Sales and Earnings Reported by J & J Snack Foods

Published

PENNSAUKEN, N.J., Nov. 07, 2019 (GLOBE NEWSWIRE) -- J & J Snack Foods Corp. (NASDAQ-JJSF) today announced sales and earnings for its fourth quarter and year ended September 28, 2019.

Sales for the fourth quarter this year increased 4% to $311.9 million from $300.7 million in last year’s fourth quarter. For the year ended September 28, 2019, sales increased 4% to $1.186 billion from $1.138 billion last year.  Net earnings increased 11% to $26.1 million ($1.36 per diluted share) in this year’s fourth quarter compared to $23.4 million ($1.24 per diluted share) last year and for the year earnings decreased 8% to $94.8 million ($5.00 per diluted share) from $103.6 million ($5.51 per diluted share).

Operating income was $31.1 million in both year’s fourth quarter.  For the year, operating income increased 6% to $117.0 million from $110.8 million last year.

Net earnings for last year’s quarter were negatively impacted by a  $1.4 million, or $0.07 per diluted share, increase in income taxes because of changes to New Jersey tax regulations enacted in July 2018 requiring the re-measurement of deferred tax liabilities.   

Net earnings for last year  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 and were also impacted by a  $1.4 million, or $0.07 per diluted share, increase in income taxes because of the changes to New Jersey tax regulations. 

Gerald B. Shreiber, J & J’s President and Chief Executive Officer, commented, “We are pleased that all of our business segments had increased operating income for the year.  We will continue to work diligently toward improving revenues, margins and operating income 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 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  
  (in thousands, except per share information)
               
    Quarter Ended   Fiscal Year Ended
               
  September 28,   September 29,   September 28,   September 29,
   2019     2018    2019    2018
  (13 weeks)   (13 weeks)   (52 weeks)   (52 weeks)
               
Net Sales $ 311,872     $ 300,715   $ 1,186,487   $ 1,138,265
Cost of goods sold   218,931       209,461     836,086     801,979
  Gross Profit   92,941       91,254     350,401     336,286
               
Operating expenses              
  Marketing $ 26,636       25,733     96,428     95,405
  Distribution   24,367       24,380     94,888     92,281
  Administrative   10,812       9,743     40,721     37,757
  Other expense (income)   65       261     1,408     68
       Total operating expenses   61,880       60,117     233,445     225,511
Operating Income   31,061       31,137     116,956     110,775
               
Other income (expenses)              
  Investment income   1,966       1,580     7,741     6,267
  Interest expense & other   (40 )     843     1,880     1,110
               
Earnings before              
  income taxes   32,987       33,560     126,577     118,152
               
Income taxes   6,920       10,175     31,758     14,556
               
  NET EARNINGS $ 26,067     $ 23,385   $ 94,819   $ 103,596
               
Earnings per diluted share $ 1.36     $ 1.24   $ 5.00   $ 5.51
               
Weighted average number              
  of diluted shares   19,101       18,867     18,959     18,817
               
Earnings per basic share $ 1.38     $ 1.25   $ 5.04   $ 5.54
               
Weighted average number of              
  basic shares   18,867       18,726     18,812     18,694
               

         
         
  J & J SNACK FOODS CORP. AND SUBSIDIARIES   
  CONSOLIDATED BALANCE SHEETS  
  (in thousands, except share amounts)  
         
  September 28,   September 29,  
    2019       2018    
Assets        
Current assets        
  Cash and cash equivalents $ 192,395     $ 111,479    
  Marketable securities held to maturity   51,091       21,048    
  Accounts receivable, net   140,938       132,342    
  Inventories   116,165       112,884    
  Prepaid expenses and other   5,768       5,044    
       Total current assets   506,357       382,797    
         
Property, plant and equipment, at cost   749,532       697,517    
  Less accumulated depreciation        
  and amortization   496,084       454,844    
       Property, plant and equipment, net   253,448       242,673    
         
Other assets        
  Goodwill   102,511       102,511    
  Other intangible assets, net   54,922       57,762    
  Marketable securities held to maturity   79,360       118,765    
  Marketable securities available for sale   19,903       24,743    
  Other   2,838       2,762    
       Total other assets   259,534       306,543    
Total Assets $ 1,019,339     $ 932,013    
         
Liabilities and Stockholders' Equity        
Current Liabilities        
  Current obligations under capital leases $ 339     $ 324    
  Accounts payable   72,029       69,592    
  Accrued insurance liability   10,457       11,217    
  Accrued liabilities   7,808       8,031    
  Accrued compensation expense   21,154       20,297    
  Dividends payable   9,447       8,438    
       Total current liabilities   121,234       117,899    
         
