SCHEDULE 14A INFORMATION
----------------------------------------
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Check the appropriate box:
[ ] Preliminary Proxy Statement
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(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
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J & J SNACK FOODS CORP.
(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[J&J SNACK FOODS LOGO OMITTED]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 5, 2004
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of J & J SNACK FOODS CORP. will be held
on Thursday, February 5, 2004 at 10:00 A.M., E.S.T., at the Cherry Hill
Hilton, Route 70 and Cuthbert Boulevard, Cherry Hill, New Jersey 08034 for the
following purposes:
1. To elect two directors;
2. To vote on approval of certain performance-based compensation
payable to Gerald B. Shreiber as more fully described in the
Proxy Statement.
3. To consider and act upon such other matters as may properly
come before the meeting and any adjournments thereof.
The Board of Directors has fixed December 8, 2003 as the record date for the
determination of shareholders entitled to vote at the Annual Meeting of
Shareholders. Only shareholders of record at the close of business on that
date will be entitled to notice of, and to vote at, the Annual Meeting of
Shareholders.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS IN
PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS
IN PERSON, YOU ARE URGED TO SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY.
A SELF- ADDRESSED, STAMPED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
Dennis G. Moore,
Secretary
December 18, 2003
[J&J SNACK FOODS LOGO OMITTED]
6000 Central Highway
Pennsauken, NJ 08109
--------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
--------------------
The enclosed proxy is solicited by and on behalf of J & J Snack Foods Corp.
(the "Company" or "J & J") for use at the Annual Meeting of Shareholders (the
"Meeting") to be held on Thursday, February 5, 2004 at 10:00 A.M., E.S.T., at
the Cherry Hill Hilton, Route 70 and Cuthbert Boulevard, Cherry Hill, New
Jersey 08034 and at any postponement or adjournment thereof. The approximate
date on which this Proxy Statement and the accompanying form of proxy will
first be sent or given to shareholders is December 18, 2003. Sending a signed
proxy will not affect the shareholder's right to attend the Meeting and vote
in person since the proxy is revocable. The grant of a later proxy revokes
this proxy. The presence at the meeting of a shareholder who has given a proxy
does not revoke the proxy unless the shareholder files written notice of the
revocation with the secretary of the meeting prior to the voting of proxy or
votes the shares subject to the proxy by written ballot.
The expense of the proxy solicitation will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited in person or by
telephone, telegraph, e-mail or teletype by directors, officers or employees
of the Company without additional compensation. The Company is required to pay
the reasonable expenses incurred by record holders of the common stock, no par
value per share, of the Company (the "Common Stock") who are brokers, dealers,
banks or voting trustees, or other nominees, for mailing proxy material and
annual shareholder reports to any beneficial owners of Common Stock they hold
of record, upon request of such record holders.
A form of proxy is enclosed herewith. This Proxy Statement and the
accompanying form of proxy are being first mailed to shareholders on or about
December 18, 2003. If properly executed and received in time for voting, and
not revoked, the enclosed proxy will be voted as indicated in accordance with
the instructions thereon. If no directions to the contrary are indicated, the
persons named in the enclosed proxy will vote all shares of Common Stock FOR
the election of the nominees for director.
The enclosed proxy confers discretionary authority to vote with respect to
any and all of the following matters that may come before the meeting: (i)
matters which the Company does not know about a reasonable time before the
proxy solicitation, and are presented at the meeting; (ii) approval of the
minutes of a prior meeting of shareholders, if such approval does not amount
to ratification of the action taken at the meeting; (iii) the election of any
person to any office for which a bona fide nominee is unable to serve or for
good cause will not serve; and (iv) matters incident to the conduct of the
meeting. In connection with such matters, the persons named in the enclosed
form of proxy will vote in accordance with their best judgment.
