jjsf_10q-062511.htm
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

X      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the period ended June 25, 2011

or


Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number:                                                                0-14616

J & J SNACK FOODS CORP.
(Exact name of registrant as specified in its charter)
 
New Jersey  
22-1935537
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

6000 Central Highway, Pennsauken, NJ 08109
(Address of principal executive offices)

Telephone (856) 665-9533

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 for 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.
X           Yes                                                                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).
X           Yes                                                                No

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):
 
 
Large Accelerated filer ()
Accelerated filer (X)
     
 
Non-accelerated filer ()
Smaller reporting company ()
  (Do not check if a smaller reporting company)  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes                                                      X           No

As of July 20, 2011, there were 18,673,848 shares of the Registrant’s Common Stock outstanding.

 
 

 
 
INDEX
 
 
 
Page
    Number
     
Part I.
Financial Information
 
     
Item l.
Consolidated Financial Statements
 
     
  Consolidated Balance Sheets – June 25, 2011 (unaudited) and September 25, 2010 3
     
  Consolidated Statements of Earnings (unaudited) – Three Months and Nine Months Ended June 25,  2011 and June 26, 2010 5
     
  Consolidated Statements of Cash Flows (unaudited) – Nine Months Ended June 25, 2011 and June 26, 2010 6
     
  Notes to the Consolidated Financial Statements (unaudited) 7
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
22
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
27
     
Item 4.
Controls and Procedures
27
     
Part II.
Other Information
28
     
Item 6.  Exhibits
  28
 
 
 

 
 
I. FINANCIAL INFORMATION
 
Item 1. Consolidated Financial Statements
 
J & J SNACK FOODS CORP. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
(in thousands)  
             
ASSETS            
   
June 25,
   
September 25,
 
   
2011
   
2010
 
   
(Unaudited)
       
Current assets
           
Cash and cash equivalents
  $ 79,643     $ 74,665  
Marketable securities held to maturity
    25,528       15,481  
Accounts receivable, net
    81,846       69,875  
Inventories, net
    66,561       50,630  
Prepaid expenses and other
    2,696       6,067  
Deferred income taxes
    3,876       3,813  
      260,150       220,531  
                 
                 
Property, plant and equipment, at cost
               
Land
    2,496       2,016  
Buildings
    15,766       13,266  
Plant machinery and equipment
    156,923       144,697  
Marketing equipment
    221,219       214,545  
Transportation equipment
    4,095       3,785  
Office equipment
    13,170       12,690  
Improvements
    20,845       19,590  
Construction in progress
    5,911       3,814  
 
    440,425       414,403  
                 
Less accumulated depreciation and amortization
    318,050       304,311  
                 
      122,375       110,092  
                 
Other assets
               
Goodwill
    70,070       70,070  
Other intangible assets, net
    53,140       55,284  
Marketable securities held to maturity
    29,998       26,300  
Other
    2,213       1,717  
      155,421       153,371  
    $ 537,946     $ 483,994  
 
See accompanying notes to the consolidated financial statements
 
 
3

 
 
J & J SNACK FOODS CORP. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
(in thousands)
 
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
   
June 25,
   
September 25,
 
   
2011
   
2010
 
   
(Unaudited)
       
             
Current liabilities
           
Current obligations under capital leases
  $ 252     $ 244  
Accounts payable
    61,872       52,338  
Accrued liabilities
    10,028       4,269  
Accrued compensation expense
    10,164       12,244  
Dividends payable
    2,193       1,986  
      84,509       71,081  
                 
Long-term obligations under capital leases
    429       619  
Deferred income taxes
    34,538       30,401  
Other long-term liabilities
    1,162       1,318  
      36,129       32,338  
                 
Stockholders' equity
               
Capital stock
               
Preferred, $1 par value; authorized, 10,000 shares; none issued
    -       -  
Common, no par value; authorized 50,000 shares; issued and outstanding, 18,662 and 18,491 shares, respectively
    42,150       38,453  
Accumulated other comprehensive loss
    (2,344 )     (2,854 )
Retained earnings
    377,502       344,976  
      417,308       380,575  
    $ 537,946     $ 483,994  
 
See accompanying notes to the consolidated financial statements
 
 
4

 
 
J & J SNACK FOODS CORP. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF EARNINGS
 
(Unaudited)  
(in thousands, except per share amounts)
 
                         
   
Three months ended
   
Nine months ended
 
   
June 25,
   
June 26,
   
June 25,
   
June 26,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Net Sales
  $ 206,328     $ 189,729     $ 524,691     $ 496,192  
                                 
Cost of goods sold(1)
    138,787       124,698       362,027       335,345  
Gross Profit
    67,541       65,031       162,664       160,847  
                                 
