U.S. Markets closed

J & J Snack Foods Reports Third Quarter Sales and Earnings

PENNSAUKEN, N.J., July 29, 2019 (GLOBE NEWSWIRE) -- J & J Snack Foods Corp. (NASDAQ-JJSF) today announced sales and earnings for the third quarter ended June 29, 2019.

Sales increased 7% to $326.7 million from $306.2 million in last year’s third quarter. Net earnings increased 18% to $30.9 million in the current quarter from $26.1 million last year.  Earnings per diluted share increased 17% to $1.63 for the third quarter from $1.39 last year. Operating income increased 12% to $39.0 million in the current quarter from $34.9 million in the year ago quarter.

For the nine months ended June 29, 2019, sales increased 4% to $874.6 million from $837.5 million in last year’s nine months.  Net earnings decreased to $68.8 million in the nine months from $80.2 million last year.  Earnings per diluted share decreased to $3.64 from $4.27 last year.  Operating income increased 8% to $85.9 million this year from $79.6 million last year.

Net earnings for last year’s nine 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 nine 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 to report improved performance and increased operating income across all of our business segments in this quarter. We continue to be focused on improving our margins and revenue going forward.”

J&J Snack Foods Corp. is a leader and innovator in the snack food industry, providing nutritional and affordable branded niche snack foods and beverages to foodservice and retail supermarket outlets.  Manufactured and distributed nationwide, our principal products include SUPERPRETZEL, BAVARIAN BAKERY and other soft pretzels, ICEE and SLUSH PUPPIE frozen beverages, LUIGI’S, MINUTE MAID* frozen juice bars and ices, WHOLE FRUIT sorbet and frozen fruit bars, MARY B’S biscuits and dumplings, DADDY RAY’S fig and fruit bars, TIO PEPE’S and CALIFORNIA CHURROS, THE FUNNEL CAKE FACTORY funnel cakes, and several bakery brands within COUNTRY HOME BAKERS and  HILL & VALLEY. For more information, please visit http://www.jjsnack.com.

*MINUTE MAID is a registered trademark of The Coca-Cola Company

 
  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 29,   June 30,   June 29,   June 30,
  2019   2018   2019   2018
               
Net Sales $  326,701   $  306,239   $  874,615   $  837,550
               
Cost of goods sold 225,352   211,764   617,155   592,518
  Gross Profit 101,349   94,475   257,460   245,032
               
Operating expenses              
  Marketing 26,398   25,589   69,792   69,672
  Distribution 24,447   24,325   70,521   67,901
  Administrative 10,668   9,654   29,909   28,014
  Other general expense (income) 794   38   1,343   (193)
  Total operating expenses 62,307   59,606   171,565   165,394
               
Operating Income 39,042   34,869   85,895   79,638
               
Other income (expense)              
  Investment income  1,953   1,705   5,775   4,687
  Interest expense & other 1,972   (209)   1,920   267
               
Earnings before              
  income taxes 42,967   36,365   93,590   84,592
               
Income taxes 12,095   10,236   24,838   4,381
               
  NET EARNINGS $  30,872   $  26,129   $  68,752   $  80,211
               
Earnings per diluted share $  1.63   $  1.39   $  3.64   $  4.27
               
Weighted average number              
  of diluted shares  18,947    18,822   18,912   18,801
               
Earnings per basic share $  1.64   $  1.40   $  3.66   $  4.29
               
Weighted average number of              
  basic shares  18,823    18,698   18,794   18,683


 
   J & J SNACK FOODS CORP. AND SUBSIDIARIES 
  CONSOLIDATED BALANCE SHEETS 
  (in thousands, except share amounts) 
       
  June 29,   September 29,
  2019   2018
  (unaudited)    
Assets      
Current assets      
  Cash and cash equivalents $  156,097   $  111,479
  Marketable securities held to maturity  40,809    21,048
  Accounts receivable, net  146,553    132,342
  Inventories  119,190    112,884
  Prepaid expenses and other  4,146    5,044
  Total current assets  466,795    382,797
       
Property, plant and equipment, at cost      
  Land  2,494    2,494
  Buildings  26,582    26,582
  Plant machinery and equipment  307,787    290,396
  Marketing equipment  307,077    290,955
  Transportation equipment  9,534    8,929
  Office equipment  30,958    30,752
  Improvements  39,761    38,941
  Construction in progress  12,978    8,468
  Total Property, plant and equipment, at cost  737,171    697,517
  Less accumulated depreciation      
  and amortization 486,519    454,844
  Property, plant and equipment, net  250,652    242,673
       