The Company had 8,783,402 shares of Common Stock outstanding at the close of
business on December 8, 2003 the record date. The presence, in person or by
proxy, of shareholders entitled to cast at least a majority of the votes which
all shareholders are entitled to cast on a particular matter constitutes a
quorum for the purpose of considering such matter. Each share of Common Stock
is entitled to one vote on each matter which may be brought before the
Meeting. The election of directors will be determined by a plurality vote and
a nominee must receive a majority of "for" votes to be elected. Approval of
any other proposal will require the affirmative vote of a majority of the
shares cast on the proposal. An abstention, withholding of authority to vote
for or broker non-vote, therefore, will not have the same legal effect as an
"against" vote and will not be counted in determining whether the proposal has
received the required shareholder vote. Shareholders do not have approval or
dissenter rights with respect to election of Directors.
1
PROPOSAL 1
ELECTION OF DIRECTORS
Two (2) directors are expected to be elected at the Annual Meeting to serve
on the Board of Directors of the Company until the expiration of their term as
indicated below or until their successors are duly elected and qualified.
The following table sets forth certain information with respect to the
director nominees. The director nominees were nominated by the Board of
Directors. All of the director nominees, Messrs. Brown and Lodish, currently
serve as directors of the Company. There are no family relationships among the
current directors or executive officers of the Company. Mr. Brown was elected
to the Board in December 2003 to fill the remaining term of Stephen N. Frankel
who resigned. Pursuant to New Jersey law, Mr. Brown's election as a director
for the period beyond the February 5, 2004 meeting of shareholders, is being
submitted to the shareholders for approval.
Year of
Expiration of
Name Age Position Term as Director
------------------------------------------------------------------------------------------
Sidney Brown(1)(2) 46 Director 2008
Leonard M. Lodish (1)(2) 60 Director 2009
---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Information concerning Director Nominees
Leonard M. Lodish became a director in 1992. He is Samuel R. Harrell
Professor in the Marketing Department and Vice Dean, Wharton West of The
Wharton School at the University of Pennsylvania where he has been a professor
since 1968. He is a Director of Franklin Electronic Publishing, Inc.(maker of
portable electronic reference works) and Decision One (Technology Servicing).
Sidney R. Brown is the Chief Executive Officer of NFI, a comprehensive
provider of freight transportation, warehousing, third party logistics,
contract manufacturing and real estate development. He is Vice Chairman of Sun
National Bank, a national bank operating in New Jersey, Delaware and
Pennsylvania.
Information Concerning Continuing Directors and Executive Officers
Year of
Expiration of
Name Age Position Term as Director
-----------------------------------------------------------------------------------------------------------------------------------
Dennis G. Moore 48 Senior Vice President, Chief Financial Officer, 2007
Secretary, Treasurer and Director
Robert M. Radano 54 Senior Vice President, Chief Operating Officer and Director 2006
Gerald B. Shreiber 62 Chairman of the Board, Chief Executive Officer and President 2005
Peter G. Stanley(1)(2) 61 Director 2006
Daniel Fachner 43 President of the ICEE Company
Michael Karaban 57 Senior Vice President, Marketing
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(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
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.
Dennis G. Moore joined the Company in 1984, and has served in various
capacities since that time. He was named Chief Financial Officer in 1992 and
was elected to the Board of Directors in 1995.
2
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 the Company. He was elected to the Board of Directors in 1996.
Peter G. Stanley became a director in 1983. From September 1996 to November
1999, Mr. Stanley was a self-employed business consultant. Since November 1999
he is the Vice President of Emerging Growth Equities, Ltd., an investment
banking firm.
Executive Officers Who Are Not Directors
Daniel Fachner has been an employee of The ICEE Company since 1979 and
became its President in August 1997.
Michael Karaban has been an employee of J & J Snack Foods Corp. in charge of
its Marketing Department since 1992, and in February 2002 was elected its
Senior Vice President, Marketing.
Board of Directors, Committees and Attendance at Meetings
Attendance at the Board of Directors Meetings
---------------------------------------------
The Board of Directors held four meetings during the 2003 fiscal year. None
of the directors attended less than 75% of all of the meetings of the Board of
Directors (held during the period for which he was a director) and the
meetings of all committees of the Board on which such director served.