Operating expenses
                               
Marketing (2)
    18,462       19,341       51,404       52,228  
Distribution (3)
    15,133       13,434       40,805       38,422  
Administrative (4)
    6,355       6,139       17,890       17,765  
Other general expense
    530       55       577       59  
      40,480       38,969       110,676       108,474  
                                 
Operating Income
    27,061       26,062       51,988       52,373  
                                 
Other income (expense)
                               
Gain on bargain purchase of a business
    6,580       -       6,580       -  
Investment income
    251       282       694       876  
Interest expense & other
    (34 )     (46 )     (106 )     (159 )
                                 
Earnings before income taxes
    33,858       26,298       59,156       53,090  
 
                               
Income taxes
    10,532       10,437       20,077       21,138  
                                 
NET EARNINGS
  $ 23,326     $ 15,861     $ 39,079     $ 31,952  
                                 
Earnings per diluted share
  $ 1.24     $ 0.85     $ 2.08     $ 1.71  
                                 
Weighted average number of diluted shares
    18,829       18,731       18,766       18,705  
 
                               
Earnings per basic share
  $ 1.25     $ 0.86     $ 2.10     $ 1.73  
                                 
Weighted average number of basic shares
    18,700       18,529       18,639       18,516  
 
(1) Includes share-based compensation expense of $31 and $112 for the three and nine months ended June 25, 2011, respectively, and $44 and $143 for the three and nine months ended June 26, 2010, respectively.
(2) Includes share-based compensation expense of $67 and $246 for the three and nine months ended June 25, 2011, respectively, and $109 and $361 for the three and nine months ended June 26, 2010, respectively.
(3) Includes share-based compensation expense of $3 and $13 for the three and nine months ended June 25, 2011, respectively, and $5 and $17 for the three and nine months ended June 26, 2010, respectively.
(4) Includes share-based compensation expense of $60 and $301 for the three and nine months ended  June 25, 2011, respectively, and $145 and $460 for the three and nine months ended June 26,  2010, respectively.
 
See accompanying notes to the consolidated financial statements
 
 
5

 
 
J & J SNACK FOODS CORP. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(Unaudited) (in thousands)
 
             
   
Nine months ended
 
   
June 25,
   
June 26,
 
   
2011
   
2010
 
Operating activities:
           
Net earnings
  $ 39,079     $ 31,952  
Adjustments to reconcile net earnings to net cash provided by operating activities:
               
Depreciation and amortization of fixed assets
    18,649       18,147  
Amortization of intangiblesand deferred costs
    4,013       3,891  
Share-based compensation
    672       992  
Gain on bargain purchase of a business
    (6,580 )     -  
Deferred income taxes
    (57 )     (14 )
Other
    19       1  
Changes in assets and liabilities net of effects from purchase of companies
               
Increase in accounts receivable
    (11,890 )     (5,051 )
Increase in inventories
    (9,144 )     (7,033 )
Decrease (increase) in prepaid expenses
    3,382       (356 )
Increase in accounts payable and accrued liabilities
    13,137       4,709  
Net cash provided by operating activities
    51,280       47,238  
Investing activities:
               
Payments for purchases of companies,net of cash acquired
    (8,806 )     (25,185 )
Purchases of property, plant and equipment
    (20,069 )     (21,314 )
Purchase of marketable securities
    (41,293 )     (50,496 )
Proceeds from redemption and sales of marketable securities
    27,547       53,956  
Proceeds from disposal of property and equipment
    303       246  
Other
    (584 )     (9 )
Net cash used in investing activities
    (42,902 )     (42,802 )
Financing activities:
               
Payments to repurchase common stock
    -       (5,894 )
Proceeds from issuance of stock
    2,869       925  
Payments on capitalized lease obligations
    (182 )     (72 )
Payment of cash dividend
    (6,347 )     (5,762 )
Net cash used in financing activities
    (3,660 )     (10,803 )
Effect of exchange rate on cash and cash equivalents
    260       317  
Net increase (decrease) in cash and cash equivalents
    4,978       (6,050 )
Cash and cash equivalents at beginning of period
    74,665       60,343  
Cash and cash equivalents at end of period
  $ 79,643     $ 54,293  
 
See accompanying notes to the consolidated financial statements.
 
 
6

 
 
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 
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 and nine months ended June 25, 2011 and June 26, 2010 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 the Company’s Annual Report on Form 10-K for the fiscal year ended September 25, 2010.

Note 2
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.   We provide an allowance for doubtful receivables after taking into consideration historical experience and other factors.  The allowance for doubtful receivables was $616,000 and $591,000 at June 25, 2011 and September 25, 2010, 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.

