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| JJSF > SEC Filings for JJSF > Form 10-Q on 23-Jul-2012 | All Recent SEC Filings |
23-Jul-2012
Quarterly Report
Liquidity and Capital Resources
Our current cash and cash equivalents balances and cash expected to be provided by future operations are our primary sources of liquidity. We believe that these sources, along with our borrowing capacity, are sufficient to fund future growth and expansion. See Note 12 to these financial statements for a discussion of our investment securities.
The Company's Board of Directors declared a regular quarterly cash dividend of $.13 per share of its common stock payable on July 5, 2012, to shareholders of record as of the close of business on June 15, 2012.
In the 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 leaving 210,772 as the number of shares that may yet be purchased under the share buyback authorization.
We completed a building expansion of our St. Louis, Missouri, bakery and a line expansion at our Carrollton, Texas, facility during the March 2012 quarter at a combined cost of approximately $12 million. Over time, we expect to generate an additional $50 - $60 million of net sales as a result of these expansions.
In the three months ended June 23, 2012 and June 25, 2011, fluctuations in the valuation of the Mexican and Canadian currencies and the resulting translation of the net assets of our Mexican and Canadian subsidiaries caused an increase of $880,000 in accumulated other comprehensive loss in the 2012 third quarter and a decrease of $29,000 in accumulated other comprehensive loss in the 2011 third quarter. In the nine months period, fluctuations in the valuation of the Mexican and Canadian currencies and the resulting translation of the net assets of our Mexican and Canadian subsidiaries caused an increase of $105,000 in accumulated other comprehensive loss in the 2012 nine month period and a decrease of $510,000 in accumulated other comprehensive loss in the 2011 nine month period.
Our general-purpose bank credit line which expires in December 2016 provides for up to a $50,000,000 revolving credit facility. The agreement contains restrictive covenants and requires commitment fees in accordance with standard banking practice. There were no outstanding balances under this facility at June 23, 2012.
Results of Operations
Net sales increased $20,007,000 or 10% for the three months to $226,335,000 and $63,884,000 or 12% to $588,575,000 for the nine months ended June 23, 2012 compared to the three and nine months ended June 25, 2011.
Excluding sales resulting from the acquisitions of the frozen handheld business of ConAgra Foods in May 2011 and Kim & Scott's Gourmet Pretzels in June 2012 in the twelve months post acquisitions, sales increased 6% for the three months and 6% for the nine months.
FOOD SERVICE
Sales to food service customers increased $17,085,000 or 14% in the third quarter to $138,464,000 and increased $41,380,000 or 12% for the nine months. Excluding handheld and Kim & Scott's sales in the twelve months post acquisitions, food service sales increased 10% for the quarter and increased 7% for nine months. Soft pretzel sales to the food service market increased 11% to $29,579,000 in the third quarter and increased 8% to $82,592,000 in the nine months due to increased sales to restaurant chains, warehouse club stores and throughout our customer base. Increased sales to one customer accounted for approximately 75% and 28% of the pretzels sales increase in the third quarter and year to date, respectively. Frozen juices and ices sales increased 15% to $19,680,000 in the three months and 9% to $39,106,000 in the nine months resulting from increased sales to warehouse club stores and throughout our customer base. Churro sales to food service customers increased 12% to $12,330,000 in the third quarter and were up 10% to $34,263,000 in the nine months with sales increasing generally throughout our customer base, with sales to international customers accounting for 85% of the increase in the third quarter and just under half of the increase in the nine months.
Sales of bakery products increased $8,674,000 or 15% in the third quarter to $66,754,000 and increased $18,729,000 or 11% for the nine months as sales increases were spread throughout our customer base. Handheld sales to food service customers were $7,249,000 in the third quarter and $21,242,000 in the nine months.
Funnel cake product sales decreased by $2,609,000 or 51% to $2,544,000 in the quarter and by $7,938,000 or 58% to $5,671,000 in the nine months as lower sales to two customers accounted for all of the decrease in the third quarter and lower sales to three customers accounted for all of the decrease in the nine months.
Sales of new products in the first twelve months since their introduction were approximately $5.4 million in this quarter and $10.5 million in the nine months. Price increases accounted for approximately $4.2 million of sales in the June quarter and $12.3 million in the nine months and net volume increases, including new product sales as defined above and sales resulting from the acquisition of the handheld business, accounted for approximately $12.9 million of sales in the June quarter and $29.1 million of sales in the nine months.
Operating income in our Food Service segment increased from $13,875,000 to $15,203,000 in the quarter and decreased from $36,795,000 to $35,205,000 for the nine months. Operating income for the quarter benefited from increased sales volume and price increases which offset higher ingredient and packaging costs of about $1 million and the negative impact of the sharp decline in funnel cake product sales. Additionally, operating income in the quarter benefitted from other general income this year of $99,000 compared to other general expense of $515,000, primarily acquisition costs,last year. For the nine months, the decrease in operating income resulted from higher ingredient and packaging costs of about $9 million, the sharp decline in funnel cake product sales and a management and sales meeting expense of about $550,000, which were partially offset by price increases.
