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J & J Snack Foods Reports Second Quarter Sales and Earnings

PENNSAUKEN, N.J., April 29, 2019 (GLOBE NEWSWIRE) -- J & J Snack Foods Corp. (NASDAQ-JJSF) today announced sales and earnings for the second  quarter ended March 30, 2019.

Sales increased 4% to $276.3 million from $266.1 million in last year’s second quarter. Net earnings increased 14% to $20.4 million in the current quarter from $17.8 million last year.  Earnings per diluted share increased 14% to $1.08 for the second quarter from $.95 last year. Operating income increased 5% to $24.8 million in the current quarter from $23.5 million in the year ago quarter.

For the six months ended March 30, 2019, sales increased 3% to $547.9 million from $531.3 million in last year’s first half.  Net earnings decreased to $37.9 million in the six months from $54.1 million last year.  Earnings per diluted share decreased to $2.00 from $2.88 last year.  Operating income increased 5% to $46.9 million this year from $44.8 million last year.

Net earnings for last year’s  six months benefitted 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 six months benefitted by a reduction of approximately $900,000 in tax, or $.05 per diluted share, as the one-time repatriation tax was recorded on an estimated basis at December 30, 2017 and was revised downward in this year’s first quarter.

Gerald B. Shreiber, J & J’s President and Chief Executive Officer, commented, “We are pleased that each of our business segments contributed to our increased operating income this quarter.  We remain focused on continuing to improve our margins and revenues going forward.”

J&J Snack Foods Corp. (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      Six months ended 
  March 30,   March 31   March 30,   March 31
  2019   2018   2019   2018
               
Net Sales $  276,302   $  266,101   $  547,914   $  531,311
               
Cost of goods sold  197,054   188,823   391,803   380,754
  Gross Profit 79,248   77,278   156,111   150,557
               
Operating expenses              
  Marketing  21,952    22,507   43,394   44,083
  Distribution  22,122    22,417   46,074   43,576
  Administrative  9,998    9,004   19,241   18,360
  Other general expense(income)  405    (191)   549   (231)
   Total Operating Expenses 54,477   53,737   109,258   105,788
               
Operating Income  24,771    23,541   46,853   44,769
               
Other income (expense)              
  Investment income  2,782    1,493   3,822   2,982
  Interest expense & other  (25)    (33)   (52)   476
               
Earnings before              
  income taxes  27,528   25,001   50,623   48,227
               
Income taxes  7,174    7,168   12,743   (5,855)
               
  NET EARNINGS $  20,354   $  17,833   $  37,880   $  54,082
               
Earnings per diluted share $  1.08   $  0.95   $  2.00   $  2.88
               
Weighted average number              
  of diluted shares 18,891    18,803   18,894   18,790
               
Earnings per basic share $  1.08   $  0.95   $  2.02   $  2.90
               
Weighted average number of              
  basic shares  18,795    18,685   18,780   18,675
               


  J & J SNACK FOODS CORP. AND SUBSIDIARIES 
  CONSOLIDATED BALANCE SHEETS 
  (in thousands, except share amounts) 
 
  March 30,   September 29,
  2019   2018
  (unaudited)    
Assets      
Current assets      
  Cash and cash equivalents $  126,655   $  111,479
  Marketable securities held to maturity  22,228    21,048
  Accounts receivable, net  130,204    132,342
  Inventories  123,104    112,884
  Prepaid expenses and other  4,904    5,044
  Total current assets 407,095    382,797
       
Property, plant and equipment, at cost      
  Land  2,494    2,494
  Buildings  26,582    26,582
  Plant machinery and equipment  303,096    290,396
  Marketing equipment  299,923    290,955
  Transportation equipment  9,058    8,929
  Office equipment  30,803    30,752
  Improvements  39,573    38,941
  Construction in progress  9,847    8,468
  Total Property, plant and equipment, at cost  721,376    697,517
  Less accumulated depreciation      
  and amortization 475,207    454,844
  Property, plant and equipment, net  246,169    242,673
       
Other assets      
  Goodwill 102,511   102,511
  Other intangible assets, net 56,077   57,762
  Marketable securities held to maturity 116,893   118,765
  Marketable securities available for sale 21,151   24,743
  Other 2,816   2,762
  Total other assets 299,448   306,543
Total Assets $  952,712   $  932,013
       