 
 
7

 

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:
  
   
Three Months Ended June 25, 2011
 
   
Income
   
Shares
   
Per Share
 
   
(Numerator)
   
(Denominator)
   
Amount
 
                   
   
(in thousands, except per share amounts)
 
Basic EPS
                 
Net Earnings available to common stockholders
  $ 23,326       18,700     $ 1.25  
                         
Effect of Dilutive Securities
                       
Options
    -       129       (0.01 )
                         
Diluted EPS
                       
Net Earnings available to common stockholders plus assumed conversions
  $ 23,326       18,829     $ 1.24  
 
   
Nine Months Ended June 25, 2011
 
   
Income
   
Shares
   
Per Share
 
   
(Numerator)
   
(Denominator)
   
Amount
 
                   
   
(in thousands, except per share amounts)
 
Basic EPS
                 
Net Earnings available to common stockholders
  $ 39,079       18,639     $ 2.10  
                         
Effect of Dilutive Securities
                       
Options
    -       127       (0.02 )
                         
Diluted EPS
                       
Net Earnings available to common stockholders plus assumed conversions
  $ 39,079       18,766     $ 2.08  
 
 
8

 
 
   
Three Months Ended June 26, 2010
 
   
Income
   
Shares
   
Per Share
 
   
(Numerator)
   
(Denominator)
   
Amount
 
                   
   
(in thousands, except per share amounts)
 
Basic EPS
                 
Net Earnings available to common stockholders
  $ 15,861       18,529     $ 0.86  
                         
Effect of Dilutive Securities
                       
Options
    -       202       (0.01 )
                         
Diluted EPS
                       
Net Earnings available to common stockholders plus assumed conversions
  $ 15,861       18,731     $ 0.85  
 
   
Nine Months Ended June 26, 2010
 
   
Income
   
Shares
   
Per Share
 
   
(Numerator)
   
(Denominator)
   
Amount
 
                   
   
(in thousands, except per share amounts)
 
Basic EPS
                 
Net Earnings available to common stockholders
  $ 31,952       18,516     $ 1.73  
                         
Effect of Dilutive Securities
                       
Options
    -       189       (0.02 )
                         
Diluted EPS
                       
Net Earnings available to common stockholders plus assumed conversions
  $ 31,952       18,705     $ 1.71  
 
 
9

 
 
Note 5   Our calculation of comprehensive income is as follows:
 
   
Three months ended
   
Nine months ended
 
   
June 25,
   
June 26,
   
June 25,
   
June 26,
 
   
2011
   
2010
   
2011
   
2010
 
   
(in thousands)
 
                         
Net Earnings
  $ 23,326     $ 15,861     $ 39,079     $ 31,952  
Foreign Currency translation adjustment
    29       (98 )     510       453  
Comprehensive income
  $ 23,355     $ 15,763     $ 39,589     $ 32,405  
 
Note 6   At June 25, 2011, the Company has three stock-based employee compensation plans.  Share-based compensation was recognized as follows:

   
Three months ended
   
Nine months ended
 
   
June 25,
   
June 26,
   
June 25,
   
June 26,
 
   
2011
   
2010
   
2011
   
2010
 
   
(in thousands, except per share amounts)
 
                         
Stock Options
  $ 40     $ 127     $ 140     $ 500  
Stock purchase plan
    37       53       169       152  
Deferred stock issued to outside directors
    -       34       46       103  
Restricted stock issued to an employee
    -       8       -       28  
    $ 77     $ 222     $ 355     $ 783  
                                 
Per diluted share
  $ -     $ 0.01     $ 0.02     $ 0.04  
                                 
The above compensation is net of tax benefits
  $ 84     $ 81     $ 317     $ 198  
 
 
10

 

The Company anticipates that share-based compensation will not exceed $600,000 net of tax benefits, or approximately $.03 per share for the fiscal year ending September 24, 2011.

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 first nine months: expected volatility of 28%; risk-free interest rate of 2.14%; dividend rate of 1.2% and expected lives ranging between 5 and 10 years.

During the 2010 nine month period, the Company granted 100,330 stock options.  The weighted-average grant date fair value of these options was $9.11.  No options were issued in the third quarter of 2010 or in the nine month period ended June 25, 2011.

Expected volatility for both years is based on the historical volatility of the price of our common shares over the past 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.

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.  

 
11

 
 
The total amount of gross unrecognized tax benefits is $1,125,000 and $1,249,000 on June 25, 2011 and September 25, 2010, 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.  As of June 25, 2011 and September 25, 2010, respectively, the Company has $401,000 and $429,000 of accrued interest and penalties.

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 with virtually all open for examination for three to four years.

Note 8
In January 2010, the FASB issued guidance that amends existing disclosure requirements of fair value measurements adding required disclosures about items transferring into and out of Levels 1 and 2 in the fair value hierarchy; adding separate disclosures about purchases, sales, issuances, and settlements relative to Level 3 measurements; and clarifying, among other things, the existing fair value disclosures about the level of disaggregation. This guidance was effective for our fiscal year beginning September 26, 2010, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for our fiscal year beginning September 25, 2011. Since this standard impacts disclosure requirements only, its adoption has not and will not have any impact on the Company’s consolidated results of operations or financial condition.
      
