J&J SNACK FOODS CORP - Quarter Report: 2009 December (Form 10-Q)

 

 

(1)	Includes share-based compensation expense of $58 and $79 for the three months ended December 26, 2009 and December 27, 2008, respectively.

(2)	Includes share-based compensation expense of $144 and $261 for the three months ended December 26, 2009 and December 27, 2008, respectively.

(3)	Includes share-based compensation expense of $7 and $8 for the three months ended December 26, 2009 and December 27, 2008, respectively.

(4)	Includes share-based compensation expense of $174 and $255 for the three months ended December 26, 2009 and December 27, 2008, respectively.

Note 1

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position and the results of operations and cash flows.  Certain prior year amounts have been reclassified to conform to the current period presentation.  These reclassifications had no effect on reported net earnings.

The results of operations for the three months ended December 26, 2009 and December 27, 2008 are not necessarily indicative of results for the full year.    Sales of our frozen beverages and frozen juice bars and ices are generally higher in the third and fourth quarters due to warmer weather.

While we believe that the disclosures presented are adequate to make the information not misleading, it is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes included in our Annual Report on Form 10-K for the fiscal year ended September 26, 2009.

Note 2

We recognize revenue from our products when the products are shipped to our customers and when equipment service is performed for our customers who are charged on a time and material basis.  We also sell equipment service contracts with terms of coverage ranging between 12 and 60 months.  We record deferred income on equipment service contracts which is amortized by the straight-line method over the term of the contracts.  Revenue is recognized only where persuasive evidence of an arrangement exists, our price is fixed or determinable 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.  We provide an allowance for doubtful receivables after taking into consideration historical experience and other factors.  The allowance for doubtful receivables was $679,000 and $623,000 at December 27, 2009 and September 26, 2009, respectively.

Note 3

Depreciation of equipment and buildings is provided for by the straight-line method over the assets’ estimated useful lives. 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, customer relationships and non compete agreements arising from acquisitions are amortized by the straight-line method over periods ranging from 3 to 20 years.

Note 4

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:

 

Note 5

Our calculation of comprehensive income is as follows:

 

Note 6

At December 26, 2009, the Company has three stock-based employee compensation plans.  Share-based compensation was recognized as follows:

Note 7

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.

Note 8

In December 2007, the FASB issued guidance expandingthe 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. The effect of this guidance on our consolidated financial statements will depend upon the nature, terms and size of any acquisitions consummated in fiscal year 2010 or later.

 

 

Note 9

Inventories consist of the following:

Note 10

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 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.

Note 11

Our four reporting units, which are also reportable segments, are Food Service, Retail Supermarkets, The Restaurant Group and Frozen Beverages.

 

Note 12

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.

Note 13

Subsequent events through January 21, 2010 have been evaluated for disclosure and recognition.  We have no subsequent events to disclose.