Other assets      
  Goodwill 102,511   102,511
  Other intangible assets, net 55,721   57,762
  Marketable securities held to maturity 96,064   118,765
  Marketable securities available for sale 21,032   24,743
  Other 2,915   2,762
  Total other assets  278,243   306,543
Total Assets $  995,690   $  932,013
       
Liabilities and Stockholders' Equity      
Current Liabilities      
  Current obligations under capital leases  $ 330    $ 324
  Accounts payable 80,237   69,592
  Accrued insurance liability 9,281   11,217
  Accrued liabilities 14,098   8,031
  Accrued compensation expense 17,177   20,297
  Dividends payable 9,413   8,438
  Total current liabilities  130,536    117,899
       
Long-term obligations under capital leases 714   753
Deferred income taxes 53,009   52,322
Other long-term liabilities 1,764   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      
 18,830,000 and 18,754,000 respectively 37,840   27,340
Accumulated other comprehensive loss (12,548)   (11,994)
Retained Earnings 784,375   743,745
  Total stockholders' equity  809,667    759,091
Total Liabilities and Stockholders' Equity $  995,690   $  932,013
       
       


  J & J SNACK FOODS CORP. AND SUBSIDIARIES    
   CONSOLIDATED STATEMENTS OF CASH FLOWS    
  (Unaudited)  (in thousands)    
       
    Nine months ended
  June 29,   June 30,
  2019   2018
Operating activities:      
  Net earnings $  68,752   $  80,211
Adjustments to reconcile net      
  earnings to net cash      
  provided by operating activities:      
  Depreciation of property, plant and equipment 33,374   31,929
  Amortization of intangibles      
  and deferred costs 2,586   2,639
  Share-based compensation 3,006   2,874
  Deferred income taxes 690   (12,502)
  Loss on marketable securities  410   32
  Other 350   (3)
  Changes in assets and liabilities      
  net of effects from purchase of companies      
  Increase in accounts receivable (14,289)   (7,530)
  Increase in inventories (6,257)   (13,020)
  Decrease (increase) in prepaid expenses 957   (2,949)
  Increase in accounts payable      
  and accrued liabilities 11,584   3,606
  Net cash provided by operating activities $  101,163   85,287
Investing activities:      
 Payment for purchases of companies, net of cash acquired  (1,155)    -
 Purchases of property, plant      
  and equipment (42,136)   (43,344)
 Purchases of marketable securities (24,056)   (65,227)
 Proceeds from redemption and sales of      
  marketable securities 29,721   51,417
 Proceeds from disposal of property, plant and      
  equipment 1,463   1,895
 Other (212)   171
 Net cash used in investing activities  (36,375)   (55,088)
Financing activities:      
  Payments to repurchase common stock  -    (2,794)
  Proceeds from issuance of stock 7,426   5,561
  Payments on capitalized lease obligations (33)   (278)
  Payment of cash dividend (27,230)   (24,652)
  Net cash used in financing activities  (19,837)   (22,163)
  Effect of exchange rate on cash      
  and cash equivalents (333)   (3,370)
  Net increase in cash      
  and cash equivalents $  44,618   $  4,666
 Cash and cash equivalents at beginning      
  of period 111,479   90,962
 Cash and cash equivalents at end      
  of period $  156,097   $  95,628
       


    Three months ended     Nine months ended  
  June 29,   June 30,   June 29,   June 30,  
  2019   2018   2019   2018  
   (unaudited) 
    (in thousands) 
Sales to External Customers:                
  Food Service                
  Soft pretzels $  55,867   $  53,880   $  154,670   $  151,649  
  Frozen juices and ices  13,862    12,825    30,336    29,448  
  Churros  18,888    16,739    49,793    46,603  
  Handhelds  8,550    9,974    25,339    30,667  
  Bakery  95,299    93,082    288,172    278,828  
  Other  6,105    5,201    19,576    16,235  
  Total Food Service $  198,571   $  191,701   $  567,886   $  553,430  
                 
  Retail Supermarket                
  Soft pretzels $  7,294   $  7,332   $  28,309   $  27,925  
  Frozen juices and ices  26,515    28,785    52,179    53,950  
  Handhelds  3,063    2,960    8,110    8,749  
  Coupon redemption  (962)    (1,278)    (2,163)    (2,647)  
  Other  642    733    1,341    1,715  
  Total Retail Supermarket $  36,552   $  38,532   $  87,776   $  89,692  
                 