In December 2010, the FASB issued guidance which requires that if a company presents comparative financial statements to include business combinations, the company should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. This guidance also expands the supplemental pro forma adjustments to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This guidance is effective for our fiscal year beginning September 25, 2011. The adoption of this guidance will not have a material impact on the Company’s financial position, results of operations or cash flows.

In May 2011, the FASB issued guidance which amends current fair value measurement and disclosure guidance to include increased transparency around valuation inputs and investment categorization. This guidance results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements. This guidance will be effective for our second quarter of fiscal year 2012, and is not expected to have a material impact on our financial statements.
 
 
12

 

In June 2011, the FASB issued guidance which gives us the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both options, we are required to present each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this guidance do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.  This guidance will be effective for our fiscal year 2013, and is not expected to have a material impact on our financial statements.

In December 2010, the FASB issued guidance related to goodwill impairment testing for reporting entities with a zero or negative carrying amount.  Under the amended guidance, we must consider whether it is more likely than not that a goodwill impairment exists for reporting units with a zero or negative carrying amount.  If it is more likely than not that a goodwill impairment exists, the second step of the goodwill impairment test must be performed to measure the amount of the goodwill impairment loss, if any.   This guidance is effective for our fiscal year 2012 and is not expected to have a material impact on our financial statements.

 
13

 
 
Note 9    Inventories consist of the following:
 
   
June 25,
   
September 25,
 
   
2011
   
2010
 
   
(unaudited)
       
   
(in thousands)
 
             
Finished goods
  $ 32,419     $ 22,171  
Raw materials
    12,779       8,702  
Packaging materials
    6,071       4,727  
Equipment parts & other
    15,292       15,030  
    $ 66,561     $ 50,630  
                 
The above inventories are net of reserves
  $ 4,717     $ 4,189  
 
Note 10
We principally sell our products to the food service and retail supermarket industries.  Sales and results of our frozen beverages business are monitored separately from the balance of our food service business because of different distribution and capital requirements.  We maintain separate and discrete financial information for the three operating segments mentioned above which is available to our Chief Operating Decision Makers.

We have applied no aggregation criteria to any of these operating segments in order to determine reportable segments.  Our three reportable segments are Food Service, Retail Supermarkets and Frozen Beverages. The Restaurant Group, operator of two BAVARIAN PRETZEL BAKERY retail stores with sales of $502,000 in the nine months ended June 25, 2011, has been included in Food Service because it no longer meets the quantitative thresholds under the guidance for reportable segments to be shown separately. 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 group are soft pretzels, frozen juice treats and desserts, churros, dough enrobed handheld products and baked goods.  Our customers in the food service industry 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.

 
14

 

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, dough enrobed handheld products and TIO PEPE’S Churros.  Within the retail supermarket channel, our frozen and prepackaged products are purchased by the consumer for consumption at home.
 
Frozen Beverages

We sell frozen beverages and related products to the food service industry, including 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 and Retail Supermarkets 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.  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 three reportable segments is as follows:

 
15

 
 
   
Three months ended
   
Nine months ended
 
   
June 25,
   
June 26,
   
June 25,
   
June 26,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Sales to External Customers:
                   
  Food Service
                       
    Soft pretzels
  $ 26,686     $ 25,349     $ 76,342     $ 75,117  
    Frozen Juices and ices
    17,176       15,949       35,904       33,320  
    Churros
    11,004       8,035       31,258       21,955  
    Handhelds
    2,835       -       2,835       -  
    Bakery
    58,080       57,089       173,209       171,161  
    Other
    5,598       6,217       14,929       18,014  
    $ 121,379     $ 112,639     $ 334,477     $ 319,567  
                                 
  Retail Supermarket
                               
    Soft pretzels
  $ 7,524     $ 7,176     $ 23,972     $ 23,079  
    Frozen juices and ices
    17,943       17,347       33,419       30,153  
    Handhelds
    2,807       -       2,807       -  
    Coupon redemption
    (940 )     (767 )     (2,264 )     (2,122 )
    Other
    506       186       1,216       560  
    $ 27,840     $ 23,942     $ 59,150     $ 51,670  
                                 
  Frozen Beverages
                               
    Beverages
  $ 41,260     $ 38,812     $ 89,789     $ 86,435  
    Repair and
                               
      maintenance service
    11,078       10,490     $ 30,831       30,058  
    Machines Sales
    4,071       3,082     $ 8,812       6,712  
    Other
    700       764     $ 1,632       1,750  
    $ 57,109     $ 53,148     $ 131,064     $ 124,955  
                                 
Consolidated Sales
  $ 206,328     $ 189,729     $ 524,691     $ 496,192  
                                 
Depreciation and Amortization:
                         
