||
|
The above
compensation is net of tax benefits
|
$ | 306 | $ | 746 | $ | 457 | |||||||||
At September 25, 2010, the
Company has unrecognized compensation expense of approximately $960,000 to be recognized over the next three fiscal years.
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 2010, 2009 and 2008: expected volatility of 29.0% for fiscal year 2010, 23.3% for year 2009 and 25.2% for year 2008; weighted average
risk-free interest rates of 2.21%, 2.70% and 3.60%; dividend rate of 1.2%, 1.2% and 1.1% and expected lives ranging between 5 and 10 years for all
years. An expected forfeiture rate of 13% was used for fiscal year 2010, and 15% was used for 2009 and 2008.
Expected volatility is based on
the historical volatility of the price of our common shares over the past 50 to 54 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 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.
14. Advertising Costs
Advertising costs are expensed as
incurred. Total advertising expense was $2,751,000, $2,267,000, and $1,666,000 for the fiscal years 2010, 2009 and 2008, respectively.
15. Commodity Price Risk Management
Our most significant raw material
requirements include flour, shortening, corn syrup, sugar, juice, cheese, chocolate, and a variety of nuts. We attempt to minimize the effect of future
price fluctuations related to the purchase of raw materials primarily through forward purchasing to cover future manufacturing requirements, generally
for periods from 1 to 12 months. As of September 25, 2010, we have approximately $44 million of such commitments. Futures contracts are not used in
combination with forward purchasing of these raw materials. Our procurement practices are intended to reduce the risk of future price increases, but
also may potentially limit the ability to benefit from possible price decreases. Our policy is to recognize estimated losses on purchase commitments
when they occur. At each of the last three fiscal year ends, we did not have any material losses on our purchase commitments.
F-11
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
16. Research and Development Costs
Research and development costs
are expensed as incurred. Total research and development expense was $866,000, $761,000 and $571,000 for the fiscal years 2010, 2009 and 2008,
respectively.
17. Recent Accounting Pronouncements
In December 2007, the FASB issued
guidance expanding the definition of a business combination and requiring the fair value of the purchase price of an acquisition, including the
issuance of equity securities, to be determined on the acquisition date. The guidance also requires that all assets, liabilities, contingent
considerations, and contingencies of an acquired business be recorded at fair value at the acquisition date. In addition, the guidance requires that
acquisition costs generally be expensed in the period incurred and changes in accounting for deferred tax asset valuation allowances and acquired
income tax uncertainties after the measurement period to impact income tax expense. We adopted this guidance for the acquisitions we made in our fiscal
year 2010.
In August 2008, the FASB issued
guidance that revises the factors that a company should consider to develop renewal or extension assumptions used in estimating the useful life of a
recognized intangible asset. The new guidance will apply to all intangible assets acquired after the guidance’s effective date. The guidance also
requires new disclosures for all intangible assets recognized as of, and subsequent to, the effective date. The underlying purpose of the guidance is
to improve the consistency between the period of expected cash flows used to measure the fair value of a recognized intangible asset and the useful
life of an intangible asset. This guidance was effective for our 2010 fiscal year. The adoption of this guidance had no impact on our consolidated
financial statements.
In April 2009, the FASB issued
guidance that amends the provisions in its guidance issued in December 2007 for the initial recognition and measurement, subsequent measurement and
accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. This revised guidance eliminates the
distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria, included in the December
2007 guidance and carries forward most of the provisions related to acquired contingencies in its June 2001 guidance. This guidance was effective for
contingent assets and contingent liabilities acquired in business combinations for which the acquisition date was on or after the beginning of our
fiscal year 2010. The effect of this guidance on our consolidated financial statements will depend upon the nature, terms and size of any acquired
contingencies consummated in fiscal year 2010 or later. For the acquisitions we made in fiscal year 2010, the adoption of this guidance had no effect
on our consolidated financial statements.
18. Reclassifications
Certain prior year financial
statement amounts have been reclassified to be consistent with the presentation for the current year.
NOTE B — ACQUISITIONS
On January 31, 2006, we acquired
the stock of ICEE of Hawaii. ICEE of Hawaii, headquartered in Waipahu, Hawaii, distributes ICEE frozen beverages and related products throughout the
Hawaiian islands.
On May 26, 2006, The ICEE
Company, our frozen carbonated beverage distribution company, acquired the SLUSH PUPPIE branded business from Dr. Pepper/Seven Up, Inc., a Cadbury
Schweppes Americas Beverages Company for $18.1 million plus approximately $4.3 million in working capital. SLUSH PUPPIE, North America’s leading
brand for frozen non-carbonated beverages, is sold through an existing established distributor network to over 20,000 locations in the United States
and Canada as well as to certain international markets.
On January 9, 2007 we acquired
the assets of Hom/Ade Foods, Inc., a manufacturer and distributor of biscuits and dumplings sold under the MARY B’S and private label store brands
to the supermarket industry. Hom/Ade is headquartered in Pensacola, Florida.