  Frozen Beverages                
  Beverages $  56,937   $  49,132   $  121,976   $  115,401  
  Repair and                
  maintenance service  22,514    19,693    62,291    58,005  
  Machines revenue  11,810    6,856    33,875    20,183  
  Other  317    326    811    839  
  Total Frozen Beverages $  91,578   $  76,006   $  218,953   $  194,428  
                 
Consolidated Sales $  326,701   $  306,239   $  874,615   $  837,550  
                 
Depreciation and Amortization:                
  Food Service $  6,973   $  6,237   $  19,911   $  19,376  
  Retail Supermarket  335    332    990    980  
  Frozen Beverages  5,015    4,860    15,059    14,212  
Total Depreciation and Amortization $  12,323   $  11,429   $  35,960   $  34,568  
                 
Operating Income:                
  Food Service $  21,154   $  19,663   $  59,195   $  54,098  
  Retail Supermarket  3,651    3,203    7,739    8,295  
  Frozen Beverages  14,237    12,003    18,961    17,245  
Total Operating Income $  39,042   $  34,869   $  85,895   $  79,638  
                 
Capital Expenditures:                
  Food Service $  8,665   $  10,172   $  23,346   $  25,872  
  Retail Supermarket  597    273    1,730    376  
  Frozen Beverages  6,523    6,618    17,060    17,096  
Total Capital Expenditures $  15,785   $  17,063   $  42,136   $  43,344  
                 
Assets:                
  Food Service $  752,117   $  672,861   $  752,117   $  672,861  
  Retail Supermarket  24,349    24,215    24,349    24,215  
  Frozen Beverages  219,224    217,156    219,224    217,156  
Total Assets $  995,690   $  914,232   $  995,690   $  914,232  
                 


RESULTS OF OPERATIONS

Net sales increased $20,462,000 or 7% to $326,701,000 for the three months and $37,065,000 or 4% to $874,615,000 for the nine months ended June 29, 2019 compared to the three and nine months ended June 30, 2018, respectively. 

FOOD SERVICE

Sales to food service customers increased $6,870,000 or 4% in the third quarter to $198,571,000 and increased $14,456,000 or 3% to $567,886,000 for the nine months. Soft pretzel sales to the food service market increased 4% to $55,867,000 in the three months and 2% to $154,670,000 in the nine months due primarily to higher sales to convenience store chains.  Two chains accounted for about 3/4 of the sales increase in the third quarter and about 1/2 of the increase in the nine months.

Frozen juices and ices sales increased 8% to $13,862,000 in the three months and 3% to $30,336,000 in the nine months as sales to warehouse club stores accounted for over 60% of the increase in the third quarter and all of the increase in the nine months.

Churro sales to food service customers were up 13% in the quarter to $18,888,000 and up 7% to $49,793,000 in the nine months with strong sales to warehouse club stores and general increases and decreases across our customer base.

Sales of bakery products increased $2,217,000 or 2% to $95,299,000 in the third quarter and increased $9,344,000 or 3% to $288,172,000 for the nine months as sales were higher school foodservice and were up and down across our customer base.  

Sales of handhelds decreased $1,424,000 or 14% in the quarter and $5,328,000 or 17% in the nine months with the decrease primarily coming from lower sales to co-pack customers because of unsuccessful product launches. Sales of funnel cake increased $522,000 or, 10%, to $5,616,000 in the quarter and $2,873,000, or 19%, to $18,308,000 in the nine months. The nine months sales increase was primarily 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 $4 million in this quarter and $11 million in the nine months.  Price increases were approximately $4 million for the quarter and $11 million for the nine months and net volume increases were approximately $3 million of sales in the quarter and in the nine months.

Operating income in our Food Service segment increased from $19,663,000 to $21,154,000 in the quarter and increased from $54,098,000 to $59,195,000 in the nine months. For the quarter, operating income increased primarily because of increased volume, lower distribution expenses and increased pricing but was impacted by approximately $600,000 of costs related to prior years’ product recalls.  For the nine months, operating income improved primarily because of increased volume, price increases, lower marketing expenses and improved operations at several of our manufacturing facilities.  Additionally, last year’s first quarter included shutdown costs of our Chambersburg, PA production facility. However, this year’s nine months, all in the first quarter, was impacted by approximately $900,000 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 last year’s first quarter.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets decreased $1,980,000 or 5% to $36,552,000 in the third quarter and decreased $1,916,000 or 2% to $87,776,000 for the nine months.  Soft pretzel sales for the third quarter were down less than 1% to $7,294,000 and up 1% to $28,309,000 for the nine months. Sales of frozen juices and ices decreased $2,270,000 or 8% to $26,515,000 in the third quarter and decreased $1,771,000 or 3% in the nine months as we lost some volume and placements due to price increases. Handheld sales to retail supermarket customers increased 3% to $3,063,000 in the quarter and were down 7% to $8,110,000 in the nine months as the sales of this product line continue their long-term decline.