  Food Service
  $ 4,197     $ 4,297     $ 12,700     $ 12,709  
  Retail Supermarket
    -       -       -       -  
  Frozen Beverages
    3,324       3,226     $ 9,962       9,329  
    $ 7,521     $ 7,523     $ 22,662     $ 22,038  
                                 
Operating Income
                               
  Food Service
  $ 13,875     $ 14,610     $ 36,795     $ 37,941  
  Retail Supermarket
    3,545       3,809     $ 7,677       7,467  
  Frozen Beverages
    9,641       7,643     $ 7,516       6,965  
    $ 27,061     $ 26,062     $ 51,988     $ 52,373  
                                 
Capital Expenditures:
                               
  Food Service
  $ 5,130     $ 4,135     $ 10,357     $ 9,869  
  Retail Supermarket
    -       -       -       -  
  Frozen Beverages
    4,322       4,098     $ 9,712       11,445  
    $ 9,452     $ 8,233     $ 20,069     $ 21,314  
                                 
Assets:
                               
  Food Service
  $ 389,042     $ 326,113     $ 389,042     $ 326,113  
  Retail Supermarket
    3,587       2,731       3,587       2,731  
  Frozen Beverages
    145,317       138,398       145,317       138,398  
    $ 537,946     $ 467,242     $ 537,946     $ 467,242  
 
 
16

 
 
Note 11
Our three reporting units, which are also reportable segments, are Food Service, Retail Supermarkets and Frozen Beverages.
 
The carrying amounts of acquired intangible assets for the Food Service, Retail Supermarkets and Frozen Beverage segments as of June 25, 2011 and September 25, 2010 are as follows:
 
   
June 25, 2011
   
September 25, 2010
 
   
Gross
         
Gross
       
   
Carrying
   
Accumulated
   
Carrying
   
Accumulated
 
   
Amount
   
Amortization
   
Amount
   
Amortization
 
      (in thousands)  
                         
FOOD SERVICE
                       
Indefinite lived intangible assets
                       
   Trade Names
  $ 12,880     $ -     $ 12,204     $ -  
                                 
Amortized intangible assets
                               
   Non compete agreements
    470       407       470       351  
   Customer relationships
    40,024       18,097       40,024       15,160  
   License and rights
    3,606       2,401       3,606       2,287  
    $ 56,980     $ 20,905     $ 56,304     $ 17,798  
                                 
RETAIL SUPERMARKETS
                               
Indefinite lived intangible assets
                               
   Trade Names
  $ 3,380     $ -     $ 2,731     $ -  
                                 
Amortized Intangible Assets
                               
  Customer relationships
    207       -       -       -  
    $ 3,587     $ -     $ 2,731     $ -  
                                 
                                 
FROZEN BEVERAGES
                               
Indefinite lived intangible assets
                               
   Trade Names
  $ 9,315     $ -     $ 9,315     $ -  
                                 
Amortized intangible assets
                               
   Non compete agreements
    198       184       198       165  
   Customer relationships
    6,478       3,374       6,478       2,876  
   Licenses and rights
    1,601       556       1,601       504  
    $ 17,592     $ 4,114     $ 17,592     $ 3,545  
 
 
17

 
      
   
 Amortized intangible assets 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 $1,532,000 were acquired in the food service and retail supermarkets segments in the three months ended June 25, 2011, in the handhelds acquisition.  Aggregate amortization expense of intangible assets for the three months ended
June 25, 2011 and June 26 2010 was $1,127,000 and $1,149,000 respectively and for the nine months ended June 25, 2011 and June 26, 2010 was $3,676,000  and $3,394,000 respectively.
 
Estimated amortization expense for the next five fiscal years is approximately $4,800,000 in 2011, $4,500,000 in 2012, and $4,400,000 in 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 Food Service, Retail Supermarket and Frozen Beverage segments are as follows:
 
   
Food Service
   
Retail Supermarket
   
Frozen Beverages
    Total  
    (in thousands)
                                 
Balance at June 25, 2011
  $ 34,130     $ -     $ 35,940     $ 70,070  
 
       There were no changes in the carrying amounts of goodwill for the three months ended June 25, 2011.
 
Note 12
We have classified our investment securities as marketable securities held to maturity.  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.

 
18

 
 
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.

The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at June 25, 2011 are summarized as follows:
 
         
Gross
   
Gross
   
Fair
 
   
Amortized
   
Unrealized
   
Unrealized
   
Market
 
   
Cost
   
Gains
   
Losses
   
Value
 
    (in thousands)  
US Government Agency Debt
  $ 29,998     $ 39     $ 85     $ 29,952  
FDIC Backed Corporate Debt
    8,037       53             8,090  
Certificate of Deposit
    17,491       2             17,493  
    $ 55,526     $ 94     $ 85     $ 55,535  
 
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 25, 2010 are summarized as follows:
 
         
Gross
   
Gross
   
Fair
 
   
Amortized
   
Unrealized
   
Unrealized
   
Market
 
   
Cost
   
Gains
   
Losses
   
Value
 
    (in thousands)  
US Government Agency Debt
  $ 8,000     $ 53     $ -     $ 8,053  
FDIC Backed Corporate Debt
    13,107       144       -       13,251  
Certificate 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.