Liabilities and Stockholders' Equity      
Current Liabilities      
  Current obligations under capital leases $  299   $  324
  Accounts payable 68,348   69,592
  Accrued insurance liability 9,963   11,217
  Accrued liabilities 8,284   8,031
  Accrued compensation expense 15,904   20,297
  Dividends payable 9,405   8,438
  Total current liabilities 112,203    117,899
       
Long-term obligations under capital leases 611   753
Deferred income taxes 52,932   52,322
Other long-term liabilities 1,851   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      
 18,815,000 and 18,754,000 respectively 35,243   27,340
Accumulated other comprehensive loss (13,044)   (11,994)
Retained Earnings 762,916   743,745
   Total stockholders' equity  785,115    759,091
Total Liabilities and Stockholders' Equity $  952,712   $  932,013
       


  J & J SNACK FOODS CORP. AND SUBSIDIARIES 
  CONSOLIDATED STATEMENTS OF CASH FLOWS 
  (Unaudited)  (in thousands) 
    Six Months Ended
       
  March 30,   March 31,
  2019   2018
Operating activities:      
  Net earnings $  37,880   $  54,082
Adjustments to reconcile net      
  earnings to net cash      
  provided by operating activities:      
  Depreciation of fixed assets 21,890   21,360
  Amortization of intangibles      
  and deferred costs 1,747   1,779
  Share-based compensation 1,931   1,914
  Deferred income taxes 615   (15,360)
  Gain on redemption and sales of marketable securities  284   (3)
  Other 268   (150)
  Changes in assets and liabilities      
  net of effects from purchase of companies      
  Decrease (increase) in accounts receivable 2,003   (1,821)
  Increase in inventories (10,186)   (12,789)
  Decrease (increase) in prepaid expenses 172   (2,560)
  Decrease in accounts payable      
  and accrued liabilities (6,345)   (4,555)
  Net cash provided by operating activities 50,259   41,897
Investing activities:      
 Purchases of property, plant      
  and equipment (26,351)   (26,281)
 Purchases of marketable securities (19,531)   (47,172)
 Proceeds from redemption and sales of      
  marketable securities 23,137   29,453
 Proceeds from disposal of property and      
  equipment 878   1,492
 Other (207)   86
 Net cash used in investing activities (22,074)   (42,422)
Financing activities:      
  Proceeds from issuance of stock 5,926   2,960
  Payments on capitalized lease obligations (167)   (188)
  Payment of cash dividend (17,825)   (16,239)
  Net cash used in financing activities (12,066)   (13,467)
  Effect of exchange rate on cash      
  and cash equivalents (943)   (1,765)
  Net increase (decrease) in cash      
  and cash equivalents 15,176   (15,757)
 Cash and cash equivalents at beginning      
  of period 111,479   90,962
 Cash and cash equivalents at end      
  of period $  126,655   $  75,205
       


    Three months ended     Six months ended
  March 30,   March 31,   March 30,   March 31,
  2019   2018   2019   2018
               
               
Sales to External Customers:              
  Food Service              
  Soft pretzels $  49,812   $  48,748   $  98,803   $  97,769
  Frozen juices and ices  8,947    9,439   16,474   16,623
  Churros  15,770    15,272   30,905   29,864
  Handhelds  7,987    9,331   16,789   20,693
  Bakery  90,764    90,813   192,873   185,746
  Other  8,145    5,862   13,471   11,034
  Total Food Service $  181,425   $  179,465   $  369,315   $  361,729
               
  Retail Supermarket              
  Soft pretzels $  10,829   $  10,081   $  21,015   $  20,593
  Frozen juices and ices  14,668    15,438   25,664   25,165
  Handhelds  2,479    2,763   5,047   5,789
  Coupon redemption  (507)    (618)   (1,201)    (1,369)
  Other  340    420   699    982
  Total Retail Supermarket $  27,809   $  28,084   $  51,224   $  51,160
               
  Frozen Beverages              
  Beverages $  33,603   $  33,127   $  65,039   $  66,270
  Repair and              
  maintenance service  20,034    19,308   39,777   38,312
  Machines revenue  13,161    5,854   22,065   13,327
  Other  270    263   494   513
  Total Frozen Beverages $  67,068   $  58,552   $  127,375   $  118,422
               
