Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 26, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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)
New Jersey 22-1935537
(State or other jurisdication (I.R.S. Employer
of incorporation or organization) Identification No.)
6000 Central Highway
Pennsauken, New Jersey 08109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609-
665-9533)
__________
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value: None None
(Title of each class) (Name of each exchange
on which registered)
__________
Securities registered pursuant to Section 12(g) of the Act: None
__________
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
and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the 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 [ ].
As of November 30, 1998, the latest practicable date,
9,036,833 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 $121,823,319, based
on the last price on that date of $20.4375 per share, which is an
average of bid and asked prices.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's 1998 Annual Report to Shareholders for the
fiscal year ended September 26, 1998 and Proxy Statement for its
Annual Meeting of Shareholders to be held on February 11, 1999
are incorporated herein by reference into Parts I, II, III and IV
as set forth herein.
J & J SNACK FOODS CORP.
1998 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Page
Item 1 Business ................................... 1
Item 2 Properties ................................. 8
Item 3 Legal Proceedings .......................... 9
Item 4 Submission Of Matters To A Vote Of
Security Holders ........................... 9
Executive Officers Of The Registrant ....... 10
PART II
Item 5 Market For Registrant's Common
Stock And Related Stockholder
Matters .................................... 11
Item 6 Selected Financial Data .................... 11
Item 7 Management's Discussion And Analysis
Of Financial Condition And Results
Of Operations .............................. 11
Item 7a Quantitative And Qualitative Disclosures
About Market Risk .......................... 11
Item 8 Financial Statements And Supplementary
Data ....................................... 12
Item 9 Changes In And Disagreements With
Accountants On Accounting And
Financial Disclosure........................ 13
PART III
Item 10 Directors And Executive Officers Of
The Registrant ............................. 14
Item 11 Executive Compensation ..................... 14
Item 12 Security Ownership Of Certain Bene-
ficial Owners And Management ............... 14
Item 13 Certain Relationships And Related
Transactions ............................... 14
PART IV
Item 14 Exhibits, Financial Statement
Schedules And Reports On Form 8-K .......... 15
PART I
Item 1. Business
General
J & J Snack Foods Corp. (the "Company" or "J & J")
manufactures nutritional snack foods which it markets nationally
to the food service and retail supermarket industries. Its
principal snack food products are soft pretzels marketed
principally under the brand name SUPERPRETZEL. J & J believes it
is the largest manufacturer of soft pretzels in the United
States. The Company also markets frozen carbonated beverages to
the food service industry under the brand names ICEE and ARCTIC
BLAST in the United States, Mexico and Canada. Other snack
products include Italian ice and frozen juice treats and
desserts, churros (a Hispanic pastry), funnel cake, popcorn and
bakery products.
The Company's 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 sells direct to the
public through its chains of specialty snack food retail outlets,
BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET, located primarily in
the Mid-Atlantic States.
The Company was incorporated in 1971 under the laws of the
State of New Jersey.
Products
Soft Pretzels
The Company's soft pretzels are sold under many brand names;
some of which are: SUPERPRETZEL, MR. TWISTER, SOFT PRETZEL BITES,
SOFTSTIX, SOFT PRETZEL BUNS, HOT KNOTS, DUTCH TWIST, TEXAS TWIST
and SANDWICH TWIST and; to a lesser extent, under private labels.
The Company sells its soft pretzels to the food service and the
retail supermarket industries and direct to the public through
BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET, its chains of
specialty snack food retail outlets. 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. Soft
pretzel sales amounted to 35% and 40% of the Company's revenue in
fiscals 1998 and 1997, respectively.
The Company's soft pretzels are manufactured according to a
proprietary formula. Soft pretzels, approximately 2-1/2 ounces
in weight, and jumbo or king size soft pretzels, approximately
5-1/2 ounces in weight, are shaped and formed by the Company's
proprietary twister machines. These soft pretzel tying machines
are automated, high speed machines for twisting dough into the
traditional pretzel shape. Soft pretzel nuggets, mini one ounce
soft pretzels and soft pretzels in customized shapes and sizes
and with fillings are extruded or shaped by hand. Soft pretzels,
1
after processing, are primarily quick-frozen in either raw or
baked form and packaged for delivery.