The Board of Directors has an Audit Committee, a Compensation Committee, but
does not have a Nominating Committee.
The Audit Committee
-------------------
During the fiscal year ended September 27, 2003, the Audit Committee was
composed of all independent directors, as such term is defined in Rule
4200(a)(15) of the National Association of Securities Dealers' listing
standards. The members of the Audit Committee during this period were Messrs.
Frankel, Lodish and Stanley. The principal functions of the Audit Committee
include, but are not limited to, (i) the oversight of the accounting and
financial reporting processes of the Company and its internal control over
financial reporting; (ii) the oversight of the quality and integrity of the
Company's financial statements and the independent audit thereof; and (iii)
the approval, prior to the engagement of, the Company's independent auditors
and, in connection therewith, to review and evaluate the qualifications,
independence and performance of the Company's independent auditors. The Audit
Committee convened six (6) times during the 2003 fiscal year.
The Audit Committee currently does not have an Audit Committee Financial
Expert, as such term is defined in Section 407 of the Sarbanes-Oxley Act of
2002. Rather, the Audit Committee members believe that each of their
individual experiences provide the Audit Committee with sufficient experience
and expertise to allow them to perform their duties as members of the Audit
Committee.
The Compensation Committee
--------------------------
The Compensation Committee fixes the compensation of the chief executive
officer and administers the Company's stock option plans. During the 2003
fiscal year, the Compensation Committee met one (1) time.
Director Compensation
Each director receives annual grants under the Deferred Stock Plan of 1,500
shares as well as $750 per quarter as a retainer and $1,000 for attendance at
each of its four quarterly Board meetings. In addition, the Chairman of the
Audit Committee receives an annual fee of $5,000.
3
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information regarding the
compensation paid to the Chief Executive Officer and each of the four other
most highly compensated executive officers of the Company for services
rendered in all capacities for the 2003, 2002 and 2001 fiscal years:
Annual Compensation Long Term Compensation
------------------------------ --------------------------
Other Annual Securities All Other
Name and Principal Position Fiscal Compensation Underlying Compensation
--------------------------- Year Salary($) Bonus($) ($)(1) Options(#) ($)(2)
------ --------- -------- ------------ ---------- ------------
Gerald B. Shreiber 2003 $550,000 $500,000 $306,000 -- $6,000
Chairman of the Board, President 2002 $525,000 $400,000 $694,000 25,000 $6,000
Chief Executive Officer 2001 $500,000 $330,000 $119,000 25,000 $6,000
Robert M. Radano 2003 $250,000 $120,000 $ 38,000 2,967 $6,000
Chief Operating Officer, Senior 2002 $225,000 $100,000 $130,000 2,598 $6,000
Vice President of Sales and 2001 $221,000 $100,000 $ 87,000 4,716 $6,000
Director
Dennis G. Moore 2003 $267,000 $137,000 $ 64,000 2,967 $6,000
Senior Vice President, Chief 2002 $255,000 $132,000 $182,000 2,598 $6,000
Financial Officer and Director 2001 $244,000 $120,000 $ 95,000 4,716 $6,000
Daniel Fachner 2003 $255,000 $215,000 $ 65,000 2,967 $6,000
President of The ICEE Company 2002 $245,000 $215,000 $324,000 2,598 $6,000
2001 $225,000 $150,000 $ 79,000 4,716 $6,000
Michael Karaban 2003 $203,000 $ 27,000 $ 31,000 2,000 $6,000
Senior Vice President, Marketing 2002 $198,000 $ 25,000 $ 62,000 2,200 $6,000
2001 $193,000 $ 18,000 $ 36,000 3,000 $6,000
---------------
(1) Value realized upon the exercise of stock options.
(2) 401(K) Profit Sharing Plan Contribution.
4
Option Grants
The following table sets forth certain information concerning stock options
granted during the 2003 fiscal year to the Chief Executive Officer and to each
of the four other most highly compensated executive officers of the Company.