 
19

 
 
The amortized cost and fair value of the Company’s held to maturity securities by contractual maturity at June 25, 2011 and September 25, 2010 are summarized as follows:
 
   
June 25, 2011
   
September 25, 2010
 
    (in thousands)  
         
Fair
         
Fair
 
   
Amortized
   
Market
   
Amortized
   
Market
 
   
Cost
   
Value
   
Cost
   
Value
 
                         
Due in one year or less
  $ 25,528     $ 25,583     $ 15,481     $ 15,501  
Due after one year through five years
    8,998       8,987       26,300       26,482  
Due after 5 years through 10 years
    21,000       20,965       -       -  
Total held to maturity securities
  $ 55,526     $ 55,535     $ 41,781     $ 41,983  
Less current portion
    25,528       25,583       15,481       15,501  
Long term held to maturity securities
  $ 29,998     $ 29,952     $ 26,300     $ 26,482  
 
Proceeds from the redemption and sale of marketable securities were $2,022,000 and $27,547,000 in the three and nine months ended June 25, 2011, respectively; and $4,618,000 and $53,956,000 in the three and nine months ended June 26, 2010, respectively. A gain of $27,000 was recorded in the nine months ended June 25, 2011 with no gain recorded in the three months ended June 25, 2011.  We use the specific identification method to determine the cost of securities sold.
 
Note 13
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 a premium brand churro.  Revenues from CALIFORNIA CHURROS were approximately $2.5 million for our 2010 fiscal year.
 
In May 2011, we acquired the frozen handheld business of ConAgra Foods.  This business had sales of approximately $50 million over the prior twelve months to food service and retail supermarket customers.
 
These acquisitions were and will be accounted for under the purchase method of accounting, and their operations are and will be included in the consolidated financial statements from their respective acquisition dates.
      
 
 
20

 
      
   
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  

Acquisition costs of $184,000 for these acquisitions are included in administrative and other general expense for the three and nine months ended June 26, 2010.

The preliminary purchase price allocation for the handhelds acquisition is as follows:
 
    (in thousands)  
       
Working Capital
  $ 6,955  
Property, plant & equipment
    11,036  
Trade Names
    1,325  
Customer Relationships
    207  
Deferred tax liability
    (4,137 )
         
         
Net Assets Acquired
    15,386  
         
Purchase Price
    8,806  
         
Gain on bargain purchase
  $ 6,580  

The preliminary purchase price allocation resulted in the recognition of a gain on bargain purchase of approximately $6,580,000 which is included in other income in the consolidated statement of earnings for the three and nine months ended June 25, 2011.  The gain on bargain purchase resulted from the fair value of the identifiable net assets acquired exceeding the purchase price.

 
21

 
 
Acquisition costs of $464,000 and $534,000 for the handhelds acquisition are included in other general expense in the consolidated statements of earnings for the three and nine months ended June 25, 2011, respectively.
 
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).
 
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 $.1175 per share of its common stock payable on July 6, 2011, to shareholders of record as of the close of business on June 15, 2011.

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.

In the three months ended June 25, 2011 and June 26, 2010, 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 a decrease of $29,000   and an increase of $98,000 respectively, in accumulated other comprehensive loss.  In the nine month periods, there was a decrease of $510,000 in fiscal year 2011 and a decrease of $453,000    in fiscal year 2010.

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. California Churros had revenue of approximately $2.5 million in our 2010 fiscal year.

 
22

 
 
In May 2011, we acquired the frozen handheld business of ConAgra Foods.  This business had sales of approximately $50 million over the prior twelve months to food service and retail supermarket customers.
 
    Our general-purpose bank credit line which expires in December 2011 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 25, 2011.
 
Results of Operations

Net sales increased $16,599,000 or 9% for the three months to $206,328,000 and $28,499,000 or 6% to $524,691,000 for the nine months ended June 25, 2011 compared to the three and nine months ended June 26, 2010.

Excluding sales from the acquisition of Parrot Ice in February 2010, California Churros in June 2010 and the frozen handheld business of ConAgra Foods in May 2011, sales increased 4% for the three months and 3% for the nine months.