F-12
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE B — ACQUISITIONS
(Continued)
On January 31, 2007 we acquired
the assets of Radar Inc., a manufacturer and seller of fig and fruit bars selling its products under the brand DADDY RAY’S. Headquartered and with
its manufacturing facility in Moscow Mills, Missouri (outside of St. Louis), Radar, Inc. sells to the retail grocery segment and mass merchandisers,
both branded and private label.
On April 2, 2007, we acquired the
WHOLE FRUIT Sorbet and FRUIT-A-FREEZE Fruit Bar brands, along with related assets including a manufacturing facility located in Norwalk, California
which sells primarily to the supermarket industry.
On June 25, 2007, we acquired the
assets of an ICEE distributor in Kansas.
In February 2010, we acquired the
assets of Parrot Ice, a manufacturer and distributor of a premium brand frozen beverage sold primarily in convenience stores. Revenues from Parrot Ice
were approximately $1.5 million for our 2010 fiscal year.
In June 2010, we acquired the
assets of California Churros, a manufacturer and distributor of a premium brand churro. Revenues from California Churros were approximately $2.5
million for our 2010 fiscal year.
The purchase price allocation for
the California Churros acquisition and other acquisitions, including Parrot Ice, which were made during the 2010 fiscal year is as
follows:
|
California
Churros |
Other
|
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | |||||||||||
|
Working Capital
|
$ | 1,075 | $ | — | |||||||
|
Property, plant
& equipment
|
2,373 | 1,135 | |||||||||
|
Trade Names
|
4,024 | — | |||||||||
|
Customer
Relationships
|
6,737 | — | |||||||||
|
Covenant not to
Compete
|
35 | 50 | |||||||||
|
Goodwill
|
9,756 | — | |||||||||
|
|
$ | 24,000 | $ | 1,185 | |||||||
The goodwill and intangible
assets acquired in the business combinations are recorded at fair value. To measure fair value for such assets, we use techniques including discounted
expected future cash flows (Level 3 input).
Acquisition costs of $184,000 for
these acquisitions is included in administrative and other general expense.
NOTE C — INVESTMENT SECURITIES
We have classified our investment
securities as marketable securities held to maturity and auction market preferred stock (AMPS). The FASB defines fair value as the price that would be
received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a
market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis
for considering such assumptions, the FASB has established three levels of inputs that may be used to measure fair value:
|
Level
1
|
Observable inputs such as quoted prices in active markets for identical assets or liabilities;
|
|||||
|
Level
2
|
Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and
|
|||||
|
Level
3
|
Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own
assumptions.
|
|||||
We have concluded that the
carrying value of certificates of deposit placed through the Certificate of Deposit Account Registry Service equals fair market value. Other marketable
securities held to maturity values are derived solely from level 1 inputs.
F-13
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C — INVESTMENT SECURITIES
(Continued)
The amortized cost, unrealized
gains and losses, and fair market values of our investment securities held to maturity at September 25, 2010 are summarized as
follows:
|
Amortized
Cost |
Gross
Unrealized Gains |
Fair
Unrealized Losses |
Market
Value |
||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | |||||||||||||||||||
|
US Government
Agency Debt
|
$ | 8,000 | $ | 53 | $ | — | $ | 8,053 | |||||||||||
|
FDIC Backed
Corporate Debt
|
13,107 | 144 | — | 13,251 | |||||||||||||||
|
Certificates
of Deposit
|
20,674 | 5 | — | 20,679 | |||||||||||||||
|
|
$ | 41,781 | $ | 202 | $ | — | $ | 41,983 | |||||||||||
All of the certificates of
deposit are within the FDIC limits for insurance coverage.
The amortized cost, unrealized
gains and losses, and fair market values of our investment securities held to maturity at September 26, 2009 are summarized as
follows:
|
Amortized
Cost |
Gross
Unrealized Gains |
Fair
Unrealized Losses |
Market
Value |
||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | |||||||||||||||||||
|
US Government
Agency Debt
|
$ | 6,009 | $ | 22 | $ | 1 | $ | 6,030 | |||||||||||
|
FDIC Backed
Corporate Debt
|
13,213 | 198 | — | 13,411 | |||||||||||||||
|
Certificates
of Deposit
|
39,425 | 21 | 3 | 39,443 | |||||||||||||||
|
|
$ | 58,647 | $ | 241 | $ | 4 | $ | 58,884 | |||||||||||
All of the certificates of
deposit are within the FDIC limits for insurance coverage.
The amortized cost and fair value
of the Company’s held to maturity securities by contractual maturity at September 25, 2010 and September 26, 2009 are summarized as
follows:
|
September 25, 2010
|
September 26, 2009
|
||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Amortized
Cost |
Fair
Market Value |
Amortized
Cost |
Fair
Market Value |
||||||||||||||||
| (in thousands) | |||||||||||||||||||
|
Due in one
year or less
|
$ | 15,481 | $ | 15,501 | $ | 38,653 | $ | 38,668 | |||||||||||
|
Due after one
year through five years
|
26,300 | 26,482 | 19,994 | 20,216 | |||||||||||||||
|
Total held to
maturity securities
|
$ | 41,781 | $ | 41,983 | $ | 58,647 | $ | 58,884 | |||||||||||
|
Less current
portion
|
15,481 | 15,501 | 38,653 | 38,668 | |||||||||||||||
|
Long term held
to maturity securities
|
$ | 26,300 | $ | 26,482 | $ | 19,994 | $ | 20,216 | |||||||||||
Proceeds from the sale and
redemption of marketable securities were $67,362,000 and $10,204,000 in the years ended September 25, 2010 and September 26, 2009, respectively, and
none in the year ended September 27, 2008, with no gain or loss recorded. We use the specific identification method to determine the cost of securities
sold.