The Company's food service marketing program includes
supplying ovens, mobil 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 Carbonated Beverages
The Company markets, through its direct sales force, frozen
carbonated beverages to the food service industry under the names
ICEE and ARCTIC BLAST in the United States, Mexico and Canada.
The Company sells direct to the public through BAVARIAN PRETZEL
BAKERY and PRETZEL GOURMET, its chains of specialty snack food
retail outlets. Frozen carbonated beverage sales amounted to 29%
of revenue in fiscal 1998 and 20% of revenue in fiscal 1997.
Under the Company's marketing program, it installs frozen
carbonated beverage dispensers at customer locations and
thereafter services the machines, arranges to supply customers
with ingredients required for production of the frozen carbonated
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 carbonated beverages.
Each new customer location requires a frozen carbonated
beverage dispenser supplied by the Company or by the customer.
Company supplied dispensers are purchased from outside vendors,
built new or rebuilt by the Company at an approximate cost of
$5,500 each. The following shows the number of Company owned and
customer owned frozen carbonated beverage dispensers at customer
locations at the dates indicated:
Company Owned Customer Owned Total
September 28, 1996 7,823 901 8,724
September 27, 1997 8,546 711 9,257
September 26, 1998 16,520 223 16,743
As a result of the acquisition of National Icee Corporation
on December 8, 1997, the Company has the rights to market and
distribute frozen carbonated beverages under the name ICEE to all
of the Continental United States, except for portions of eleven
states.
Frozen Juice Treats and Desserts
The Company's frozen juice treats and desserts are marketed
under the FROSTAR, SHAPE-UPS, MAZZONE'S, MAMA TISH'S and LUIGI'S
brand names to the food service and to the retail supermarket
2
industries. Frozen juice treat and dessert sales were 15% and
19% of the Company's revenue in fiscal years 1998 and 1997,
respectively.
The Company's SHAPE-UPS and MAZZONE frozen juice bars are
manufactured from an apple or pear juice base to which water,
sweeteners, coloring (in some cases) and flavorings 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 FROSTAR product line includes frozen juice and other
frozen desserts on a stick and in a cup. The juice bar and
FROSTAR products are sold primarily to the school portion of the
food service industry.
LUIGI'S Real Italian Ice and MAMA TISH'S Italian Ice and
Sorbets are sold to the foodservice and to the retail supermarket
industries. They are manufactured from water, sweeteners and
fruit juice concentrates in various flavors and are packaged in
plastic cups for retail supermarket and foodservice and in four
and eight ounce squeeze up tubes for foodservice.
Churros
The Company sells frozen churros under the TIO PEPE'S brand
name to both the food service and retail supermarket industries,
primarily in the Western and Southwestern United States. Churro
sales were 4% and 5% of the Company's sales in fiscal 1998 and
1997, respectively. Churros are Hispanic donuts 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 creme filled churros. The Company supplies churro
merchandising equipment similar to that used for its soft
pretzels.
Baked Goods
The Company has a contract and private label bakery business
which manufactures cookies, muffins and other baked goods for
third parties. In addition, the Company produces and markets
these products under its own brand names, including DANISH MILL
and PRETZELCOOKIE. Baked goods sales amounted to 9% and 8% of
the Company's sales in fiscals 1998 and 1997, respectively.
Other Products
The Company also markets to the food service industry and
direct to the public other products including soft drinks, funnel
cakes sold under the FUNNEL CAKE FACTORY brand name, popcorn sold
under the AIRPOPT brand name, as well as smaller amounts of
various other food products. In addition, J & J manufactures and
markets machines and machine parts for sale primarily to other
food and beverage companies.
3
Customers
The Company sells its products to two principal customer
groups: food service and retail supermarkets. The primary
products sold to the food service group are soft pretzels, frozen
carbonated beverages, frozen juice treats and desserts, churros
and baked goods. The primary products sold to the retail
supermarket industry are soft pretzels and Italian ice.