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
-------------------------------------------------------------------------------------- ----------------------------------
Number of
securities % of Total Options
underlying Granted to
Options Employee in Fiscal Exercise Expiration
Name Granted (#) Year Price Date 5% 10%
-----------------------------------------------------------------------------------------------------------------------------
Gerald B. Shreiber 0(1) 0% $33.70 4/30/12 $ 0 $ 0
Robert M. Radano 2,967(2) 4% $33.70 9/28/08 $28,000 $61,000
Dennis G. Moore 2,967(2) 4% $33.70 9/28/08 $28,000 $61,000
Daniel Fachner 2,967(2) 4% $33.70 9/28/08 $28,000 $61,000
Michael Karaban 2,000(2) 3% $33.70 9/28/08 $19,000 $41,000
---------------
(1) Under the Option Plan Mr. Shreiber, as Chief Executive Officer, was
entitled to 10,000 shares. He waived receipt of those options in fiscal
2003.
(2) All options granted are first exercisable on 9/28/06
Option Exercises and Holdings
The following table summarizes exercises of stock options during fiscal year
2003 by the Chief Executive Officer and highly compensated executives and the
number of unexercised options and the value of unexercised options held at the
end of fiscal year 2003.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Unexercised Value of Unexercised In-the-Money
Shares Acquired on Value Options at FY-End(#) Options at FY-End($)
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
--------------------------------------------------------------------------------------------------------------------------------
Gerald B. Shreiber 25,000 $306,000 225,000/25,000 $ 2,948,000/$0
Robert M. Radano 4,371 $ 38,000 6,000/10,281 $126,000/$59,000
Dennis G. Moore 6,349 $ 64,000 11,371/10,281 $194,000/$59,000
Daniel Fachner 4,371 $ 65,000 6,000/10,281 $126,000/$59,000
Michael Karaban 3,000 $ 31,000 4,000/ 7,200 $ 84,000/$38,000
5
Option Repricing
The following table sets forth information concerning repricings of options
held by executive officers of the Company during the last ten completed fiscal
years:
Ten-Year Option/SAR Repricings
Length of
Number of Original
Securities Market Price Exercise Option Term
Underlying of Stock at Price at Remaining At
Options/SARs Time of Time of New Date of
Repriced or Repricing or Repricing or Exercise Repricing or
Name Date Amended (#) Amendment Amendment ($) Price ($) Amendment
------------------------------------------------------------------------------------------------------------------------------------
Robert M. Radano 8/l/96 6,000* $9.75 $12.375 $9.75 58 months
Senior Vice President,
Chief Operating
Officer
Dennis G. Moore 8/l/96 6,000* $9.75 $12.375 $9.75 58 months
Senior V.P., Chief
Financial Officer,
Secretary/Treasurer
Daniel Fachner 8/l/96 5,000* $9.75 $12.375 $9.75 58 months
President,
The ICEE Company
Michael Karaban, 8/1/96 6,000* $9.75 $12.375 $9.75 58 months
Senior Vice President - Marketing
---------------
*Effective August 1, 1996, above referenced options to purchase shares of
Common Stock at an exercise price of $12.375 per share, granted on May 24,
1996, were canceled and replaced by options to purchase shares at an exercise
price of $9.75 per share.
401(k) Profit Sharing Plan
The Company maintains a 401(K) Profit Sharing Plan for the benefit of
eligible employees, and the Company offers a matching contribution based upon
the individual employee's contribution. During the fiscal year ended September
27, 2003, matching contributions to the 401(K) Profit Sharing Plan, made by
the Company, amounted to $1,071,000.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors is composed of
directors who are not employees of the Company and are responsible for
developing and making recommendations to the Board with respect to the
Company's executive compensation programs. In addition, the Compensation
Committee, pursuant to authority delegated by the Board, determines on an
annual basis the compensation to be paid to the Chief Executive Officer. The
Compensation Committee neither reviews nor approves the decisions of the Chief
Executive Officer with respect to the compensation of the other executive
officers.
The Company's compensation is comprised of base salary, bonus, long term
incentive compensation in the form of stock options, and various benefits
generally available to all full-time employees of the Company, including
participation in group medical and life insurance plans and the 401(K) Profit
Sharing Plan.