F-14
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE D — INVENTORIES
Inventories consist of the
following:
|
September 25,
2010 |
September 26,
2009 |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | |||||||||||
|
Finished goods
|
$ | 22,171 | $ | 19,913 | |||||||
|
Raw materials
|
8,702 | 8,060 | |||||||||
|
Packaging
materials
|
4,727 | 5,141 | |||||||||
|
Equipment parts
and other
|
15,030 | 12,890 | |||||||||
|
|
$ | 50,630 | $ | 46,004 | |||||||
Inventory is presented net of an
allowance for obsolescence of $4,189,000 and $4,209,000 as of fiscal year ends 2010 and 2009, respectively.
NOTE E — PROPERTY, PLANT AND
EQUIPMENT
Property, plant and equipment
consist of the following:
|
September 25,
2010 |
September 26,
2009 |
Estimated
Useful Lives |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | ||||||||||||||
|
Land
|
$ | 2,016 | $ | 1,416 | — | |||||||||
|
Buildings
|
13,266 | 8,672 | 15–39.5 | years | ||||||||||
|
Plant
machinery and equipment
|
144,697 | 133,758 | 5–20 | years | ||||||||||
|
Marketing
equipment
|
214,545 | 202,708 | 5–7 | years | ||||||||||
|
Transportation
equipment
|
3,785 | 2,733 | 5 | years | ||||||||||
|
Office
equipment
|
12,690 | 11,461 | 3–5 | years | ||||||||||
|
Improvements
|
19,590 | 18,454 | 5–20 | years | ||||||||||
|
Construction
in progress
|
3,814 | 3,954 | — | |||||||||||
|
|
$ | 414,403 | $ | 383,156 | ||||||||||
NOTE F — GOODWILL AND INTANGIBLE
ASSETS
Our four reporting units, which
are also reportable segments, are Food Service, Retail Supermarket, The Restaurant Group and Frozen Beverages.
The carrying amount of acquired
intangible assets for the reportable segments are as follows:
|
September 25, 2010
|
September 26, 2009
|
||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Gross
Carrying Amount |
Accumulated
Amortization |
Gross
Carrying Amount |
Accumulated
Amortization |
||||||||||||||||
| (in thousands) | |||||||||||||||||||
|
Food
Service
|
|||||||||||||||||||
|
Indefinite
lived intangible assets
|
|||||||||||||||||||
|
Trade Names
|
$ | 12,204 | $ | — | $ | 8,180 | $ | — | |||||||||||
|
Amortized
intangible assets
|
|||||||||||||||||||
|
Non compete
agreements
|
470 | 351 | 435 | 282 | |||||||||||||||
|
Customer
relationships
|
40,024 | 15,160 | 33,287 | 11,526 | |||||||||||||||
|
Licenses and
rights
|
3,606 | 2,287 | 3,606 | 2,061 | |||||||||||||||
|
|
$ | 56,304 | $ | 17,798 | $ | 45,508 | $ | 13,869 | |||||||||||
F-15
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE F — GOODWILL AND INTANGIBLE ASSETS
(Continued)
|
September 25, 2010
|
September 26, 2009
|
||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Gross
Carrying Amount |
Accumulated
Amortization |
Gross
Carrying Amount |
Accumulated
Amortization |
||||||||||||||||
| (in thousands) | |||||||||||||||||||
|
Retail
Supermarket
|
|||||||||||||||||||
|
Indefinite
lived intangible assets
|
|||||||||||||||||||
|
Trade Names
|
$ | 2,731 | $ | — | $ | 2,731 | $ | — | |||||||||||
|
The
Restaurant Group
|
|||||||||||||||||||
|
Amortized
intangible assets
|
|||||||||||||||||||
|
Licenses and
rights
|
$ | — | $ | — | $ | — | $ | — | |||||||||||
|
Frozen
Beverages
|
|||||||||||||||||||
|
Indefinite
lived intangible assets
|
|||||||||||||||||||
|
Trade Names
|
$ | 9,315 | $ | — | $ | 9,315 | $ | — | |||||||||||
|
Amortized
intangible assets
|
|||||||||||||||||||
|
Non compete
agreements
|
198 | 165 | 148 | 141 | |||||||||||||||
|
Customer
relationships
|
6,478 | 2,876 | 6,478 | 2,212 | |||||||||||||||
|
Licenses and
rights
|
$ | 1,601 | $ | 504 | $ | 1,601 | $ | 434 | |||||||||||
|
|
$ | 17,592 | $ | 3,545 | $ | 17,542 | $ | 2,787 | |||||||||||
The gross carrying amount of
intangible assets is determined by applying a discounted cash flow model to the future sales and earnings associated with each intangible asset or is
set by contract cost. The amortization period used for definite lived intangible assets is set by contract period or by the period over which the bulk
of the discounted cash flow is expected to be generated. We currently believe that we will receive the benefit from the use of the trade names
classified as indefinite lived intangible assets indefinitely and they are therefore not amortized.