RETAIL SUPERMARKETS
Sales of products to retail supermarkets increased $2,015,000 or 7% to $29,855,000 in the third quarter and were up 25% to $74,123,000 in the nine months. Excluding handheld sales in the twelve months post acquisition, sales decreased 2% for the third quarter and increased 1% for the nine months. Soft pretzel sales for the third quarter were up 1% to $7,635,000 and were up 1% to $24,242,000 for the nine months on flat unit volume for the quarter and a decrease of 2% for the nine months. Sales of frozen juices and ices decreased $314,000 or 2% to $17,629,000 in the third quarter and were up 2% to $34,204,000 in the nine months on a unit volume decrease of 2% in this quarter and an increase of 1% for the nine months. Sales increases in excess of volume changes were due to pricing and mix changes. Coupon redemption costs, a reduction of sales, decreased 9% or about $83,000 for the quarter and decreased $81,000 or 4% for the nine months. Handheld sales to retail supermarket customers were $5,193,000 in the quarter and $16,861,000 for the nine months.
Sales of new products in the first twelve months since their introduction were approximately $2.2 million in the third quarter and $5.2 million in the nine months. Price increases accounted for approximately $1.0 million of sales in the quarter and $3.0 million in the nine months and net volume increases, including new product sales as defined above and handheld sales and net of increased coupon costs, accounted for approximately $1.0 million of sales in this quarter and $12.0 million of sales in the nine months. Operating income in our Retail Supermarkets segment increased from $3,545,000 to $4,115,000 in the quarter primarily because of operating income generated by handheld sales. Operating income decreased from $7,677,000 to $7,597,000 in the nine months primarily as a result of higher trade spending for the introduction of new products and higher products costs related to ingredient and packaging cost increases.
FROZEN BEVERAGES
Frozen beverage and related product sales increased 2% to $58,016,000 in the third quarter and increased $7,531,000 or 6% to $138,595,000 in the nine month period. Beverage related sales alone were essentially unchanged in the third quarter and were up 2% to $91,616,000 in the nine months. Gallon sales were down 5% for the three months and 2% for the nine months as we had double digit sales decline at several of our larger customers during the quarter. Service revenue increased 12% to $12,386,000 in the third quarter and 16% to $35,875,000 for the nine months with about 75% of the increase coming from three new service customers.
Sales of beverage machines, which tend to fluctuate from year to year while following no specific trend, were $360,000 lower this year than last in the three month period and $834,000 higher in the nine months. The approximate number of company owned frozen beverage dispensers was 42,000 and 39,900 at June 23, 2012 and September 24, 2011, respectively. Operating income in our Frozen Beverage segment increased $932,000 to $10,573,000 in the third quarter and to $11,825,000 from $7,516,000 in the nine months as a result of increased sales as discussed above and controlled expenses. Higher gasoline costs of approximately $80,000 and $572,000 impacted the June quarter and nine months, respectively.
CONSOLIDATED
Gross profit as a percentage of sales decreased to 32.04% in the three month period from 32.73% last year and decreased to 29.38% in the nine month period from 31.00% a year ago. Higher ingredient and packaging costs compared to last year of approximately $1.5 million for the quarter and $10 million for the nine months and the lower gross margin percentage of handhelds sales through the anniversary of the acquisition date were primarily responsible for the decreased gross profit percentage. Without this handhelds impact, gross profit as a percentage of sales would have been about 32.6% in the quarter and 30.5% in the nine months. 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 ingredient and packaging over the past 24 months. We anticipate these continuing market cost increases may result in higher costs to the company over the remaining three months of our fiscal year 2012. Although we have implemented price increases to defray the impact of a portion or all of these cost increases, the impact of these higher costs and increased costs in operational areas may result in lower net earnings over the remaining three months of our fiscal year 2012 compared to our fiscal year 2011.
Total operating expenses increased $2,136,000 in the third quarter but as a percentage of sales decreased from 20% percent to 19%. For the nine months, operating expenses increased $7,597,000, but as a percentage of sales decreased from 21% to 20% of sales. The drops in percentages were generally because of increased sales. Additionally, other general income of $183,000 in this year's quarter compared to other general expense of $530,000, primarily acquisition costs, in last year's quarter. Marketing expenses were 9% of sales in both years' quarter and decreased about 1/2 of one percent in the nine months, from 10% of sales to 9% of sales. Distribution expenses were 7% of sales in both years' quarter and 8% of sales in both years' nine months. Administrative expenses were 3% of sales in all periods.
Operating income increased $2,830,000 or 10% to 29,891,000 in the third quarter and increased $2,639,000 or 5% to $54,627,000 in the nine months as a result of the aforementioned items. Additionally, for the nine months of this year operating income was impacted by approximately $800,000 of costs of a management and sales meeting held in October, which historically has been held every five years.
Gain on the bargain purchase of a business of $6,580,000 in last year's quarter resulted from the fair value of the identifiable assets acquired in the handhelds acquisition exceeding the purchase price.
Investment income increased by $146,000 and $438,000 in the third quarter and nine months, respectively, due primarily to increased investments of marketable securities.
The effective income tax rate has been estimated at 38% and 31% for the quarter this year and last year, respectively, and at 38% and at 34% for the nine months this year and last year, respectively. Adjusting out the effect of last year's gain on bargain purchase of a business, the effective income tax rate was estimated at 39% and 38% for the quarter and nine months of last year, respectively. We are estimating an effective income tax rate of between 37 1/2% and 38 1/2% for the year.
Net earnings decreased $4,654,000 or 20% in the current three month period to $18,672,000 and decreased 12% to $34,580,000 for the nine months this year from $39,079,000 last year as a result of the aforementioned items. Without the benefit of last year's gain on bargain purchase of a business, net earnings were $18,672,000 in this year's quarter compared to $16,746,000 last year and were $34,580,000 for the nine months compared to $32,499,000 last year.
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.
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