FOOD SERVICE

Sales to food service customers increased $8,740,000 or 8% in the third quarter to $121,379,000 and increased $14,910,000 or 5% for the nine months.  Excluding sales from the acquisition of California Churros and handheld sales, food service sales increased 2% for the quarter and were up 1% for the nine months. Soft pretzel sales to the food service market increased 5% to $26,686,000 in the third quarter and increased 2% to $76,342,000 in the nine months due primarily to increased sales to chain restaurants in the third quarter. Frozen juices and ices sales increased 8% to $17,176,000 in the three months and 8% to $35,904,000 in the nine months primarily as the result of higher sales to school food service accounts.  Churro sales to food service customers increased 37% to $11,004,000 in the third quarter and were up 42% to $31,258,000 in the nine months.  Without sales from California Churros, churros sales for the quarter were down about 5% and for the nine months were essentially unchanged.

Sales of bakery products, excluding biscuit and dumpling sales and fruit and fig bar sales, increased $1,485,000 or 4% in the third quarter to $43,342,000 and increased $4,229,000 or 3% for the nine months due primarily to increased sales to private label customers.  Biscuit and dumpling sales increased 7% to $7,119,000 in the quarter and were up 4% to $26,366,000 for the nine months. Sales of fig and fruit bars decreased 11% in the third quarter to $7,619,000 and decreased 13% in the nine months to $21,389,000 with lower sales spread across many customers for many reasons.  Handheld sales to food service customers were $2,835,000 in the quarter and year to date.

 
23

 
 
Funnel cake sales decreased by $788,000 to $5,153,000 in the quarter and by $3,346,000 to $13,609,000 in the nine months with sales to one customer down $3,021,000, or 100%, in the quarter and down $7,240,000 or 69%, in the nine months.  This one customer accounted for $12.7 million of funnel cake fries in our fiscal year 2010, of which $2.2 million were in the last three months.  We anticipate no sales to this customer in the last three months of fiscal year 2011.

Sales of new products in the first twelve months since their introduction were approximately $1.3 million in the June quarter and $9.1 million in the nine months. Price increases accounted for approximately $3.5 million of sales in the June quarter and $6.1 million of sales in the nine months and net volume increases, including new product sales as defined above and sales resulting from the acquisition of California Churros and handheld sales, accounted for approximately $5.2 million of sales in the June quarter and $8.8 million of sales in the nine months.

Operating income in our Food Service segment decreased from $14,610,000 to $13,875,000 in the quarter and from $37,941,000 to $36,795,000 for the nine months primarily as a result of higher ingredient and packaging costs of about $5.5 million in the quarter and about $10.0 million for the nine months partially offset by higher pricing and the benefit of increased volumes.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $3,898,000 or 16% to $27,840,000 in the third quarter and were up 14% to $59,150,000 in the first nine months. Excluding handheld sales for the quarter and for the nine months, sales increased 5% for the quarter and increased 9% for the nine months. Soft pretzel sales for the third quarter were up 5% to $7,524,000 and were up 4% to $23,972,000 for the nine months on unit volume increases of 4% for the quarter and 2% for the nine months.  Sales of frozen juices and ices increased $596,000 or  3% to $17,943,000 in the third quarter and were up 11% to $33,419,000 in the first nine months on a unit volume increase of 2% in the quarter and 11% for the nine months. Coupon redemption costs, a reduction of sales, increased 7% or about $142,000 for the nine months and were up $173,000 or 23% in the quarter. Handheld sales to retail supermarket customers were $2,807,000 in the quarter and year to date.

 
24

 
 
Sales of products in the first twelve months since their introduction were approximately $1.6 million in the June quarter and $2.8 million in the nine months. Price increases accounted for approximately $1.3 million of sales in the June quarter and $1.8 million of sales in the nine months and net volume increases, including new product sales as defined above and handheld sales and net of decreased coupon costs, accounted for approximately $2.6 million of sales in the June quarter and $5.8 million of sales in the nine months.  Operating income in our Retail Supermarkets segment decreased from $3,809,000 to $3,545,000 in the quarter and increased to $7,677,000 from $7,467,000 in the nine months.  Operating income in the quarter was impacted by additional trade spending of about $450,000 related to the introduction of our SUPERPRETZEL PRETZELDOGS hot dog product and by higher product costs related to ingredient and packaging cost increases.  The increase in operating income for the year was primarily the result of higher volume.
 
FROZEN BEVERAGES

Frozen beverage and related product sales increased 7% to $57,109,000 in the third quarter and increased $6,109,000 or 5% to $131,064,000 in the nine-month period.  Beverage sales alone increased 6% to $41,260,000 in the third quarter and were up 4% to $89,789,000 in the nine months. Gallon sales were up 2% for the three months and essentially unchanged for the nine months in our base ICEE business.  Service revenue increased 6% to $11,078,000   in the third quarter and 3% to $30,831,000 for the nine months.