Base Salary
The base salary level for the Company's Chief Executive Officer is
competitively set relative to companies in the food industry that are similar
to the Company. In obtaining this information, the Company informally
6
reviews newspaper and trade journal reports and information gathered from
discussion with others in the industry. No formal survey is undertaken.
Bonuses
Annual performance standards for each executive officer's area of
responsibility are established by the Chief Executive Officer for other
executive officers. In some cases, bonuses are linked primarily to achieving
increases from the prior year's sales and/or earnings. In other cases, bonuses
reflect a more subjective view of an individual's performance.
While the bonus for Mr. Shreiber was not linked to any specific formula, the
Compensation Committee has established a guideline of 3% of Net Earnings
excluding extraordinary items. It then considers whether this guideline should
be adjusted by other factors. Other factors considered include the long term
aspect of the Company's performance and year to year results. Among the items
considered by the Committee were the Company's Sales, Operating Income,
Operating Income as a percent of sales, Net Earnings, Earnings Per Share,
Return on Equity and Stock Price. These items were reviewed for the previous
year and for a five year period. The Committee reviewed and considered
published reports about the compensation levels of the 100 largest public
companies in the Delaware Valley. The Committee also considers matters which
are likely to have a long term impact on the Company but may not be reflected
on the annual financial statements.
Stock Options
The Company uses the Stock Option Plan as its long-term incentive plan for
executive officers and key employees. The objectives of this Plan are to align
the long term interests of executive officers and shareholders by creating a
direct link between executive compensation and shareholder return and to
enable executives to develop and maintain a significant long term equity
interest in the Company. Options given to the Chief Executive Officer had been
fixed according to the Company's Stock Option Plan. Mr. Shreiber elected not
to take the 10,000 options that he was entitled to receive under the Stock
Option Plan. Options given to other executive officers are recommended by the
Chief Executive Officer and approved by the Compensation Committee. On
September 27, 2003, options were awarded to various employees at the then
price of $33.70.
COMPENSATION COMMITTEE
LEONARD M. LODISH
PETER G. STANLEY
7
STOCK PERFORMANCE GRAPH
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG J & J SNACK FOODS CORP., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S & P PACKAGED FOODS & MEATS INDEX
Cumulative Total Return
----------------------------------------------------------------------
9/98 9/99 9/00 9/01 9/02 9/03
J & J SNACK FOODS CORP. 100.00 106.76 69.94 101.35 199.19 193.41
NASDAQ STOCK MARKET (U.S.) 100.00 163.12 217.03 88.74 69.90 106.49
S & P PACKAGED FOODS & MEATS 100.00 96.23 91.18 109.95 109.36 118.59
*$100 invested on 9/30/98 in stock or index-including reinvestment of dividends.
Fiscal year ending September 30.
Copyright(C)2002, Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved. www.researchdatagroup.com/S&P.htm
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors and executive officers, and persons who beneficially own
more than ten percent of the Company's Common Stock, file with the Securities
and Exchange Commission initial reports of ownership and reports of any
changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten-percent shareholders are
required by regulation of the Securities and Exchange Commission to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to the
Company's officers, directors and greater than ten percent beneficial owners
were complied with during fiscal 2003.
8
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 1, 2003 concerning
(i) each person or group known to J & J to be the beneficial owner of more
than 5% of Common Stock, (ii) each director and nominee for director of the
Company, (iii) each of the Company's four most highly compensated executive
officers for the 2003 fiscal year, and (iv) the beneficial ownership of Common
Stock by J & J's directors and all executive officers as a group. Except as
otherwise noted, each beneficial owner of the Common Stock listed below has
sole investment and voting power.
