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J & J Snack Foods Reports First Quarter Sales and Earnings

PENNSAUKEN, N.J., Jan. 27, 2020 (GLOBE NEWSWIRE) -- J & J Snack Foods Corp. (NASDAQ-JJSF) today announced sales and earnings for the first quarter ended December 28, 2019.

Sales increased 4% to $282.9 million from $271.6 million in last year’s first quarter. Net earnings decreased to $17.1 million in the current quarter from $17.5 million last year. Earnings per diluted share decreased to $.89 for the first quarter from $.93 last year. Operating income decreased 2% to $21.7 million in the current quarter from $22.1 million in the year ago quarter. Operating income was impacted by approximately $1 million of costs related to the relocation of our ICEE company’s headquarters to Tennessee. 

Net earnings for last year’s quarter benefited from a reduction of approximately $900,000 in tax, or $.05 per diluted share, as the provision for the one time repatriation tax as a result of the Tax Cuts and Job Act of 2017 was reduced as the amount recorded the year prior was an estimate. Excluding the reduction in the provision for the one-time repatriation tax, our effective tax rate was 28.0% in last year’s quarter. 
Our effective tax rate was 27.3% in this year’s quarter.    

Gerald B. Shreiber, J & J’s President and Chief Executive Officer, commented, “We remain committed to long term profitable sales growth.”  

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 48 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 28,   December 29,
  2019   2018
       
Net Sales $   282,897   $   271,612
       
Cost of goods sold 205,036   194,749
  Gross Profit 77,861   76,863
       
Operating expenses      
  Marketing  22,732   21,442
  Distribution  23,542   23,952
  Administrative  9,618   9,243
  Other general expense  266   144
  Total Operating Expenses  56,158   54,781
       
Operating Income 21,703   22,082
       
Other income (expense)      
  Investment income 1,786   1,040
  Interest expense & other (26)   (27)
       
Earnings before       
  income taxes 23,463   23,095
       
Income tax expense  6,404   5,569
       
  NET EARNINGS $   17,059   $   17,526
       
Earnings per diluted share $   0.89   $   0.93
       
Weighted average number       
  of diluted shares 19,144   18,897
       
Earnings per basic share $   0.90   $   0.93
       
Weighted average number of       
  basic shares 18,898   18,765


       
J & J SNACK FOODS CORP. AND SUBSIDIARIES      
CONSOLIDATED BALANCE SHEETS 
     
(in thousands, except share amounts)      
  December 28,       
  2019     September 28,
  (unaudited)     2019
Assets        
Current assets        
  Cash and cash equivalents $   170,327     $   192,395
  Marketable securities held to maturity   63,594       51,091
  Accounts receivable, net   131,574       140,938
  Inventories   125,789       116,165
  Prepaid expenses and other   3,862       5,768
  Total current assets 495,146       506,357
         
Property, plant and equipment, at cost        
  Land   2,494       2,494
  Buildings   26,582       26,582
  Plant machinery and equipment   324,511       315,360
  Marketing equipment   250,308       240,681
  Transportation equipment   10,218       9,725
  Office equipment   32,072       31,217
  Improvements   40,750       40,626
  Construction in progress   8,291       10,039
  Total Property, plant and equipment, at cost   695,226       676,724
  Less accumulated depreciation         
  and amortization 431,596       423,276
  Property, plant and equipment, net   263,630       253,448
         
Other assets        
  Goodwill 119,484     102,511
  Other intangible assets, net 75,848     54,922
  Marketable securities held to maturity 55,289     79,360
  Marketable securities available for sale 16,541     19,903
  Operating lease right-of-use assets 64,399       -
  Other  2,698     2,838
  Total other assets 334,259     259,534
Total Assets $   1,093,035     $   1,019,339
         
Liabilities and Stockholders' Equity        
Current Liabilities        
  Current finance lease liabilities $   342     $   339
  Accounts payable 71,919     72,029
  Accrued insurance liability 11,615     10,457
  Accrued liabilities 13,140     7,808
  Current operating lease liabilities 13,762       -
  Accrued compensation expense 12,709     21,154
  Dividends payable 10,867     9,447
  Total current liabilities 134,354       121,234
         
Noncurrent finance lease liabilities  628     718
Noncurrent operating lease liabilities 53,300       -
Deferred income taxes 61,730     61,920
Other long-term liabilities 503     1,716
         