Sales of beverage machines, which tend to fluctuate from year to year while following no specific trend, were $989,000 higher this year than last in the three month period and for the nine months, sales of machines were higher by $2,100,000. The estimated number of company owned frozen beverage dispensers was 39,300 and 37,600 at June 25, 2011 and September 25, 2010, respectively.  Operating income in our Frozen Beverage segment increased $1,998,000 to $9,641,000 in the quarter and for the nine months, operating income increased $551,000 primarily due to higher third quarter revenues combined with lower operating expenses in the quarter. Higher gasoline costs of approximately $475,000 and $900,000 impacted the June quarter and nine months, respectively.  We expect higher gasoline costs to impact operating income for at least the balance of our fiscal year.

CONSOLIDATED

Gross profit as a percentage of sales decreased to 32.73% in the three month period from 34.28% last year and decreased to 31.00% in the nine month period from 32.42% a year ago.  Higher ingredient and packaging costs compared to last year of approximately $6 million for the quarter and $11 million for the nine months was primarily responsible for the decreased gross profit percentages. 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 since June 2010 and the cost of other commodities has increased as well over the past year.  We anticipate these market cost increases will result in higher costs to the company over the remaining three months of our fiscal year 2011.  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 2011 compared to our fiscal year 2010.

 
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Total operating expenses increased $1,511,000 in the third quarter but as a percentage of sales decreased about one percent to 20% in this year.  For the nine months, operating expenses increased $2,202,000, but as a percentage of sales decreased about 3/4 of one percent to 21% of sales.  Marketing expenses decreased to 9% of sales in the quarter from 10% last year and to 10% of sales from 11% of sales for the nine months.  Moderate spending decreases throughout our business and higher sales accounted for the percent of sales decrease.  Distribution expenses were 7% in both years' quarter and 8% in both years' nine months.  Administrative expenses were 3% of sales in both years' third quarter and declined slightly to 3% of sales in the nine months from 4% last year.

Other general expenses this year included about $464,000 and $534,000 of costs related to the handhelds acquisition in the three and nine months, respectively.

Operating income increased $999,000 or 4% to $27,061,000 in the third quarter and decreased $385,000 or less than one percent to $51,988,000 in the nine months as a result of the aforementioned items.

Gain on the bargain purchase of a business of $6,580,000 in the third quarter resulted from the fair value of the identifiable assets acquired in the handhelds acquisition exceeding the purchase price.

Investment income decreased by $31,000 and $182,000 in the third quarter and nine months, respectively, due to a general decline in the level of interest rates.

The effective income tax rate has been estimated at 31%     and 40% for the quarter this year and last year respectively; and at 34% and 40% for the nine months this year and last year respectively. Adjusting out the effect of the gain on bargain purchase of a business, the effective income tax rate has been estimated at 39% and 38% for the quarter and nine months of this year, respectively. We are estimating an effective income tax rate of between 38% and 39% for the year after adjusting out the effect of the gain on bargain purchase of a business.

 
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Net earnings increased $7,465,000 or 47% in the current three month period to $23,326,000 and increased 22% to $39,079,000 in the nine months this year from $31,952,000 last year as a result of the aforementioned items.  Without the benefit of the gain on bargain purchase of a business, net earnings were $16,746,000 in the quarter compared to $15,861,000 last year and were $32,499,000 in the nine months compared to $31,952,000 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.
 
Item 3.     Quantitative and Qualitative Disclosures About Market Risk
 
   
There has been no material change in the Company’s assessment of its sensitivity to market risk since its presentation set forth, in item 7a. “Quantitative and Qualitative Disclosures About Market Risk,” in its 2010 annual report on Form 10-K filed with the SEC.
        
Item 4.     Controls and Procedures
 
   
The Chief Executive Officer and the Chief Financial Officer of the Company (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of June 25, 2011, that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information  required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
        
There were no changes in the Company’s internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of such evaluation.
 
 
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 PART II.  OTHER INFORMATION
 
 
 
Item 6.
 
Exhibits
   
       
   
Exhibit No.
   
       
  31.1 & Certification Pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002  
  31.2    
       
  99.5 & Certification Pursuant to the 18 U.S.C.  
  99.6 Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  
       
  101.1 The following financial information from J&J Snack Foods Corp.'s Quarterly Report on Form 10-Q for the quarter ended June 25, 2011, formatted in XBRL (eXtensible Business Reporting Language):
(i) Consolidated Statements of Earnings,
(ii) Consolidated Balance Sheets and
(iii) Consolidated Statements of Cash Flows.
 
 
 
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SIGNATURES
Pursuant to the requirements 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.
 
       
Dated: July 25, 2011
By:
/s/ Gerald B. Shreiber  
   
Gerald B. Shreiber
 
   
Chairman of the Board,
 
    President, Chief Executive  
    Officer and Director  
    (Principal Executive Officer)  

Dated: July 25, 2011
By:
/s/ Dennis G. Moore  
    Dennis G. Moore, Senior Vice  
    President, Chief Financial  
    Officer and Director  
    (Principal Financial Officer)  
   
(Principal Accounting Officer)
 

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