Name and Address Shares Owned Percent
of Beneficial Owner Beneficially (1) of Class
--------------------------------------------------------------------------------
Directors, Nominees and Named Executive Officers
Gerald B. Shreiber .............................. 2,367,489(2) 26%
6000 Central Highway
Pennsauken, NJ 08109
Sidney R. Brown ................................. -0- *
Leonard M. Lodish ............................... 36,000(3) *
Dennis G. Moore ................................. 50,188(4) *
Robert M. Radano ................................ 60,687(5) *
Peter G. Stanley ................................ 47,161(3)(6) *
Daniel Fachner .................................. 21,763(7) *
Michael Karaban ................................. 23,617(8) *
All executive officers and directors as a group
(8 persons).................................... 2,606,905(9) 32%
Five percent Shareholders
Barclays Global Investors, NA ................... 569,776 6%
45 Fremont Street
San Francisco, CA 94106
Systematic Financial Management ................. 474,315 5%
2 Executive Drive
Fort Lee, NJ 07024
---------------
* Less than 1%
(1) The securities "beneficially owned" by a person are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission and, accordingly,
include securities owned by or for the spouse, children or certain other
relatives of such person as well as other securities as to which the
person has or shares voting or investment power or has the right to
acquire within 60 days of Record Date. The same shares may be
beneficially owned by more than one person. Beneficial ownership may be
disclaimed as to certain of the securities.
(2) Includes 225,000 shares of Common Stock issuable upon the exercise of
options granted to Mr. Shreiber and exercisable within 60 days from the
date of this Proxy Statement, 29,649 shares held for the benefit of Mr.
Shreiber in J & J's 401(k) Plan and 61,275 shares owned by a charitable
foundation in which Mr. Shreiber has the right to vote and dispose of the
shares.
(3) Includes 27,000 shares of Common Stock issuable upon the exercise of
options and exercisable within 60 days from the date of this Proxy
Statement and 4,500 shares issuable under the Deferred Stock Plan.
(4) Includes 11,371 shares of Common Stock issuable upon the exercise of
options granted to Mr. Moore and exercisable within 60 days from the date
of this Proxy Statement and 1751 shares held for the benefit of Mr. Moore
in the Company's 401(k) Plan and 1,499 shares in the Company's Stock
Purchase Plan.
9
(5) Includes 6,000 shares of Common Stock issuable upon the exercise of
options granted to Mr. Radano and exercisable within 60 days from the
date of this Proxy Statement and 2,314 shares in the Company's Stock
Purchase Plan.
(6) Includes 15,661 shares owned jointly with Mr. Stanley's spouse with
shared voting and investment power.
(7) Includes 6,000 shares of Common Stock issuable upon the exercise of
options granted to Mr. Fachner and exercisable within 60 days from the
date of this Proxy Statement and 735 shares held for the benefit of Mr.
Fachner in the Company's 401(k) Plan and 1,038 shares in the Company's
Stock Purchase Plan.
(8) Includes 4,000 shares of Common Stock issuable upon the exercise of
options granted to Mr. Karaban and exercisable within 60 days from the
date of this Proxy Statement and 3,565 shares in the Company's Stock
Purchase Plan.
(9) Includes 306,371 shares of Common Stock issuable upon the exercise of
options granted to executive officers and directors of J & J and
exercisable within 60 days from the date of this Proxy Statement and
9,000 shares issuable under the Deferred Stock Plan.
SHAREHOLDER PROPOSALS
As to all such matters which the Company does not have notice on or prior to
December 18, 2003 discretionary authority shall be granted to the persons
designated in the Company's proxy related to the 2004 Meeting to vote on such
proposal. This procedure does not affect the Rule 14a-8 requirements
applicable to inclusion of shareholder proposals in the Company's proxy
materials related to the 2005 Meeting. A shareholder proposal regarding the
2005 Meeting must be submitted to the Company at its office located at 6000
Central Highway, Pennsauken, New Jersey 08109, by October 9, 2004 to receive
consideration for inclusion in the Company's 2005 proxy materials. Any such
proposal must also comply with the proxy rules under the Securities Exchange
Act, including Rule 14a-8.
AUDIT COMMITTEE REPORT
In November, 2003 the Audit Committee met with management to review and
discuss the audited financial statements. The Audit Committee also conducted
discussions with the Company's independent auditors, Grant Thornton LLP,
regarding the matters required by the Statement on Auditing Standards No. 61.
