J & J Snack Foods Reports First Quarter Sales and Earnings

PENNSAUKEN, N.J., Jan. 28, 2019 (GLOBE NEWSWIRE) — J & J Snack Foods Corp. (NASDAQ-JJSF) today announced sales and earnings for the first quarter ended December 29, 2018.

Sales increased 2% to $271.6 million from $265.2 million in last year’s first quarter. Net earnings decreased to $17.5 million in the current quarter from $36.2 million last year. Earnings per diluted share decreased to $.93 for the first quarter from $1.93 last year. Operating income increased 4% to $22.1 million in the current quarter from $21.2 million in the year ago quarter.

Net earnings for last year’s quarter benefited from a $20.9 million, or $1.11 per diluted share, gain on the re-measurement of deferred tax liabilities and were impacted by a $1.2 million, or $.06 per diluted share, provision for the one-time repatriation tax, both of which resulted from the Tax Cuts and Jobs Act enacted in December 2017. This year’s quarter benefitted from a reduction of approximately $900,000 in income tax, or $0.5 per diluted share, as the one-time repatriation tax was recorded on an estimated basis at December 30, 2017 and was revised downward this quarter. Excluding the reduction in the provision for the one-time repatriation tax, our effective tax rate was 28.0% in this year’s quarter.

Gerald B. Shreiber, J & J’s President and Chief Executive Officer, commented, “Although we had only a modest sales increase this quarter, our operating income improved largely due to improved operations at several of our production facilities. We continue to focus on improving our margins and overall business going forward.” 

J&J Snack Foods Corp. (NASDAQ: JJSF) is a leader and innovator in the snack food industry, providing innovative, niche and affordable branded snack foods and beverages to foodservice and retail supermarket outlets. Manufactured and distributed nationwide, our principal products include SUPERPRETZEL, the #1 soft pretzel brand in the world, as well as internationally known ICEE and SLUSH PUPPIE frozen beverages, LUIGI’S Real Italian Ice, MINUTE MAID* frozen ices, WHOLE FRUIT sorbet and frozen fruit bars, SOUR PATCH KIDS** Flavored Ice Pops, Tio Pepe’s & CALIFORNIA CHURROS, and THE FUNNEL CAKE FACTORY funnel cakes and several bakery brands within DADDY RAY’S, COUNTRY HOME BAKERS and HILL & VALLEY. With nearly twenty manufacturing facilities, and more than $1 billion in annual revenue, J&J Snack Foods Corp. has continued to see steady growth as a company, reaching record sales for 47 consecutive years. The company consistently seeks out opportunities to expand its unique niche market product offering while bringing smiles to families worldwide. For more information, please visit http://www.jjsnack.com.

*MINUTE MAID is a registered trademark of The Coca-Cola Company.
**SOUR PATCH KIDS is a registered trademark of Mondelēz International group, used under license.

 
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
       
  Three months ended
  December 29,   December 30,
    2018       2017  
       
Net Sales $ 271,612     $ 265,210  
       
Cost of goods sold   194,749       191,931  
Gross Profit   76,863       73,279  
       
Operating expenses      
Marketing   21,442       21,576  
Distribution   23,952       21,159  
Administrative   9,243       9,356  
Other general expense (income)   144       (40 )
Total Operating Expenses   54,781       52,051  
       
Operating Income   22,082       21,228  
       
Other income (expense)      
Investment income   1,040       1,489  
Interest expense & other   (27 )     509  
       
Earnings before      
income taxes   23,095       23,226  
       
Income tax expense (benefit)   5,569       (13,023 )
       