Additionally, the Company sells soft pretzels, frozen carbonated
beverages and various other food products direct to the public
through BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET, its chains
of specialty snack food retail outlets.
The Company's customers in the food service industry include
snack bars and food stands in chain, department and discount
stores such as KMart, Walmart, Bradlees, Caldor and Target; malls
and shopping centers; fast food outlets; stadiums and sports
arenas; leisure and theme parks such as Disneyland, Walt Disney
World, Opryland, Universal Studios, Sea World, Six Flags, Hershey
Park and Busch Gardens; convenience stores such as 7-Eleven,
Circle K, AM/PM, White Hen Pantry and Wawa; movie theatres;
warehouse club stores such as Sam's Club, Price Costco and
B.J.'s; schools, colleges and other institutions; and independent
retailers such as Hot Sam. Food service concessionaires
purchasing soft pretzels and other products from the Company for
use in sports arenas and for institutional meal services include
ARAMARK, Ogden, Service America, Sportservice, Marriott and
Volume Services. 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 over 90% of supermarkets
in the United States. Products sold to retail supermarket
customers are primarily soft pretzel products, including
SUPERPRETZEL, LUIGI'S Real Italian Ice and MAMA TISH'S Italian
Ice and sorbets and various secondary brands. 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 customers, this marketing program
includes providing ovens, mobile merchandisers, display cases,
warmers, frozen carbonated 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 products include trade shows, newspaper
advertisements with coupons, in-store demonstrations, billboards
and, periodically, television advertise- ments.
The Company's products are sold through a network of about
180 food brokers and over 1,000 independent sales distributors
and the Company's own direct sales force. The Company maintains
frozen warehouse and distribution facilities in Pennsauken, New
Jersey; Vernon (Los Angeles) California; Scranton, Pittsburgh,
4
Hatfield and Lancaster, Pennsylvania; and Solon, Ohio. Frozen
carbonated beverages are distributed from 97 warehouse and
distribution facilities located in 41 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 carbonated
beverage sales and Italian ice sales are generally higher during
the warmer months and sales of the Company's retail stores are
generally higher in the Company's first quarter during the
holiday shopping season.
Trademarks and Patents
The Company has numerous trademarks, the most important of
which are SUPERPRETZEL, DUTCH TWIST, TEXAS TWIST, MR. TWISTER,
SOFT PRETZEL BITES and SOFTSTIX for its soft pretzel products;
FROSTAR, SHAPE-UPS, MAZZONE'S, MAMA TISH'S and LUIGI'S for its
frozen juice treats and desserts; TIO PEPE'S for its churros;
ARCTIC BLAST for its frozen carbonated beverages; FUNNEL CAKE
FACTORY for its funnel cake products, PRIDE O' THE FARM for its
cookies, muffins and other baked goods; and TANGO WHIP for its
whipped fruit drinks. 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 markets frozen carbonated beverages under the
trademark ICEE in all of the Continental United States, except
for portions of eleven states, and in Mexico and Canada.
Additionally, the Company has the international rights to the
trademark ICEE.
The Company has four patents related to frozen carbonated
beverage dispensers, including a countertop unit. One expires in
2005 and three expire in 2006. The Company also has two process
patents for dessert products which expire in 2010 and 2012.
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
carbonated beverages is purchased from the Coca Cola Company, the
Pepsi Cola Company, and Western Syrup Company. Cups, straws and
lids are readily available from various suppliers. Parts for
frozen carbonated beverage dispensing machines are manufactured
internally and purchased from other sources. Frozen carbonated
beverage dispensers are purchased from IMI Cornelius, Inc.
5
Competition
Snack food and baked goods 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, baked goods 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. Competition is also increasing in that there are
several chains of retail pretzel stores which have been
aggressively expanding over the past several years. These chains
compete with the Company's products.
In Frozen Carbonated Beverages the Company competes directly
with other frozen carbonated beverage companies. These include
several companies which have the right to use the ICEE name in
portions of eleven states. There are many other regional frozen
carbonated beverage competitors throughout the country and one
large retail chain which uses its own frozen carbonated beverage
brand.
