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| JJSF > SEC Filings for JJSF > Form 10-Q on 28-Jan-2013 | All Recent SEC Filings |
28-Jan-2013
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 11 to these financial statements for a discussion of our investment securities.
The Company's Board of Directors declared a regular quarterly cash dividend of $.16 per share of its common stock payable on December 27, 2012, to shareholders of record as of the close of business on December 11, 2012.
In our fiscal year ended September 29, 2012, we purchased and retired 142,038 shares of our common stock at a cost of $8,167,125. All of the shares were purchased in the fourth quarter. Subsequent to September 29, 2012 and through October 31, 2012, we purchased and retired 48,255 shares of our common stock at a cost of $2,762,602. On November 8, 2012 the Company's Board of Directors authorized the purchase and retirement of an additional 500,000 shares of the Company's common stock.
In the three months ended December 29, 2012 and December 24, 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 $123,000 in accumulated other comprehensive loss in the 2013 first quarter and an increase of $156,000 in accumulated other comprehensive loss in the 2012 first quarter.
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 December 29, 2012.
Results of Operations
Net sales increased $18,722,000 or 11% to $191,408,000 for the three months ended December 29, 2012 compared to the three months ended December 24, 2011.
Excluding sales resulting from the acquisition of Kim & Scott's Gourmet Pretzels in June 2012, sales increased approximately 10% for the three months.
FOOD SERVICE
Sales to food service customers increased $17,118,000 or 15% in the first quarter to $130,187,000. Excluding Kim & Scott's sales, food service sales increased approximately 14% for the quarter. Soft pretzel sales to the food service market increased 27% to $32,594,000 in the first quarter due to increased sales to restaurant chains, warehouse club stores and throughout our customer base. Increased sales to two customers accounted for approximately 50% of the increase in pretzel sales in the quarter. Without Kim & Scott's, pretzel sales increased about 23%. Frozen juices and ices sales decreased 4% to $7,527,000 in the three months resulting from lower sales to school food service accounts partially offset by higher sales to warehouse club stores. Churro sales to food service customers increased 33% to $13,807,000 in the first quarter with sales to one restaurant chain accounting for 85% of the increase.
Sales of bakery products increased $7,485,000 or 12% in the first quarter to $68,305,000 as sales increases were spread throughout our customer base.
Sales of new products in the first twelve months since their introduction were approximately $4.8 million in this quarter. Price increases accounted for approximately $3.0 million of sales in the quarter and net volume increases, including new product sales as defined above and sales resulting from the acquisition of Kim & Scott's, accounted for approximately $14.1 million of sales in the quarter.
Operating income in our Food Service segment increased from $7,254,000 to $12,597,000 in the quarter. Operating income for the quarter benefited from increased sales volume and price increases. Additionally, last year's quarter was impacted by a management and sales meeting expense of about $550,000.
RETAIL SUPERMARKETS
Sales of products to retail supermarkets decreased $131,000 or less than 1% to $20,703,000 the first quarter. Excluding Kim & Scott's sales, sales decreased 2% for the first quarter. Soft pretzel sales for the first quarter were up 5% to $8,578,000 on a unit volume increase of 6% for the quarter. Excluding Kim & Scott's sales, soft pretzel sales increased about 2% for this quarter. Sales of frozen juices and ices decreased $610,000 or 9% to $6,470,000 in the first quarter on a unit volume decrease of 14% in this quarter. Coupon redemption costs, a reduction of sales, increased 4% or about $32,000 for the quarter. Handheld sales to retail supermarket customers increased 7% to $6,313,000 in the quarter.
Sales of new products in the first twelve months since their introduction were approximately $1.2 million in the first quarter. Price increases accounted for approximately $200,000 of sales in the quarter and net volume decreases, including new product sales as defined above and Kim & Scott's sales and net of increased coupon costs, accounted for approximately $300,000 of the sales decrease in this quarter. Operating income in our Retail Supermarkets segment decreased from $1,824,000 to $1,570,000 in the quarter primarily because of increased allowances for the introduction of products into additional retailers, lower sales and increased advertising expenses.
FROZEN BEVERAGES
Frozen beverage and related product sales increased 4% to $40,518,000 in the first quarter. Beverage related sales alone were up 5% in the first quarter. Gallon sales were up 2% for the three months. Service revenue increased 3% to $11,842,000 in the first quarter with sales increases and decreases spread throughout our customer base.
Sales of beverage machines, which tend to fluctuate from year to year while following no specific trend, were $135,000 or 5% higher in the three month period. The approximate number of company owned frozen beverage dispensers was 42,700 and 42,500 at December 29, 2012 and September 29, 2012, respectively. Operating income in our Frozen Beverage segment was $894,000 in this year's quarter compared to an operating loss of $615,000 last year. The improvement in operating results was from a combination of higher sales and a reduction of expenses. Last year's quarter included a management and sales meeting expense of about $200,000.
CONSOLIDATED
Gross profit as a percentage of sales increased to 28.28% in the three month period from 26.87% last year. Higher volume in our food service segment was the primary reason for the improved gross profit margin. 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 packaging as well as lesser used ingredients over the past nine months which we anticipate will result in higher costs over the balance of our fiscal year, although there was no impact in our first quarter.
Total operating expenses increased $1,131,000 in this quarter but as a percentage of sales decreased from 22% percent to 20%. The drop in percentage was generally because of increased sales and lower expenses in our frozen beverage segment and the overall reduction of $800,000 in expense because of the management and sales meeting we had last year. Marketing expenses decreased from 10% of sales last year to 9% this year also because of higher sales and reduction of expenses. Distribution expenses were 8% of sales in both years' quarter. Administrative expenses were 3.45% of sales this year compared to 3.51% of sales last year.
Operating income increased $6,598,000 or 78% to $15,061,000 in the first quarter as a result of the aforementioned items.
Investment income increased by $421,000 in the quarter due primarily to increased investments of marketable securities. We invested $80 million in this quarter in mutual funds that seek current income with an emphasis on maintaining low volatility and overall moderate duration. We estimate yield from these funds to approximate 4%.
The effective income tax rate has been estimated at 35% and 38% for the quarter this year and last year, respectively. We are estimating an effective income tax rate of between 36 1/2% and 37% for the year. The first quarter benefitted from a reduction of tax expense because of changes in estimates related to a prior year.
Net earnings increased $4,741,000 or 86% in the current three month period to $10,226,000 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.
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