Licenses and rights are being
amortized by the straight-line method over periods ranging from 3 to 20 years and amortization expense is reflected throughout operating
expenses.
Intangible assets of $10,796,000
were acquired in the food service segment in the California Churros acquisition in fiscal year 2010.
Aggregate amortization expense of
intangible assets for the fiscal years 2010, 2009 and 2008 was $4,687,000, $4,508,000 and $4,700,000.
Estimated amortization expense
for the next five fiscal years is approximately $4,800,000 in 2011, $4,400,000 in 2012, 2013 and 2014 and $4,300,000 in 2015. The weighted average
amortization period of the intangible assets is 10.1 years.
Goodwill
The carrying amounts of goodwill
for the reportable segments are as follows:
|
Food
Service |
Retail
Supermarkets |
Restaurant
Group |
Frozen
Beverages |
Total
|
|||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | |||||||||||||||||||||||
|
Balance
at
September 25, 2010 |
$ | 33,744 | $ | — | $ | 386 | $ | 35,940 | $ | 70,070 | |||||||||||||
|
Balance
at
September 26, 2009 |
$ | 23,988 | $ | — | $ | 386 | $ | 35,940 | $ | 60,314 | |||||||||||||
F-16
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE F — GOODWILL AND INTANGIBLE ASSETS
(Continued)
The carrying value of goodwill is
determined based on the excess of the purchase price of acquisitions over the estimated fair value of tangible and intangible net assets. Goodwill is
not amortized but is evaluated annually by management for impairment. Our analysis is based on a combination of the income approach, which estimates
the fair value based on future discounted cash flows, and the market approach, which estimates the fair value based on comparable market prices. Under
the income approach the Company used a discounted cash flow which requires Level 3 inputs such as: annual growth rates, discount rates based upon the
weighted average cost of capital and terminal values based upon our stock market multiples. There were no impairment charges in 2010, 2009 or
2008.
Goodwill of $9,756,000 was
acquired in the food service segment in the California Churros acquisition in fiscal year 2010.
In December 2006, we entered into
an amended and restated loan agreement with our existing banks which provides for up to a $50,000,000 revolving credit facility repayable in December
2011, with the availability of repayments without penalty. The agreement contains restrictive covenants and requires commitment fees in accordance with
standard banking practice. As of September 25, 2010 and September 26, 2009, there were no outstanding balances under the facility.
NOTE H — OBLIGATIONS UNDER CAPITAL
LEASES
Obligations under capital leases
consist of the following:
|
September 25,
2010 |
September 26,
2009 |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | |||||||||||
|
Capital lease
obligations, with interest at 5.8%, payable in monthly
installments of $14,625, through May 2014 |
$ | 578 | $ | — | |||||||
|
Capital lease
obligations, with interest at 2.6%, payable in monthly
installments of $8,700, through August 2013 |
285 | 381 | |||||||||
|
|
863 | 381 | |||||||||
|
Less current
portion
|
244 | 96 | |||||||||
|
|
$ | 619 | $ | 285 | |||||||
NOTE I — INCOME TAXES
Income tax expense (benefit) is
as follows:
|
Fiscal year ended
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 25,
2010 |
September 26,
2009 |
September 27,
2008 |
|||||||||||||
| (in thousands) | |||||||||||||||
|
Current
|
|||||||||||||||
|
U.S. Federal
|
$ | 21,020 | $ | 18,574 | $ | 11,417 | |||||||||
|
Foreign
|
970 | 706 | 844 | ||||||||||||
|
State
|
4,484 | 3,744 | 2,270 | ||||||||||||
|
|
26,474 | 23,024 | 14,531 | ||||||||||||
F-17
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I — INCOME TAXES
(Continued)
|
Fiscal year ended
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 25,
2010 |
September 26,
2009 |
September 27,
2008 |
|||||||||||||
| (in thousands) | |||||||||||||||
|
Deferred
|
|||||||||||||||
|
U.S. Federal
|
$ | 2,692 | $ | 3,106 | $ | 2,983 | |||||||||
|
Foreign
|
(48 | ) | 109 | (168 | ) | ||||||||||
|
State
|
570 | 658 | 631 | ||||||||||||
|
|
3,214 | 3,873 | 3,446 | ||||||||||||
|
|
$ | 29,688 | $ | 26,897 | $ | 17,977 | |||||||||
The provisions for income taxes
differ from the amounts computed by applying the statutory federal income tax rate of approximately 35% to earnings before income taxes for the
following reasons:
|
Fiscal year ended
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 25,
2010 |
September 26,
2009 |
September 27,
2008 |
|||||||||||||
| (in thousands) | |||||||||||||||
|
Income taxes
at statutory rates
|
$ | 27,334 | $ | 23,873 | $ | 16,059 | |||||||||
|
Increase