The Company competes with large soft drink manufacturers for
counter and floor space for its frozen carbonated beverage
dispensing machines at retail locations and with products which
are more widely known than the ICEE and ARCTIC BLAST frozen
carbonated beverages.
The Company competes with a number of other companies in the
frozen juice treat and dessert and baked goods markets.
Divestitures
During the third quarter of fiscal year 1995, the Company
sold its syrup and flavor manufacturing subsidiary, Western Syrup
Company, to an unrelated third party for cash and notes. The
sale of Western did not have a material impact on the Company's
operations or financial position.
Employees
The Company had approximately 1,900 full and part time
employees as of September 26, 1998. Certain production and
distribution employees at the Pennsauken plant are covered by a
collective bargaining agreement which expires in September 1999.
The Company considers its employee relations to be good.
Year 2000
The Year 2000 ("Y2K") issue is the result of computer
programs using a two-digit format, as opposed to four digits, to
indicate the year. Such computer systems will be unable to
6
interpret dates beyond the year 1999, which could cause a system
failure or other computer errors, leading to disruptions in
operations.
In 1997 the Company commenced a program to evaluate and
determine the potential impact of Y2K issues on its operations
and the need to modify or replace its existing computer systems.
The scope of the program encompassed all phases of the
operational activities of the Company and its subsidiaries. In
1998 the program was expanded to develop an action plan for the
resolution of problem issues. The process of resolving problem
issues is anticipated to be completed by the third calendar
quarter of 1999. The Company has identified the following areas
to be critical for Y2K compliance: financial and informational
systems, manufacturing applications, third-party relationships,
and what was deemed to include environmental areas of concern to
include HVAC, telephone and communication environments, and
security systems.
The Company is currently monitoring all of its software
vendors to determine the compliance status of purchased
applications. This is an ongoing process that is scheduled for
completion by the second calendar quarter of 1999. The Company
currently has been implementing enhanced financial and
informational application systems. The software product is Y2K
compliant and will satisfy the majority of the informational
processing requirements when fully implemented. This process is
in the final stages of implementation and it is anticipated to be
fully completed early in 1999. Additionally, the Company is
negotiating to purchase a new, and fully Y2K compliant, financial
reporting system to enhance our future ability to manage, control
and report on the operation of the business. It is anticipated
that this system will be in place by mid 1999. In the
manufacturing area, the Company is in the process of identifying
areas of exposure. The third party relationship area has been
addressed by directly contacting major trading partners. Most of
the parties who have so far responded to our inquiries indicate
that they will be Y2K compliant no later than the end of 1999.
The Company has been utilizing outside consultants to
augment the efforts of its internal staff to address the Y2K
problem. It is anticipated that there will be an ongoing need to
utilize these services through the first half of 1999. Specific
areas of activity include the Y2K monitoring process and
additional application programming effort. The balance of 1998
and the first half of 1999 will be devoted to the completion and
testing of the software applications and testing of the
environmental areas.
The Company does not anticipate that Y2K compliance costs
will be significantly higher than its normal management
information systems operating costs.
7
Item 2. Properties
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 and churros are
manufactured at this company-owned facility which also serves as
the Company's corporate headquarters. This facility operates at
approximately 80% of capacity. The Company leases a 101,200
square foot building adjacent to its manufacturing facility in
Pennsauken, New Jersey through March 2012. The Company has
constructed a large freezer within this facility for warehousing
and distribution purposes. The warehouse has a utilization rate
of 60-90% depending on product demand. The Company also leases
through September 1999 16,000 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. Approximately 30% of the facility
is leased to a third party. The remainder is used by the Company
to manufacture some of its products including funnel cake and
pretzels.
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
2010. The Company leases an additional 15,000 square feet of
warehouse space, adjacent to its manufacturing facility, through
May 2002. The manufacturing facility operates at approximately
60% of capacity.
The Company owns a 52,700 square foot building located on
five acres in Chicago Heights, Illinois which is leased to a
third party.
The Company owns a 46,000 square foot frozen juice treat and
dessert manufacturing facility located on three acres in
Scranton, Pennsylvania. The facility, which was expanded from
26,000 square feet in 1998, operates at less than 50% of
capacity.