As required by Independence Standards Board Standard No. 1, "Independence
discussion with Audit Committees", the Audit Committee has discussed with and
received the required written disclosures and confirming letter from Grant
Thornton LLP regarding its independence and has discussed with Grant Thornton
LLP its independence. Based upon the review and discussions referred to above,
the Audit committee recommended to the Board of Directors that the audited
financial statements be included in the Company's Annual Report on Form 10-K
for the year ended September 27, 2003.
This Audit Committee Report shall not be deemed incorporated by reference in
any document previously or subsequently filed with the Securities and Exchange
Commission that incorporates by reference all or any portion of this proxy
statement except to the extent that the Company specifically requests that the
report be specifically incorporated by reference.
The Audit Committee of the Board of Directors has selected Grant Thornton
LLP to be employed as the Company's independent certified public accountants
to make the annual audit and to report on, as may be required, the
consolidated financial statements which may be filed by the Company with the
Securities and Exchange Commission during the ensuing year.
AUDIT COMMITTEE
PETER G. STANLEY
LEONARD M. LODISH
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RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountant for the fiscal year ended
September 27, 2003, was the firm of Grant Thornton LLP. The Audit Committee
has selected Grant Thornton LLP to be the Company's independent auditor for
2004. The selection of the Company's independent auditor is not being
submitted to Shareholders because there is no legal requirement to do so.
A representative of Grant Thornton LLP is expected to be present at the
Annual Meeting and to be available to respond to appropriate questions from
Shareholders. The representative will have the opportunity to make a statement
if he or she so desires.
Principal Accountant Fees and Services
Aggregate fees for professional services rendered for the Company by Grant
Thornton, LLP as of or for the years ended September 27, 2003 and 2002 were:
2003 2002
---- ----
Audit Fees $222,000 $211,000
Audit Related Fees $ 9,000 $ 8,000
Tax Fees $123,000 $ 81,000
All Other fees $ 12,000 $ 10,000
-------- --------
Total $366,000 $310,000
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All of the services performed by the Company independent auditors, including
audit related and non-audit related services, were pre-approved by the Audit
Committee.
The Audit Fees for the years ended September 27, 2003 and September 28,
2002, respectively, were for professional services rendered for the audits of
the consolidated financial statements of the Company, quarterly reviews, and
issuance of consents, and assistance with review of documents filed with the
SEC.
Tax Fees for the years ended September 27, 2003 and September 28, 2002 were
for services performed in connection with income tax services other than those
directly related to the audit of the income tax accrual.
The amount listed above for "All Other Fees," includes fees incurred related
to acquisitions, accounting research and other special projects.
The Audit Committee has considered and determined that the services provided
by Grant Thornton LLP are compatible with maintaining Grant Thornton LLP's
independence.
The aggregate fees included in Audit fees are fees billed for the fiscal
years for the audit of the Company's annual financial statements and reviews
of interim financial statements. The aggregate fees included in each of the
other categories are fees billed in the fiscal years.
Of the time expended by the Company's principal accountant to audit the
Company's financial statements for the fiscal year ended September 27, 2003,
less than 50% of such time involved work performed by persons other than the
principal accountant's full-time, permanent employees.
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PROPOSAL TO APPROVE CERTAIN PERFORMANCE-BASED COMPENSATION
FOR GERALD B. SHREIBER
Shareholders are being asked to approve a bonus formulae for the Chief
Executive Officer equal to 2.5 percent of Company's Net Earnings.
The Company's Chief Executive Officer, Gerald B. Shreiber, has his
compensation fixed annually by the Compensation Committee which is composed of
three (3) independent Directors. His compensation consists of a salary, bonus,
stock options and a 401(k) Profit Sharing Plan Contribution. Under the Option
Plan approved by the Stockholders at the last annual meeting, Mr. Shreiber is
annually entitled to 10,000 options. For the 2003 fiscal year, Mr. Shreiber
waived receipt of the options.