(decrease) in taxes resulting from:
|
|||||||||||||||
|
State income
taxes, net of federal income tax benefit
|
3,403 | 2,958 | 1,918 | ||||||||||||
|
Domestic
production activities deduction
|
(850 | ) | (400 | ) | (450 | ) | |||||||||
|
Other, net
|
(199 | ) | 466 | 450 | |||||||||||
|
|
$ | 29,688 | $ | 26,897 | $ | 17,977 | |||||||||
Deferred tax assets and
liabilities consist of the following:
|
September 25,
2010 |
September 26,
2009 |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | |||||||||||
|
Deferred tax
assets
|
|||||||||||
|
Vacation
accrual
|
$ | 1,334 | $ | 1,233 | |||||||
|
Insurance
accrual
|
3,098 | 2,943 | |||||||||
|
Deferred
income
|
60 | 67 | |||||||||
|
Allowances
|
1,881 | 1,902 | |||||||||
|
Inventory
capitalization
|
573 | 499 | |||||||||
|
Share-based
compensation
|
1,209 | 1,113 | |||||||||
|
Other, net
|
56 | 65 | |||||||||
|
|
8,211 | 7,822 | |||||||||
|
Deferred tax
liabilities
|
|||||||||||
|
Amortization
of goodwill and other intangible assets
|
14,885 | 13,388 | |||||||||
|
Depreciation
of property and equipment
|
19,907 | 17,793 | |||||||||
|
Other, net
|
7 | 15 | |||||||||
|
|
34,799 | 31,196 | |||||||||
|
|
$ | 26,588 | $ | 23,374 | |||||||
F-18
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE J — COMMITMENTS
1. Lease Commitments
The following is a summary of
approximate future minimum rental commitments for non-cancelable operating leases with terms of more than one year as of September 25,
2010:
|
Plants and
Offices |
Equipment
|
Total
|
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | |||||||||||||||
|
2011
|
$ | 4,900 | $ | 4,013 | $ | 8,913 | |||||||||
|
2012
|
4,603 | 2,732 | 7,335 | ||||||||||||
|
2013
|
4,270 | 1,287 | 5,557 | ||||||||||||
|
2014
|
3,919 | 495 | 4,414 | ||||||||||||
|
2015
|
3,586 | 134 | 3,720 | ||||||||||||
|
2016 and
thereafter
|
22,327 | 6 | 22,333 | ||||||||||||
|
|
$ | 43,605 | $ | 8,667 | $ | 52,272 | |||||||||
Total rent expense was
$13,099,000, $12,856,000 and $12,907,000 for fiscal years 2010, 2009 and 2008, respectively.
2. Other Commitments
We are a party to litigation
which has arisen in the normal course of business which management currently believes will not have a material adverse effect on our financial
condition or results of operations.
We self-insure, up to loss
limits, certain insurable risks such as worker’s compensation and automobile liability claims. Accruals for claims under our self-insurance
program are recorded on a claims incurred basis. Our total recorded liability for all years’ claims incurred but not yet paid was $7,300,000 and
$7,100,000 at September 25, 2010 and September 26, 2009, respectively. In connection with certain self-insurance agreements, we customarily enter into
letters of credit arrangements with our insurers. At September 25, 2010 and September 26, 2009, we had outstanding letters of credit totaling
$8,175,000 and $8,675,000, respectively.
NOTE K — CAPITAL STOCK
In our fiscal year ended
September 25, 2010, we purchased and retired 203,507 shares of our common stock at a cost of $7,768,000 under a million share buyback authorization
approved by the Company’s Board of Directors in February 2008. 49,804 shares were purchased in the fourth quarter of 2010 at a cost of $1,874,000.
There remains 210,772 shares that can be purchased under the existing authorization.
In our fiscal year ended
September 26, 2009, we purchased and retired 450,597 shares of our common stock at a cost of $12,510,000. Of the shares purchased and retired in 2009,
400,000 shares were purchased at the purchase price of $27.90 per share from Gerald B. Shreiber, Chairman of the Board, Chief Executive Officer and
Director of the Company.
In our 2008 fiscal year ended
September 27, 2008, we purchased and retired 135,124 shares of our common stock at a cost of $3,539,000.
NOTE L — STOCK OPTIONS
We have a Stock Option Plan (the
“Plan”). Pursuant to the Plan, stock options may be granted to officers and our key employees which qualify as incentive stock options as
well as stock options which are nonqualified. The exercise price of incentive stock options is at least the fair market value of the common stock on
the date of grant. The exercise price for nonqualified options is determined by a committee of the Board of Directors. The options are generally
exercisable after three years and expire no later than ten years from date of grant. There were 1,400,000
F-19
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L — STOCK OPTIONS
(Continued)
shares reserved under the Plan; options for 610,000 shares remain unissued as of September 25, 2010. There are options that were issued under an option plan that has since expired that are still outstanding.