The Company leases a 29,635 square foot soft pretzel
manufacturing facility located in Hatfield, Pennsylvania. The
lease runs through June 2017. The facility operates at
approximately two thirds of capacity.
The Company leases a 19,200 square foot soft pretzel
manufacturing facility located in Carrollton, Texas. The lease
runs through April 2004. The facility operates at less than 50%
of capacity.
The Company's Bavarian Pretzel Bakery headquarters and
warehouse and distribution facilities are located in a 11,000
square foot owned building in Lancaster, Pennsylvania.
The Company owns a 25,000 square foot facility located on 11
acres in Hatfield, Pennsylvania which is leased to a third party.
8
The Company also leases 99 warehouse and distribution
facilities.
Item 3. Legal Proceedings
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.
Item 4. Submission Of Matters To A Vote Of Security Holders
None.
9
EXECUTIVE OFFICERS OF THE REGISTRANT
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 11, 1999 or until their successors are
duly elected.
Name Age Position
Gerald B. Shreiber 57 Chairman of the Board, President,
Chief Executive Officer and
Director
Dennis G. Moore 43 Senior Vice President, Chief
Financial Officer, Secretary,
Treasurer and Director
Robert M. Radano 49 Senior Vice President, Sales,
Chief Operating Officer and
Director
Robyn Shreiber Cook 38 Senior Vice President
Dan Fachner 38 President of The ICEE Company
Subsidiary
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 2000.
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 2002.
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 foodservice sales of J & J. His
term as a director expires in 2001.
Robyn Shreiber Cook joined the Company in 1982 and in
February 1996 was named Senior Vice President, West with
operating and sales responsibilities for the Company's West Coast
foodservice and bakery business. Prior to becoming Senior Vice
President, West she was responsible for Western region food
service sales.
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.
10
PART II
Item 5. Market For Registrant's Common Stock And
Related Stockholder Matters
The Company's common stock is traded on the over-the-counter
market on the NASDAQ National Market System under the symbol
JJSF. The following table sets forth the high and low final sale
price quotations as reported by NASDAQ for the common stock for
each quarter of the years ended September 27, 1997 and September
26, 1998.
High Low
Fiscal 1997
First quarter ended December 28, 1996 14-1/8 10-5/8
Second quarter ended March 29, 1997 14-1/8 10-1/2
Third quarter ended June 28, 1997 16-1/8 11-1/4
Fourth quarter ended September 27, 1997 17-1/4 14-1/2
Fiscal 1998
First quarter ended December 30, 1997 17-3/8 13-1/2
Second quarter ended March 28, 1998 19-1/2 12-1/2
Third quarter ended June 27, 1998 20-3/4 17-7/8
Fourth quarter ended September 26, 1998 22-1/4 14-3/4
On November 30, 1998, there were 9,036,833 shares of common
stock outstanding. Those shares were held by approximately 2,200
beneficial shareholders and shareholders of record.
The Company has never paid a cash dividend on its common
stock and does not anticipate paying cash dividends in the
foreseeable future.
Item 6. Selected Financial Data
The information set forth under the caption "Financial
Highlights" of the 1998 Annual Report to Shareholders is
incorporated herein by reference.
Item 7. Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
The information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" of the 1998 Annual Report to Shareholders is
incorporated herein by reference.
Item 7a. Quantitative And Qualitative Disclosures
About Market Risk
The following is the Company's quantitative and qualitative
analysis of its financial market risk:
Interest Rate Sensitivity
The table below provides information about the Company's
derivative financial instruments and other financial instruments
as of September 26, 1998 that are sensitive to changes in
11
interest rates. These instruments include debt obligations and
interest rate swaps. For debt obligations, the table presents
principal cash flows and related weighted-average interest rates
by expected maturity dates. For interest rate swaps, the table
presents notional amounts and weighted-average interest rates by
expected (contractual) maturity dates. The notional amounts are
used to calculate the contractual payments to be exchanged under
the swap contract. Weighted-average variable rates are based on
implied forward rates in the yield curve at the reporting date.