NET EARNINGS $ 17,526     $ 36,249  
       
Earnings per diluted share $ 0.93     $ 1.93  
       
Weighted average number      
of diluted shares   18,897       18,778  
       
Earnings per basic share $ 0.93     $ 1.94  
       
Weighted average number of      
basic shares   18,765       18,666  

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
 
  December 29,   September 29,
    2018       2018  
  (unaudited)    
Assets      
Current assets      
Cash and cash equivalents $ 124,714     $ 111,479  
Marketable securities held to maturity   12,465       21,048  
Accounts receivable, net   117,764       132,342  
Inventories   117,842       112,884  
Prepaid expenses and other   4,683       5,044  
Total current assets   377,468       382,797  
       
Property, plant and equipment, at cost      
Land   2,494       2,494  
Buildings   26,582       26,582  
Plant machinery and equipment   291,178       290,396  
Marketing equipment   294,252       290,955  
Transportation equipment   8,930       8,929  
Office equipment   30,854       30,752  
Improvements   38,893       38,941  
Construction in progress   13,895       8,468  
Total Property, plant and equipment, at cost   707,078       697,517  
Less accumulated depreciation      
and amortization   464,138       454,844  
Property, plant and equipment, net   242,940       242,673  
       
Other assets      
Goodwill   102,511       102,511  
Other intangible assets, net   56,907       57,762  
Marketable securities held to maturity   130,857       118,765  
Marketable securities available for sale   20,394       24,743  
Other   2,907       2,762  
Total other assets   313,576       306,543  
Total Assets $ 933,984     $ 932,013  
       
Liabilities and Stockholders’ Equity      
Current Liabilities      
Current obligations under capital leases $ 322     $ 324  
Accounts payable   65,149       69,592  
Accrued insurance liability   11,114       11,217  
Accrued liabilities   11,456       8,031  
Accrued compensation expense   12,446       20,297  
Dividends payable   9,389       8,438  
Total current liabilities   109,876       117,899  
       
Long-term obligations under capital leases   672       753  
Deferred income taxes   53,003       52,322  
Other long-term liabilities   1,888       1,948  
       
Stockholders’ Equity      
Preferred stock, $1 par value; authorized      
10,000,000 shares; none issued          
Common stock, no par value; authorized,      
50,000,000 shares; issued and outstanding      
18,774,000 and 18,754,000 respectively   30,016       27,340  
Accumulated other comprehensive loss   (13,438 )     (11,994 )
Retained Earnings   751,967       743,745  
Total stockholders’ equity   768,545       759,091  
Total Liabilities and Stockholders’ Equity $ 933,984     $ 932,013  

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)  (in thousands)
       
  Three months ended
  December 29,   December 30,
    2018       2017  
Operating activities:      
Net earnings $ 17,526     $ 36,249  
Adjustments to reconcile net      
earnings to net cash      
provided by operating activities:      
Depreciation of fixed assets   10,774       11,152  
Amortization of intangibles      
and deferred costs   861       834  
Share-based compensation   972       953  
Deferred income taxes   689       (18,265 )
Loss (gain) on marketable securities   1,027       (8 )
Other   82       (317 )
Changes in assets and liabilities      
net of effects from purchase of companies      
Decrease in accounts receivable   14,386       14,547  
Increase in inventories   (4,974 )     (9,933 )
Decrease in prepaid expenses   340       111  
Decrease in accounts payable and      
accrued liabilities   (8,872 )     (9,216 )
Net cash provided by operating activities   32,811       26,107  
Investing activities:      
Purchases of property, plant      
and equipment   (11,837 )     (14,623 )
Purchases of marketable securities   (17,513 )     (30,865 )
Proceeds from redemption and sales of      
marketable securities   17,125       19,096  
Proceeds from disposal of property and      
equipment   577       1,046  
Other   (236 )     27  
Net cash used in investing activities   (11,884 )     (25,319 )
Financing activities:      
Proceeds from issuance of stock   1,704       253  
Payments on capitalized lease obligations   (83 )     (90 )
Payment of cash dividend   (8,438 )     (7,838 )
Net cash used in financing activities   (6,817 )     (7,675 )
Effect of exchange rate on cash      
and cash equivalents   (875 )     (2,986 )
Net increase (decrease) in cash      
and cash equivalents   13,235       (9,873 )
Cash and cash equivalents at beginning      
of period   111,479       90,962  
Cash and cash equivalents at end      
of period $ 124,714     $ 81,089  