We have an Employee Stock
Purchase Plan (“ESPP”) whereby employees purchase stock by making contributions through payroll deductions for six month periods. The
purchase price of the stock is 85% of the lower of the market price of the stock at the beginning of the six-month period or the end of the six-month
period. In fiscal years 2010, 2009 and 2008 employees purchased 22,143, 25,803 and 31,366 shares at average purchase prices of $32.70, $26.63 and
$24.93, respectively. ESPP expense of $184,000, $237,000 and $137,000 was recognized for fiscal years 2010, 2000 and 2008,
respectively.
A summary of the status of our
stock option plans as of fiscal years 2010, 2009 and 2008 and the changes during the years ended on those dates is represented below:
|
Incentive Stock Options
|
Nonqualified Stock Options
|
||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Stock
Options Outstanding |
Weighted-
Average Exercise Price |
Stock
Options Outstanding |
Weighted-
Average Exercise Price |
||||||||||||||||
|
Balance,
September 30, 2007
|
673,405 | $ | 21.87 | 459,354 | $ | 16.12 | |||||||||||||
|
Granted
|
96,345 | 33.22 | 20,000 | 34.17 | |||||||||||||||
|
Exercised
|
(111,768 | ) | 16.57 | (77,000 | ) | 9.66 | |||||||||||||
|
Cancelled
|
(44,150 | ) | 26.36 | (5,000 | ) | 38.54 | |||||||||||||
|
Balance,
September 27, 2008
|
613,832 | 24.29 | 397,354 | 18.00 | |||||||||||||||
|
Granted
|
4,500 | 32.13 | — | — | |||||||||||||||
|
Exercised
|
(169,388 | ) | 18.73 | (71,000 | ) | 10.70 | |||||||||||||
|
Cancelled
|
(20,000 | ) | 26.79 | (20,000 | ) | 20.02 | |||||||||||||
|
Balance,
September 26, 2009
|
428,944 | 26.45 | 306,354 | 19.55 | |||||||||||||||
|
Granted
|
101,330 | 36.77 | 20,000 | 41.75 | |||||||||||||||
|
Exercised
|
(92,760 | ) | 16.40 | (72,354 | ) | 10.12 | |||||||||||||
|
Cancelled
|
(19,505 | ) | 33.47 | (10,000 | ) | 38.81 | |||||||||||||
|
|
|||||||||||||||||||
|
Balance,
September 25, 2010
|
418,009 | $ | 30.86 | 244,000 | $ | 23.38 | |||||||||||||
|
Exercisable
Options, September 25, 2010
|
235,089 | 184,000 | |||||||||||||||||
The weighted-average fair value
of incentive options granted during fiscal years ended September 25, 2010, September 26, 2009 and September 27, 2008 was $9.12, $7.13 and $7.99,
respectively. The weighted-average fair value of non-qualified stock options granted during the fiscal years ended September 25, 2010 and September 27,
2008 was $17.33 and $15.21, respectively. There were no non-qualified options granted during the fiscal year ended September 26, 2009. The total
intrinsic value of stock options exercised was $5.1 million, $5.4 million and $3.2 million in fiscal years 2010, 2009 and 2008,
respectively.
F-20
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L — STOCK OPTIONS
(Continued)
The following table summarizes
information about incentive stock options outstanding at September 25, 2010:
|
Options Outstanding
|
Options Exercisable
|
||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Range of
Exercise Prices |
Number
Outstanding at September 25, 2010 |
Weighted-
Average Remaining Contractual Life |
Weighted
Average Exercise Price |
Number
Exercisable at September 25, 2010 |
Weighted-
Average Exercise Price |
||||||||||||||||||
| $10.60 – $10.60 | 82,632 | .9 | years | $ | 10.60 | 82,632 | $ | 10.60 | |||||||||||||||
| $27.45 – $41.06 | 245,477 | 2.5 | years | $ | 33.74 | 62,557 | $ | 29.94 | |||||||||||||||
| $41.50 – $41.60 | 89,900 | 1.2 | years | $ | 41.60 | 89,900 | $ | 41.60 | |||||||||||||||
| 418,009 | 235,089 | ||||||||||||||||||||||
The following table summarizes
information about nonqualified stock options outstanding at September 25, 2010:
|
Options Outstanding
|
Options Exercisable
|
||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Range of
Exercise Prices |
Number
Outstanding at September 25, 2010 |
Weighted-
Average Remaining Contractual Life |
Weighted
Average Exercise Price |
Number
Exercisable at September 25, 2010 |
Weighted-
Average Exercise Price |
||||||||||||||||||
| $10.30 – $10.30 | 62,000 | .6 | years | $ | 10.30 | 62,000 | $ | 10.30 | |||||||||||||||
| $19.77 – $20.43 | 82,000 | 2.2 | years | $ | 19.93 | 82,000 | $ | 19.93 | |||||||||||||||
| $29.78 – $41.75 | 100,000 | 7.2 | years | $ | 34.32 | 40,000 | $ | 30.44 | |||||||||||||||
| 244,000 | 184,000 | ||||||||||||||||||||||
NOTE M — 401(k) PROFIT-SHARING PLAN
We maintain a 401(k)
profit-sharing plan for our employees. Under this plan, we may make discretionary profit-sharing and matching 401(k) contributions. Contributions of
$1,436,000, $1,354,000 and $1,411,000 were made in fiscal years 2010, 2009 and 2008, respectively.