Expected Maturity Date
($ in thousands)
There- Fair
1999 2000 2001 2002 2003 after Total Value
Liabilities
Long-term debt
Fixed rate $ 423 $ 382 $ 317 $ 131 $ 369 $5,000 $ 6,622 $ 6,622
Average
interest
rate 8.34% 8.54% 8.48% 8.50% 9.27% 7.25% 7.59%
Variable rate $8,000 $8,000 $24,000 $8,000 $2,000 - $50,000 $50,000
Average
interest
rate 5.89% 5.89% 5.78% 5.89% 5.89% - 5.84%
Interest Rate Swaps
Receive
variable/
pay fixed $8,000 $8,000 $ 8,000 $8,000 $2,000 $ - $34,000 $ 1,400
Average
pay rate 6.11% 6.11% 6.11% 6.11% 6.11% - 6.11%
Average
receive
rate 5.39% 5.39% 5.39% 5.39% 5.39% - 5.39%
Interest Rate Risk
The Company holds long-term debt with variable interest
rates indexed to LIBOR, which exposes it to the risk of
increased interest costs if interest rates rise. To reduce the
risk related to unfavorable interest rate movements, the Company
enters into interest rate swap contracts to pay a fixed rate and
receive a variable rate that is indexed to LIBOR. The ratio of
the swap notional amount to the principal amount of variable rate
debt issued changes periodically based on the Company's ongoing
assessment of the future trend in interest rate movements. At
September 26, 1998, this ratio was 68 percent and no change in
the ratio is expected at the current time. The percentage of
variable rate debt fixed under interest rate swap contracts is
expected to decrease as scheduled debt payments are made.
Foreign Exchange Rate Risk
The Company has not entered into any forward exchange
contracts to hedge its foreign currency rate risk as of September
26, 1998 because it does not believe its foreign exchange
exposure is significant.
Item 8. Financial Statements And Supplementary Data
The following consolidated financial statements of the
Company set forth in the 1998 Annual Report to Shareholders are
incorporated herein by reference:
Consolidated Balance Sheets as of September 26, 1998 and
September 27, 1997
Consolidated Statements of Earnings for the fiscal years
ended September 26, 1998, September 27, 1997 and
September 28, 1996
Consolidated Statement of Stockholders' Equity for the
12
three fiscal years ended September 26, 1998
Consolidated Statements of Cash Flows for the fiscal years
ended September 26, 1998, September 27, 1997 and
September 28, 1996
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
Item 9. Changes In And Disagreements With Accountants On
Accounting And Financial Disclosure
None.
13
PART III
Item 10. Directors And Executive Officers Of The Registrant
Information concerning directors, appearing under the
captions "Information Concerning Nominee For Election To Board"
and "Information Concerning Continuing Directors And Executive
Officers" 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 11, 1999, is
incorporated herein by reference. Information concerning the
executive officers is included on page 10 following Item 4 in
Part I hereof.
Item 11. Executive Compensation
Information concerning executive compensation appearing in
the Company's Proxy Statement under the caption "Management
Remuneration" is incorporated herein by reference.
Item 12. Security Ownership Of Certain Beneficial Owners And
Management
Information concerning the security ownership of certain
beneficial owners and management appearing in the Company's Proxy
Statement under the caption "Principal Shareholders" is
incorporated herein by reference.
Item 13. Certain Relationships And Related Transactions
Not applicable.
14
PART IV
Item 14. Exhibits, Financial Statement Schedules And
Reports On Form 8-K
(a)Financial Statements
The following are incorporated by reference in Part II
of this report:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of September 26, 1998 and
September 27, 1997
Consolidated Statements of Earnings for the fiscal years
ended September 26, 1998, September 27, 1997 and
September 28, 1996
Consolidated Statement of Stockholders' Equity for the
three fiscal years ended September 26, 1998
Consolidated Statements of Cash Flows for the fiscal
years ended September 26, 1998, September 27, 1997
and September 28, 1996
Notes to Consolidated Financial Statements
Financial Statement Schedule
The following are included in Part IV of this report:
Page
Report of Independent Certified Public Account-
ants on Schedule 18
Schedule:
II. Valuation and Qualifying Accounts 19
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.