  Three months ended
  December 29,   December 30,
    2018       2017  
    (unaudited)  
    (in thousands)  
Sales to External Customers:      
Food Service      
Soft pretzels $ 48,991     $ 49,021  
Frozen juices and ices   7,527       7,184  
Churros   15,135       14,592  
Handhelds   8,802       11,362  
Bakery   102,109       94,933  
Other   5,326       5,172  
Total Food Service $ 187,890     $ 182,264  
       
Retail Supermarket      
Soft pretzels $ 10,186     $ 10,512  
Frozen juices and ices   10,996       9,727  
Handhelds   2,568       3,026  
Coupon redemption   (694 )     (751 )
Other   359       562  
Total Retail Supermarket $ 23,415     $ 23,076  
       
Frozen Beverages      
Beverages $ 31,436     $ 33,143  
Repair and      
maintenance service   19,743       19,004  
Machines revenue   8,904       7,473  
Other   224       250  
Total Frozen Beverages $ 60,307     $ 59,870  
       
Consolidated Sales $ 271,612     $ 265,210  
       
Depreciation and Amortization:      
Food Service $ 6,322     $ 7,098  
Retail Supermarket   335       290  
Frozen Beverages   4,978       4,598  
Total Depreciation and Amortization $ 11,635     $ 11,986  
       
Operating Income :      
Food Service $ 18,461     $ 15,900  
Retail Supermarket   1,447       2,558  
Frozen Beverages   2,174       2,770  
Total Operating Income $ 22,082     $ 21,228  
       
Capital Expenditures:      
Food Service $ 6,278     $ 9,441  
Retail Supermarket   552        
Frozen Beverages   5,007       5,182  
Total Capital Expenditures $ 11,837     $ 14,623  
       
Assets:      
Food Service $ 692,912     $ 635,988  
Retail Supermarket   21,380       21,531  
Frozen Beverages   219,692       207,498  
Total Assets $ 933,984     $ 865,017  
               

Results of Operations

Net sales increased $6,402,000 or 2% to $271,612,000 for the three months ended December 29, 2018 compared to the three months ended December 30, 2017. 

FOOD SERVICE

Sales to food service customers increased $5,626,000 or 3% in the first quarter to $187,890,000. Soft pretzel sales to the food service market of $48,991,000 were roughly the same as last year. Although sales to restaurant chains and schools increased, sales to mass merchandising chains and warehouse club stores declined.

Frozen juices and ices sales increased 5% to $7,527,000 in the three months with sales increases and decreases across our customer base.

Churro sales to food service customers were up 4% in the quarter to $15,135,000 with sales increases and decreases across our customer base.

Sales of bakery products increased $7,176,000 or 8% in the first quarter to $102,109,000 with sales to one co-pack customer accounting for approximately 40% of the sales increase and increased sales to warehouse club stores in part due to a special promotion and increased sales to schools accounting for the balance.

Sales of handhelds decreased $2,560,000 or 23 % in the quarter with the decrease primarily coming from lower sales to co-pack customers because of unsuccessful product launches. Sales of funnel cake increased $166,000 or 3% in the quarter although sales to school food service were slightly lower this quarter.

Sales of new products in the first twelve months since their introduction were approximately $6 million in this quarter. Price increases were approximately $3 million for the quarter and net volume increases accounted for approximately $2.5 million of sales in the quarter.