Consolidated Sales $  276,302   $  266,101   $  547,914   $  531,311
               
Depreciation and Amortization:              
  Food Service $  6,616   $  6,041   $  12,938   $  13,139
  Retail Supermarket  320    358    655    648
  Frozen Beverages  5,066    4,754   10,044   9,352
Total Depreciation and Amortization $  12,002   $  11,153   $  23,637   $  23,139
               
Operating Income :              
  Food Service $  19,580   $  18,535   $  38,041   $  34,435
  Retail Supermarket  2,641    2,534   4,088   5,092
  Frozen Beverages  2,550    2,472   4,724   5,242
Total Operating Income $  24,771   $  23,541   $  46,853   $  44,769
               
Capital Expenditures:              
  Food Service $  8,403   $  6,259   $  14,681   $  15,700
  Retail Supermarket  581    103    1,133    103
  Frozen Beverages  5,530    5,296   10,537   10,478
Total Capital Expenditures $  14,514   $  11,658   $  26,351   $  26,281
               
Assets:              
  Food Service $  705,724   $  652,850   $  705,724   $  652,850
  Retail Supermarket 23,338   23,783   23,338   23,783
  Frozen Beverages 223,650   210,916   223,650   210,916
Total Assets $  952,712   $  887,549   $  952,712   $  887,549
               


RESULTS OF OPERATIONS

Net sales increased $10,201,000 or 4% to 276,302,000 for the three months and $16,603,000 or 3% to $547,914,000 for the six months ended March 30, 2019 compared to the three and six months ended March 31, 2018, respectively. 

FOOD SERVICE

Sales to food service customers increased $1,960,000 or 1% in the second quarter to $181,425,000 and increased $7,586,000 or 2% to $369,315,000 for the six months. Soft pretzel sales to the food service market increased 2% to $49,812,000 in the three months and 1% to $98,803,000 in the six months due primarily to higher sales to school foodservice and throughout our customer base but with lower sales to restaurant chains in the second quarter.

Frozen juices and ices sales decreased 5% to $8,947,000 in the three months and 1% to $16,474,000 in the six months as sales to school food service were lower.

Churro sales to food service customers were up 3% in the quarter to $15,770,000 and up 3% to $30,905,000 in the six months with sales increases and decreases across our customer base.

Sales of bakery products were essentially unchanged at $90,764,000 in the second quarter and increased $7,127,000 or 4% to $192,873,000 for the six months.  For the six months, sales to one co-pack customer accounted for approximately 55% of the sales increase and increased sales to warehouse club stores, schools and mass merchandising chains accounted for the balance of the sales increase.

Sales of handhelds decreased $1,344,000 or 14% in the quarter and $3,904,000 or 19% in the six months with the decrease primarily coming from lower sales to co-pack customers because of unsuccessful product launches. Sales of funnel cake increased $2,185,000, or 39%, to $7,732,000 in the quarter and $2,351,000, or 23%, to $12,692,000 in the six months due to sales to a quick service restaurant under a limited time offer program which ended in the second quarter.

Sales of new products in the first twelve months since their introduction were approximately $2 million in this quarter and $7 million in the six months.  Price increases were approximately $4 million for the quarter and $7 million for the six months and net volume decreases were approximately $2 million of sales in the quarter and volume was essentially unchanged in the six months.

Operating income in our Food Service segment increased from $18,535,000 to $19,580,000 in the quarter and increased from $34,435,000 to $38,041,000 in the six months. For the quarter, operating income increased primarily because of lower marketing and distribution expenses and increased pricing.  For the six months, operating income improved primarily because of increased bakery sales, price increases and improved operations at several of our manufacturing facilities.  Additionally, last year’s first quarter had the burden of shutdown costs of our Chambersburg, PA production facility. However, this year’s six months was impacted by approximately $1.4 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 first quarter.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets decreased $275,000 or 1% to $27,809,000 in the second quarter and were essentially unchanged at $51,224,000 for the six months.  Soft pretzel sales for the second quarter were up 7% to $10,829,000 and up 2% to $21,015,000 for the six months due to increased sales of AUNTIE ANNE’S pretzels. Sales of frozen juices and ices decreased $770,000 or 5% to $14,668,000 in the second quarter and increased $499,000 or 2% in the six months. Handheld sales to retail supermarket customers decreased 10% to $2,479,000 in the quarter and 13% to $5,047,000 in the six months as the sales of this product line continue their long term decline.