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        
 18,900,000 and 18,895,000 respectively 47,511     45,744
Accumulated other comprehensive loss (12,178)     (12,988)
Retained Earnings  807,187     800,995
  Total stockholders' equity   842,520       833,751
Total Liabilities and Stockholders' Equity $   1,093,035     $   1,019,339
         


J & J SNACK FOODS CORP. AND SUBSIDIARIES    
CONSOLIDATED STATEMENTS OF CASH FLOWS    
(Unaudited) (in thousands) 
   
       
    Three months ended
  December 28,   December 29,
  2019   2018
Operating activities:      
  Net earnings $   17,059   $   17,526
Adjustments to reconcile net       
  earnings to net cash      
  provided by operating activities:      
Depreciation of fixed assets 11,887   10,774
Amortization of intangibles       
and deferred costs 843   861
Share-based compensation 1,299   972
Deferred income taxes (231)   689
Loss on marketable securities    9     1,027
Other 14   82
Changes in assets and liabilities       
net of effects from purchase of companies      
  Decrease in accounts receivable 10,254   14,386
  Increase in inventories (8,524)   (4,974)
  Decrease in prepaid expenses 1,922   340
  Decrease in accounts payable and      
  accrued liabilities (963)   (8,872)
Net cash provided by operating activities 33,569   32,811
Investing activities:      
 Payments for purchases of companies,       
  net of cash acquired (44,970)     -
 Purchases of property, plant       
  and equipment (17,605)   (11,837)
 Purchases of marketable securities (4,000)   (17,513)
 Proceeds from redemption and sales of       
  marketable securities 18,782   17,125
 Proceeds from disposal of property and       
  equipment 898   577
 Other  38   (236)
 Net cash used in investing activities  (46,857)   (11,884)
Financing activities:      
  Proceeds from issuance of stock 468   1,704
  Payments on finance lease obligations (86)   (83)
  Payment of cash dividend (9,447)   (8,438)
  Net cash used in financing activities (9,065)   (6,817)
  Effect of exchange rate on cash       
  and cash equivalents 285   (875)
 Net (decrease) increase in cash       
  and cash equivalents (22,068)   13,235
 Cash and cash equivalents at beginning       
  of period 192,395   111,479
 Cash and cash equivalents at end       
  of period $   170,327   $   124,714
       


    Three months ended
  December 28,   December 29,
  2019   2018
    (unaudited)
    (in thousands)
Sales to External Customers:      
  Food Service      
  Soft pretzels $   49,941   $   48,991
  Frozen juices and ices 7,043   7,527
  Churros 16,391   15,135
  Handhelds 7,189   8,802
  Bakery 96,372   94,245
  Other 6,512   5,326
  Total Food Service $   183,448   $   180,026
       
  Retail Supermarket      
  Soft pretzels $   9,826   $   10,186
  Frozen juices and ices 10,093   10,996
  Biscuits 6,978
  7,864
  Handhelds 2,761   2,568
  Coupon redemption   (543)     (694)
  Other 311
  359
  Total Retail Supermarket $   29,426   $   31,279
       
  Frozen Beverages      
  Beverages $   35,255   $   31,167
  Repair and       
  maintenance service 22,486   19,915
  Machines revenue 11,981   8,904
  Other 301   321
  Total Frozen Beverages $   70,023   $   60,307
       
Consolidated Sales $   282,897   $   271,612
       
Depreciation and Amortization:      
  Food Service $   6,918   $   6,322
  Retail Supermarket   359     335
  Frozen Beverages 5,453   4,978
Total Depreciation and Amortization $   12,730   $   11,635
       
Operating Income :      
  Food Service $   18,034   $   17,697
  Retail Supermarket 2,217   2,211
  Frozen Beverages 1,452   2,174
Total Operating Income  $   21,703   $   22,082
       
Capital Expenditures:      
  Food Service $   8,403   $   6,278
  Retail Supermarket   960     552
  Frozen Beverages 8,242   5,007
Total Capital Expenditures $   17,605   $   11,837
       
Assets:      
  Food Service $   757,781   $   686,192
  Retail Supermarket 30,963   28,100
  Frozen Beverages 304,291   219,692
Total Assets $   1,093,035   $   933,984
       


RESULTS OF OPERATIONS

Net sales increased $11,285,000 or 4% to $282,897,000 for the three months ended December 28, 2019 compared to the three months ended December 29, 2018. Excluding sales from the acquisition of ICEE Distributors in October 2019, sales increased 3%. 