NOTE N — CASH FLOW INFORMATION
The following is supplemental
cash flow information:
|
Fiscal Year Ended
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 25,
2010 |
September 26,
2009 |
September 27,
2008 |
|||||||||||||
| (in thousands) | |||||||||||||||
|
Cash paid
for:
|
|||||||||||||||
|
Interest
|
$ | 76 | $ | 14 | $ | 21 | |||||||||
|
Income taxes
|
31,379 | 21,345 | 13,896 | ||||||||||||
|
Non cash
items:
|
|||||||||||||||
|
Capital
leases
|
$ | 625 | $ | — | $ | — | |||||||||
NOTE O — SEGMENT REPORTING
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
F-21
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE O — SEGMENT REPORTING
(Continued)
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 segment are soft pretzels, frozen juice treats and desserts, churros and baked goods. Our customers in the food service segment 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 channel,
our products are purchased by the consumer primarily for consumption at the point-of-sale.
Retail Supermarkets
The primary products sold by the
retail supermarket segment are soft pretzel products — including SUPERPRETZEL, frozen juice treats and desserts including LUIGI’S Real
Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE FRUIT frozen fruit bars, WHOLE FRUIT Sorbet, ICEE Squeeze-Up Tubes and TIO
PEPE’S Churros. Within the retail supermarket channel, 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 two BAVARIAN PRETZEL BAKERY retail stores.
Frozen Beverages
We sell frozen beverages and
related products and beverage machines to the food service channel, and our Restaurant Group, primarily under the names ICEE, SLUSH PUPPIE, PARROT ICE
and ARCTIC BLAST in the United States, Mexico and Canada. We also provide repair and maintenance service to customers for customers’ owned
equipment.
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
detailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales is
considered to be the one and only key variable monitored by the Chief Operating Decision Makers and management when determining each segment’s and
the company’s financial condition and operating performance. 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:
|
Fiscal year ended
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 25,
2010 |
September 26,
2009 |
September 27,
2008 |
|||||||||||||
| (in thousands) | |||||||||||||||
|
Sales to
External Customers:
|
|||||||||||||||
|
Food
Service
|
|||||||||||||||
|
Soft pretzels
|
$ | 100,694 | $ | 99,471 | $ | 99,784 | |||||||||
|
Frozen juices
and ices
|
47,273 | 50,272 | 51,206 | ||||||||||||
|
Churros
|
31,732 | 29,404 | 25,286 | ||||||||||||
|
Bakery
|
234,032 | 229,371 | 217,398 | ||||||||||||
|
Other
|
23,228 | 9,235 | 6,520 | ||||||||||||
|
|
$ | 436,959 | $ | 417,753 | $ | 400,194 | |||||||||
F-22
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE O — SEGMENT REPORTING
(Continued)
|
Fiscal year ended
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 25,
2010 |
September 26,
2009 |
September 27,
2008 |
|||||||||||||
| (in thousands) | |||||||||||||||
|
Retail
Supermarket
|
|||||||||||||||
|
Soft pretzels
|
$ | 30,463 | $ | 30,506 | $ | 27,559 | |||||||||
|
Frozen juices
and ices
|
48,288 | 37,819 | 31,742 | ||||||||||||
|
Coupon
redemption
|
(3,399 | ) | (3,753 | ) | (2,722 | ) | |||||||||
|
Other
|
767 | 586 | 533 | ||||||||||||
|
|
$ | 76,119 | $ | 65,158 | $ | 57,112 | |||||||||
|
The
Restaurant Group
|
$ | 847 | $ | 1,257 | $ | 1,635 | |||||||||
|
Frozen
Beverages
|
|||||||||||||||
|
Beverages
|
$ | 128,125 | $ | 112,983 | $ | 113,903 | |||||||||
|
Repair and
maintenance service
|
40,410 | 42,013 | 38,803 | ||||||||||||
|
Machine sales
|
11,964 | 11,729 | 14,794 | ||||||||||||
|
Other
|
2,279 | 2,154 | 2,918 | ||||||||||||
|
|
$ | 182,778 | $ | 168,879 | $ | 170,418 | |||||||||
|
Consolidated
Sales
|
$ | 696,703 | $ | 653,047 | $ | 629,359 | |||||||||
|
Depreciation
and Amortization:
|
|||||||||||||||
|
Food Service
|