Sales of new products in the second quarter were approximately $200,000 and were approximately $500,000 for the six months.  Price increases provided about $300,000 of sales in the quarter and $900,000 of sales in the six months and net volume decreased by about $600,000 for the quarter and $900,000 for the six months.

Operating income in our Retail Supermarkets segment was $2,641,000 in this year’s second quarter compared to $2,534,000 in last year’s quarter, a 4% increase and decreased to $4,088,000 in this year’s six months compared to $5,092,000 in last year’s six months.  For the quarter, operating income benefited from slightly lower marketing and distribution costs and increased pricing.  For the six months, increased product and distribution costs combined with the lack of a sales increase were the primary drivers of the decrease in operating income. 

FROZEN BEVERAGES

Frozen beverage and related product sales increased 15% to $67,068,000 in the second quarter and increased 8% to $127,375,000 in the six months.  Beverage related sales were up 1% to $33,603,000 in the quarter but down  2% to $65,039,000 in the six months.  Six months’ sales were down primarily because last year’s first quarter sales were up a very strong 21% compared to the prior year.  Gallon sales were unchanged for the three months.  Service revenue increased 4% to $20,034,000 in the second quarter and increased 4% to $39,777,000 in the six months with sales increases and decreases spread throughout our customer base.

Machines revenue (primarily sales of frozen beverage machines) were $13,161,000, an increase of $7,307,000 in the quarter and $22,065,000, an increase of $8,738,000 in the six months.  Operating income in our Frozen Beverage segment increased to $2,550,000 in this quarter as a result of higher service and machines revenue but down $518,000  in the six months as a result of lower beverage sales and generally higher costs.  

CONSOLIDATED

Gross profit as a percentage of sales was 28.68% in the second quarter and 29.04% last year.  Gross profit as a percentage of sales was 28.49% in the six month period this year and 28.34% last year.  Gross profit percentage decreased in the second quarter because of the increase in lower margin machines revenue in our frozen beverages segment. Gross profit percentage for the six months increased because of improved operations at several of our manufacturing facilities, 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 $740,000 in the second quarter and as a percentage of sales decreased to 19.7% from 20.2% last year.  For the first half, operating expenses increased $3,470,000 and as a percentage of sales increased to 20.0% from 19.9% last year.   Marketing expenses decreased to 7.9% of sales in this year’s quarter from 8.5% last year and were 7.9% in the six months compared to 8.3% of sales in last year’s six months primarily because of reduced spending across all of our segments.  Distribution expenses were 8.0% of sales in the second quarter and 8.4% of sales in last year’s quarter and were 8.4% in this year’s six months compared to 8.2% of sales in last year’s six months.  Distribution expenses increased as a percentage of sales for the six months primarily because of increased freight rates which increased with the implementation of the electronic logging device mandate in January 2018. Our second quarter benefitted from a slight moderation in rates compared to last year.  Administrative expenses were 3.6% of sales in the second quarter compared to 3.4% of sales last year in the second quarter and were 3.5% in this year’s six months compared to 3.5% of sales in last year’s six months.

Operating income increased $1,230,000 or 5% to $24,771,000 in the three months and increased $2,084,000 or 5% to $46,853,000 in the first six months as a result of the aforementioned items.
     
Investment income increased by $1,289,000 and $840,000 in the second quarter and six months, respectively, resulting from higher amounts invested and higher interest rates.  Additionally, the second quarter benefitted from recognized unrealized gains of $760,000 and the six months were impacted by $267,000 of recognized unrealized losses.
     
Other income for last year’s six months includes a $520,000 gain on a sale of property.
       
Net earnings increased $2,521,000, or 14%, in the current three month period to $20,354,000 and were $37,880,000 for the six month period this year compared to $54,082,000 for the six month period last year. 

Net earnings for last year’s six months benefited from a $20.9 million gain, or $1.11 per diluted share, 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 December 2017. Excluding the deferred tax gain and the one time repatriation tax, our effective tax rate was 28.7% in last year’s six months. Net earnings in this year’s six months 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 provision for the one time repatriation tax, our effective tax rate was 27.0% in this year’s six months.  Our effective tax rate for the second quarter this year was 26.1% and 28.7% for last year’s second quarter, as this year benefitted from tax credits on returns filed this quarter and a lower federal tax rate.   
   
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