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 Amended and Restated Bylaws adopted May 15, 1990.
(Incorporated by reference from the Company's Form
10-Q dated August 3, 1990.)
4.1 New Jersey Economic Development Authority Economic
Development Revenue Bonds Trust Indenture dated as
of December 1, 1991. (Incorporated by reference
from the Company's 10-K dated December 18, 1992.)
4.2 Credit Agreement dated as of December 5, 1997 by and
among J & J Snack Foods Corp. and Certain of its
Subsidiaries, as borrowers, Mellon Bank, N.A. and
Corestates Bank, N.A., as lenders, and Mellon Bank,
N.A. as Administrative Agent (Page 20).
10.1 Proprietary Exclusive Manufacturing Agreement dated
15
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 Form
S-8 dated July 24, 1992, file no. 33-50036.)
10.3* J & J Snack Foods Corp. 401(K) Profit Sharing Plan,
As Amended, Effective January 1, 1989. Incorporated
by reference from the Company's 10-K dated December
18, 1992.)
10.4* First, Second and Third Amendments to the J & J
Snack Foods Corp. 401(k) Profit Sharing Plan.
(Incorporated by reference from the Company's 10-K
dated December 19, 1996).
10.6 Lease dated September 24, 1991 between J & J Snack
Foods Corp. of New Jersey and A & H Bloom
Construction Co. for the 101,200 square foot
building next to the Company's manufacturing
facility in Pennsauken, New Jersey. (Incorporated
by reference from the Company's Form 10-K dated
December 17, 1991).
10.7 Lease dated August 29, 1995 between J & J Snack
Foods Corp. and 5353 Downey Associates 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).
13.1 Company's 1998 Annual Report to Shareholders
(except for the captions and information thereof
expressly incorporated by reference in this Form
10-K, the Annual Report to Shareholders is provided
solely for the information of the Securities and
Exchange Commission and is not deemed "filed" as
part of the Form 10-K.) (Page 115.)
22.1 Subsidiaries of J & J Snack Foods Corp. (Page 148.)
24.1 Consent of Independent Certified Public Accountants.
(Page 149.)
*Compensatory Plan
(b)Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during
the last quarter of the period covered by this report.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
J & J SNACK FOODS CORP.
December 21, 1998 By /s/ Gerald B. Shreiber
Gerald B. Shreiber,
Chairman of the Board,
President, Chief Executive
Officer and Director
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 21, 1998 /s/ Robert M. Radano
Robert M. Radano, Senior Vice
President, Sales, Chief Operating
Officer and Director
December 21, 1998 /s/ Dennis G. Moore
Dennis G. Moore, Senior Vice
President, Chief Financial
Officer and Director
December 21, 1998 /s/ Stephen N. Frankel
Stephen N. Frankel, Director
December 21, 1998 /s/ Peter G. Stanley
Peter G. Stanley, Director
December 21, 1998 /s/ Leonard M. Lodish
Leonard M. Lodish, Director
17
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS ON SCHEDULE
Board of Directors
J & J Snack Foods Corp.
In connection with our audit of the consolidated financial
statements of J & J Snack Foods Corp. and Subsidiaries referred
to in our report dated November 3, 1998 which is included in the
Annual Report to Shareholders and incorporated by reference in
Part II of this form, we have also audited Schedule II for each
of the three years in the period ended September 26, 1998. In
our opinion, this schedule presents fairly, in all material
respects, the information required to be set forth therein.
GRANT THORNTON LLP
Philadelphia, Pennsylvania
November 3, 1998
18
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Opening Charged to Closing
Year Desscription balance expense Deductions balance
1998 Allowance
for doubtful
accounts $392,000 $250,000 $ 45,000(1) $597,000
1997 Allowance
for doubtful
accounts 257,000 252,000 117,000(1) 392,000
1996 Allowance
for doubtful
accounts 271,000 64,000 78,000(1) 257,000
(1) Write-off unncollectible accounts receivable.
19