For fiscal 2003 Mr. Shreiber's salary and bonus totaled $1,050,000. Section
162(m) of the Internal Revenue Code denies a publicly held corporation, such
as the Company, a deduction for federal income tax purposes for compensation
in excess of $1 million per year paid after January 1, 1994 to such
Corporation's Chief Executive officer ("CEO") and the four other employees who
are the highest compensated officers (other than the CEO). The deduction limit
of Section 162(m) applies to any compensation in excess of $1 million that
could otherwise be deducted in a taxable year, except for enumerated types of
payments, including payments that meet the requirements in Section 162(m) for
performance-based compensation. Under the requirements for performance-based
compensation set forth in Section 162(m), compensation will not be subject to
the deduction limit if: (1) it is payable on account of the attainment of one
or more performance goals; (2) the performance goals are established by a
Compensation Committee of the Board of Directors that is comprised solely of
two or more outside directors; (3) the material terms of the compensation and
the performance goals are disclosed to and approved by shareholders before
payment and (4) the Compensation Committee certifies that the performance
goals have been satisfied before payment.
Since under Section 162(m) $50,000 of the compensation paid to Mr. Shreiber
will be non-deductible by the Company, the Compensation Committee considered
it prudent to establish a bonus formulae which would comply with 162(m). As
described in the Compensation Committee report, the Compensation Committee had
established a guideline of 3 percent of Net Earnings excluding extraordinary
items to be used in calculating Mr. Shreiber's bonus. The Compensation
Committee then subjectively considered certain criteria. Such subjective
considerations are not permissible under Section 162(m). Therefore, the
Committee has established a bonus formulae for Mr. Shreiber of 2.5 percent of
Net Earnings. If that formulae were used in fiscal 2003, Mr. Shreiber would
have received $495,000 as a bonus. The Compensation Committee will still
annually determine Mr. Shreiber's salary.
The performance-based bonus plan established for Mr. Shreiber is conditioned
upon approval by the shareholders at the February 5, 2004 annual meeting. If
the Company does not obtain shareholder approval of this bonus formulae for
Mr. Shreiber, then his bonus will continue to be determined annually by the
Compensation Committee using the criteria discussed in the Compensation
Committee report. However, in such event if the total salary and bonus paid to
Mr. Shreiber in any fiscal year exceeds $1,000,000, such excess will not be
deductible by the Company.
The Board of Directors recommends that you vote "FOR" approval of this
Proposal.
OTHER MATTERS
The Company is not presently aware of any matters (other than procedural
matters) which will be brought before the Meeting which are not reflected in
the attached Notice of the Meeting. The enclosed proxy confers discretionary
authority to vote with respect to any and all of the following matters that
may come before the Meeting: (i) matters which the Company does not know, a
reasonable time before the proxy solicitation, are to be presented at the
Meeting; (ii) approval of the minutes of a prior meeting of shareholders, if
such approval does not amount to ratification of the action taken at the
meeting; (iii) the election of any person to any office for which a bona fide
nominee named in this Proxy Statement is unable to serve or for good cause
will not serve; (iv) any proposal omitted from this Proxy Statement and the
form of proxy pursuant to Rules 14a-8 or 14a-9 under the Securities Exchange
Act of 1934; and (v) matters incident to the conduct of the Meeting. In
connection with such matters, the persons named in the enclosed proxy will
vote in accordance with their best judgment.
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ADDITIONAL INFORMATION
The Company files reports and other information with the Securities and
Exchange Commission. Copies of these documents may be obtained at the SEC's
public reference room in Washington, D.C. The Company's SEC filings are also
available from commercial document retrieval services or on the SEC's web site
at http://www.sec.gov. Shareholders may also request a copy of the Company's
financial reports filed with the SEC by contacting the Company's Secretary in
writing at 6000 Central Highway, Pennsauken, NJ 08109, Attn: Dennis G. Moore.
A copy of our 2003 Annual Report to Shareholders is being mailed to each
stockholder with this Proxy Statement.
By Order of the Board of Directors,
Dennis G. Moore, Secretary
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