Operating income in our Food Service segment increased from $15,900,000 to $18,461,000 in the quarter primarily because of increased bakery sales, price increases and improved operations at several of our manufacturing facilities, especially at our Labriola production facility, which was recently acquired at this time a year ago. Additionally, last year’s quarter had the burden of shutdown costs of our Chambersburg, PA production facility. However, this year’s quarter was impacted by approximately $2.0 million of higher distribution expenses primarily due to higher freight rates which increased with the implementation of the electronic logging device mandate in January 2018. Additionally, lower sales of our MARY B’s biscuits and related costs due to our recall in January 2018 impacted our operating income by approximately $500,000 in the quarter.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $339,000 or 1% to $23,415,000 in the first quarter. Soft pretzel sales for the first quarter were down 3% to $10,186,000. Sales of frozen juices and ices increased $1,269,000 or 13% to $10,996,000 in the first quarter due to increased customer promotional support. Handheld sales to retail supermarket customers decreased 15% to $2,568,000 in the quarter as the sales of this product line continues their long term decline.

Sales of new products in the first quarter were less than $400,000. Price increases provided about $600,000 of sales in the quarter and net volume decreased by about $300,000. 

Operating income in our Retail Supermarkets segment was $1,447,000 in this year’s first quarter compared to $2,558,000 in last year’s quarter, a 43% decrease. Increased product and distribution costs along with just a modest sales increase were the primary drivers of the decrease in operating income. 

FROZEN BEVERAGES

Frozen beverage and related product sales increased 1% to $60,307,000 in the first quarter. Beverage related sales were down 5% to $31,436,000, primarily because sales were up a very strong 21% last year compared to the prior year. Gallon sales were down 1% for the three months with lower sales across our customer base. Service revenue increased 4% to $19,743,000 in the first quarter with sales increases and decreases spread throughout our customer base.

Machines revenue (primarily sales of frozen beverage machines) were $8,904,000, an increase of 19%. Operating income in our Frozen Beverage segment decreased to $2,174,000 in this quarter compared to $2,770,000 last year as a result of lower beverage sales and generally higher costs.

CONSOLIDATED

Gross profit as a percentage of sales was 28.30% in the three month period this year and 27.63% last year. Gross profit percentage increased because of improved operations at several of our manufacturing facilities, especially at our Labriola production facility, price increases and because last year had the burden of shutting down our Chambersburg, PA production facility and moving its production to other facilities.

Total operating expenses increased $2,730,000 in the first quarter and as a percentage of sales increased to 20.2% from 19.6% last year. Marketing expenses decreased to 7.89% of sales in this year’s quarter from 8.14% last year primarily because of reduced spending in our frozen beverages segment. Distribution expenses were 8.82% of sales in this year’s quarter and 7.98% of sales in last year’s quarter primarily because of increased freight rates which increased with the implementation of the electronic logging device mandate in January 2018. Administrative expenses were 3.40% of sales this quarter compared to 3.53% of sales last year in the first quarter.

Operating income increased $854,000 or 4% to $22,082,000 in the first quarter as a result of the aforementioned items.

Investment income decreased by $449,000 in the first quarter because of unrealized losses of $1,027,000 which were partially offset by higher interest income of $585,000.

Other income in last year’s quarter includes a $520,000 gain on a sale of property.

Net earnings decreased $18,723,000, or 52%, in the current three month period to $17,526,000. Net earnings for last year’s quarter benefited from a $20.9 million, or $1.11 per diluted share, gain on the remeasurement of deferred tax liabilities which was partially offset by a $1.2 million, or $.06 per diluted share, provision for the one time repatriation tax, both of which resulted from the Tax Cuts and Jobs Act enacted in in December 2017. Excluding the deferred tax gain and the one time repatriation tax, our effective tax rate in last year’s quarter was 28.6%. This year’s quarter benefitted by a reduction of approximately $900,000 in tax as the provision for the one time repatriation tax was reduced as the amount recorded last year was an estimate. Excluding the reduction in the one time repatriation tax, our effective tax rate was 28.0% in this year’s quarter.

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.

The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. The Company undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof.

Contact:
Dennis G. Moore
Senior Vice President
Chief Financial Officer
(856) 532-6603