$ | 17,221 | $ | 16,530 | $ | 16,655 | |||||||||
|
Retail
Supermarket
|
— | — | — | ||||||||||||
|
The
Restaurant Group
|
31 | 33 | 54 | ||||||||||||
|
Frozen
Beverages
|
12,600 | 11,190 | 10,761 | ||||||||||||
|
|
$ | 29,852 | $ | 27,753 | $ | 27,470 | |||||||||
|
Operating
Income(Loss):
|
|||||||||||||||
|
Food Service
|
$ | 50,255 | $ | 45,024 | $ | 24,784 | |||||||||
|
Retail
Supermarket
|
11,281 | 7,442 | 4,665 | ||||||||||||
|
The
Restaurant Group
|
(35 | ) | (64 | ) | (140 | ) | |||||||||
|
Frozen
Beverages
|
15,661 | 14,536 | 14,027 | ||||||||||||
|
|
$ | 77,162 | $ | 66,938 | $ | 43,336 | |||||||||
|
Capital
Expenditures:
|
|||||||||||||||
|
Food Service
|
$ | 18,392 | $ | 14,979 | $ | 11,898 | |||||||||
|
Retail
Supermarket
|
— | — | — | ||||||||||||
|
The
Restaurant Group
|
— | — | — | ||||||||||||
|
Frozen
Beverages
|
15,139 | 12,211 | 10,883 | ||||||||||||
|
|
$ | 33,531 | $ | 27,190 | $ | 22,781 | |||||||||
|
Assets:
|
|||||||||||||||
|
Food Service
|
$ | 343,513 | $ | 309,988 | $ | 277,481 | |||||||||
|
Retail
Supermarket
|
— | — | — | ||||||||||||
|
The
Restaurant Group
|
503 | 557 | 629 | ||||||||||||
|
Frozen
Beverages
|
139,978 | 129,282 | 130,298 | ||||||||||||
|
|
$ | 483,994 | $ | 439,827 | $ | 408,408 | |||||||||
F-23
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE P — QUARTERLY FINANCIAL DATA
(UNAUDITED)
|
Fiscal Year Ended September 25, 2010
|
|||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Net Sales
|
Gross
Profit |
Net
Earnings |
Net Earnings
Per Diluted Share(1) |
||||||||||||||||
| (in thousands, except per share information) | |||||||||||||||||||
|
1
st
Quarter
|
$ | 149,102 | $ | 46,019 | $ | 7,091 | $ | .38 | |||||||||||
|
2
nd
Quarter
|
157,361 | 49,797 | 9,000 | .48 | |||||||||||||||
|
3
rd
Quarter
|
189,729 | 65,031 | 15,861 | .85 | |||||||||||||||
|
4
th
Quarter
|
200,511 | 66,933 | 16,457 | .88 | |||||||||||||||
|
Total
|
$ | 696,703 | $ | 227,780 | $ | 48,409 | $ | 2.59 | |||||||||||
|
Fiscal Year Ended September 26, 2009
|
|||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Net Sales
|
Gross
Profit |
Net
Earnings |
Net Earnings
Per Diluted Share(1) |
||||||||||||||||
| (in thousands, except per share information) | |||||||||||||||||||
|
1
st
Quarter
|
$ | 141,142 | $ | 40,682 | $ | 4,319 | $ | .23 | |||||||||||
|
2
nd
Quarter
|
149,352 | 45,377 | 7,244 | .39 | |||||||||||||||
|
3
rd
Quarter
|
179,761 | 61,034 | 14,929 | .80 | |||||||||||||||
|
4
th
Quarter
|
182,792 | 61,751 | 14,820 | .79 | |||||||||||||||
|
Total
|
$ | 653,047 | $ | 208,844 | $ | 41,312 | $ | 2.21 | |||||||||||
|
(1)
|
Total of quarterly amounts do not necessarily agree to the annual report amounts due to separate quarterly calculations of weighted average shares outstanding |
F-24
SCHEDULE II — VALUATION AND QUALIFYING
ACCOUNTS
|
Year
|
Description
|
Opening
Balance |
Charged to
Expense |
Deductions
|
Closing
Balance |
|||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2010
|
Allowance for doubtful accounts
|
$ | 623,000 | $ | 493,000 | $ | 525,000 | (1) | $ | 591,000 | ||||||||||||
|
2009
|
Allowance for doubtful account
|
$ | 926,000 | $ | 492,000 | $ | 795,000 | (1) | $ | 623,000 | ||||||||||||
|
2008
|
Allowance for doubtful accounts
|
$ | 1,052,000 | $ | 502,000 | $ | 628,000 | (1) | $ | 926,000 | ||||||||||||
|
2010
|
Inventory Reserve
|
$ | 4,209,000 | $ | 1,509,000 | $ | 1,529,000 | (2) | $ | 4,189,000 | ||||||||||||
|
2009
|
Inventory Reserve
|
$ | 3,817,000 | $ | 2,036,000 | $ | 1,644,000 | (2) | $ | 4,209,000 | ||||||||||||
|
2008
|
Inventory Reserve
|
$ | 2,864,000 | $ | 3,149,000 | $ | 2,196,000 | (2) | $ | 3,817,000 | ||||||||||||
|
(1)
|
Write-off of uncollectible accounts receivable. |
|
(2)
|
Disposals of obsolete inventory. |
S-1
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission Of Matters To A Vote Of Security HoldersPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accounting Fees and ServicesPart IVItem 15. Exhibits, Financial Statement Schedules