Sales of new products in the third quarter were approximately $200,000 and were approximately $1 million for the nine months.  Price increases provided about $1.1 million of sales in the quarter and $2.0 million of sales in the nine months and net volume decreased by about $3.1 million for the quarter and $4.0 million for the nine months.

Operating income in our Retail Supermarkets segment increased to $3,651,000 in this year’s third quarter from $3,203,000 in last year’s quarter, a 14% increase and decreased to $7,739,000 in this year’s nine months compared to $8,295,000 in last year’s nine months.  For the quarter, operating income benefited from lower marketing and distribution costs and increased pricing.  For the nine months, increased product costs combined with lower volume were the primary drivers of the decrease in operating income.  

FROZEN BEVERAGES

Frozen beverage and related product sales increased 20% to $91,578,000 in the third quarter and increased 13% to $218,953,000 in the nine months.  Beverage related sales were up 16% to $56,937,000 in the quarter due in large part to increased sales to one distributor of about $4 million and up 6% to $121,976,000 in the nine months.   The increased sales to this one distributor did not benefit operating income.  Sales to this distributor may continue to be higher into our fourth quarter.  Gallon sales were up 2% for the three months.  Service revenue increased 14% to $22,514,000 in the third quarter and increased 7% to $62,291,000 in the nine months with sales increases and decreases spread throughout our customer base, but with significant increases in sales to two customers.

Machines revenue (primarily sales of frozen beverage machines) was $11,810,000, an increase of $4,954,000, in the quarter and $33,875,000, an increase of $13,692,000, in the nine months. Increases in sales to three customers accounted for the higher revenue in the quarter.  Operating income in our Frozen Beverages segment increased to $14,237,000, or 19%, in this quarter and was up $1,716,000, or 10%, to $18,961,000 in the nine months primarily as a result of the increases in sales.

CONSOLIDATED

Gross profit as a percentage of sales was 31.02% in the third quarter and 30.85% last year.  Gross profit as a percentage of sales was 29.44% in the nine month period this year and 29.26% last year.  Gross profit percentage for the quarter and nine 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 $2,701,000 in the third quarter and as a percentage of sales decreased to 19.1% from 19.5% last year.  For the nine months, operating expenses increased $6,171,000 and as a percentage of sales decreased to 19.6% from 19.7% last year.   Marketing expenses decreased to 8.1% of sales in this year’s quarter from 8.4% last year and were 8.0% in the nine months compared to 8.3% of sales in last year’s nine months primarily because of controlled spending across all of our segments.  Distribution expenses were 7.5% of sales in the third quarter and 7.9% of sales in last year’s quarter and were 8.1% in both year’s nine months.  Distribution expenses as a percentage of sales were lower in the third quarter primarily because freight rates have dropped compared to last year.  Administrative expenses were 3.3% of sales in the third quarter compared to 3.2% of sales last year in the third quarter and were 3.4% in this year’s nine months compared to 3.3% of sales in last year’s nine months. Other general operating expense in this year’s quarter includes $621,000 of costs related to prior years’ product recalls.

Operating income increased $4,173,000 or 12% to $39,042,000 in the three months and increased $6,257,000 or 8% to $85,895,000 the first nine months as a result of the aforementioned items.
           
Investment income increased by $248,000 and $1,088,000 in the third quarter and nine months, respectively, resulting from higher amounts invested and higher interest rates.  Additionally, the third quarter and nine months were impacted by $118,000 and $385,000 of recognized unrealized losses.
           
This year’s other income in the third quarter includes a $2.0 million payment received from a customer due to cancellation of production under a co-manufacturing agreement.  Other income for last year’s nine months includes a $520,000 gain on a sale of property.
             
Net earnings increased $4,743,000, or 18%, in the current three month period to $30,872,000 and were $68,752,000 for the nine month period this year compared to $80,211,000 for the nine month period last year. 

Net earnings for last year’s nine 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 28.4% in last year’s nine months. Net earnings in this year’s nine 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 27.5% in this year’s nine months.  Our effective tax rate for the third quarter this year was 28.1% and 28.1% for last year’s third quarter, as this year benefitted from tax credits on returns filed this year 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