FOOD SERVICE

Sales to food service customers increased $3,422,000 or 2% in the first quarter to $183,448,000. Soft pretzel sales to food service increased 2% to $49,941,000 as higher sales to convenience store chains more than offset lower sales to schools.

Frozen juices and ices sales decreased 6% to $7,043,000 in the three months with sales decreases primarily to school food service customers.

Churro sales to food service customers were up 8% in the quarter to $16,391,000 with sales increases to warehouse club stores and generally across our customer base.

Sales of bakery products increased $2,127,000 or 2% in the first quarter to $96,372,000 with significant offsetting increases and decreases in sales to particular customers.

Sales of handhelds decreased $1,613,000 or 18% in the quarter with the decrease primarily coming from lower sales to co-pack customers. Sales of funnel cake increased $1,240,000 or 25% in the quarter primarily due to higher sales to one casual dining restaurant chain.

Sales of new products in the first twelve months since their introduction were approximately $2.5 million in this quarter. Price increases were approximately $2.7 million for the quarter and net volume increases accounted for approximately $700,000 of sales in the quarter.
    
Operating income in our Food Service segment increased from $17,697,000 to $18,034,000 in the quarter primarily because of higher volume and improved operations at our Hill & Valley bakery.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets decreased $1,853,000 or 6% to $29,426,000 in the first quarter. Soft pretzel sales for the first quarter were down 4% to $9,826,000, sales of frozen juices and ices were down 8% to $10,093,000 in the first quarter and sales of biscuits were down 11% to $6,978,000 in the first quarter as we lost some volume and placements in all three product categories due to price increases implemented a year ago. We expect volume to at least stabilize beginning in our second quarter. Handheld sales to retail supermarket customers increased 8% to $2,761,000 in the quarter.

There were virtually no sales of new products in the first quarter. Price increases provided about $1.3 million of sales in the quarter and net volume decreased by about $3.2 million. 

Operating income in our Retail Supermarkets segment was $2,217,000 in this year’s first quarter compared to $2,211,000 in last year’s quarter as the benefits of higher prices offset the negative impact of lower volume.

FROZEN BEVERAGES
     
Frozen beverage and related product sales increased 16% to $70,023,000 in the first quarter. Beverage related sales were up 13% to $35,255,000. Excluding sales from the acquisition of ICEE Distributors in October 2019, frozen beverages and related product sales increased 12% and beverage related sales increased 4%. Gallon sales were up 6% for the three months exclusive of ICEE Distributors’ gallons. Service revenue increased 13% to $22,486,000 in the first quarter with sales increases and decreases spread throughout our customer base.

Machines revenue (primarily sales of frozen beverage machines) were $11,981,000, an increase of 35%. Operating income in our Frozen Beverage segment decreased to $1,452,000 in this quarter compared to $2,174,000 last year as a result of generally higher costs, including approximately $1 million of costs for the relocation of ICEE’s headquarters. We expect additional relocation costs of about $800,000 in our second quarter.   

CONSOLIDATED

Gross profit as a percentage of sales was 27.52% in the three month period this year and 28.30% last year. Gross profit percentage decreased because of lower volume in our combined food service and retail supermarket segments, product mix changes including higher machines sales in our frozen beverages segment and generally higher costs in our frozen beverages segment.

Total operating expenses increased $1,377,000 in the first quarter but as a percentage of sales decreased to 19.9% from 20.2% last year. Marketing expenses increased to 8.04% of sales in this year’s quarter from 7.89% last year. Distribution expenses were 8.32% of sales in this year’s quarter and 8.82% of sales in last year’s quarter primarily because of lower freight rates. Administrative expenses were 3.40% of sales this quarter compared to 3.40% of sales last year.
     
Operating income decreased $379,000 or 2% to $21,703,000 in the first quarter as a result of the aforementioned items.      

Investment income increased by $746,000 in the first quarter primarily because of recognized unrealized gains of $71,000 this year compared to recognized unrealized losses of $1,027,000 last year. 

Net earnings decreased $467,000, or 3%, in the current three month period to $17,059,000. Net earnings in last year’s quarter benefitted by a reduction of approximately $900,000 in tax as the provision for the one time repatriation tax as a result of the Tax Cuts and Job Act of 2017 was reduced as the amount recorded the year prior was an estimate. Excluding the reduction in the provision for the one time repatriation tax, our effective tax rate was 28.0% in last year’s quarter. Our effective tax rate was 27.3% 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