Long-term obligations under capital leases   718       753    
Deferred income taxes   61,920       52,322    
Other long-term liabilities   1,716       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        
 18,895,000 and 18,754,000 respectively   45,744       27,340    
Accumulated other comprehensive loss   (12,988 )     (11,994 )  
Retained Earnings   800,995       743,745    
       Total stockholders' equity   833,751       759,091    
Total Liabilities and Stockholders' Equity $ 1,019,339     $ 932,013    
         

           
  J & J SNACK FOODS CORP. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  (in thousands) 
           
  Fiscal Year Ended 
           
  September 28, September 29, September 30,
    2019       2018       2017  
  (52 weeks)   (52 weeks)   (53 weeks)
           
Operating activities:          
  Net earnings $ 94,819     $ 103,596     $ 79,174  
Adjustments to reconcile net earnings to net cash provided by          
operating activities:          
     Depreciation of fixed assets   45,225       42,939       38,211  
     Amortization of intangibles and deferred costs   3,385       3,538       4,234  
     Gains from disposals of property & equipment   (347 )     (912 )     (346 )
     Amortization of bond premiums   730       1,012       1,189  
     Share-based compensation   4,230       3,858       3,048  
     Deferred income taxes   9,637       (10,392 )     7,847  
     Loss (gain) on sale of marketable securities   404       140       (14 )
     Changes in assets and liabilities, net of effects from purchase          
     of companies:          
       Increase in accounts receivable, net   (8,759 )     (7,917 )     (20,370 )
       Increase in inventories   (3,231 )     (9,639 )     (7,410 )
       (Increase) decrease in prepaid expenses and other   (744 )     (1,120 )     10,265  
       Increase (decrease) in accounts payable and accrued liabilities   2,150       (1,736 )     9,521  
  Net cash provided by operating activities   147,499       123,367       125,349  
Investing activities:          
     Payments for purchases of companies, net of cash acquired   (1,156 )     -       (47,698 )
     Purchases of property, plant and equipment   (57,128 )     (60,022 )     (72,180 )
     Purchases of marketable securities   (26,091 )     (91,112 )     (39,923 )
     Proceeds from redemption and sales of marketable securities   39,158       75,302       22,997  
     Proceeds from disposal of property, plant and equipment   2,050       2,639       1,935  
     Other   (196 )     54       (450 )
  Net cash used in investing activities   (43,363 )     (73,139 )     (135,319 )
Financing activities:          
     Payments to repurchase common stock   -       (2,794 )     (18,229 )
     Proceeds from issuance of common stock   14,174       8,894       7,231  
     Payments on capitalized lease obligations   (356 )     (370 )     (356 )
     Payment of cash dividend   (36,644 )     (33,066 )     (30,859 )
  Net cash used in financing activities   (22,826 )     (27,336 )     (42,213 )
     Effect of exchange rates on cash and cash equivalents   (394 )     (2,375 )     2,493  
  Net increase (decrease) in cash and cash equivalents   80,916       20,517       (49,690 )
Cash and cash equivalents at beginning of year   111,479       90,962       140,652  
Cash and cash equivalents at end of year $ 192,395     $ 111,479     $ 90,962  
           

               
               
  J & J SNACK FOODS CORP. AND SUBSIDIARIES  
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
               
               
               
    September 28, September 29, September 30,  
      2019       2018       2017    
    (52 weeks)   (52 weeks)   (53 weeks)  
     
Sales to External Customers:              
  Food Service              
     Soft pretzels   $ 209,227     $ 208,544     $ 180,138    
     Frozen juices and ices     43,672       42,364       49,469    
     Churros     65,976       61,726       62,809    
     Handhelds     31,685       38,928       36,913    
     Bakery     384,636       371,391       351,357    
     Other     26,407       22,991       21,108    
  Total Food Service   $ 761,603     $ 745,944     $ 701,794    
               
  Retail Supermarket              
     Soft pretzels   $ 36,264     $ 36,438     $ 35,081    
     Frozen juices and ices     73,751       74,435       71,325    
     Handhelds     10,902       12,419       14,892    
     Coupon redemption     (3,596 )     (4,439 )     (4,898 )  
     Other     1,955       2,086       2,847    
  Total Retail Supermarket   $ 119,276     $ 120,939     $ 119,247    
               
  Frozen Beverages              
     Beverages   $ 171,820     $ 160,937     $ 154,157    
     Repair and              
       maintenance service     85,103       78,805       74,594    
     Machines revenue     45,811       28,652       31,497    
     Other     2,874       2,988       2,935    
  Total Frozen Beverages   $ 305,608     $ 271,382     $ 263,183    
               
Consolidated Sales   $ 1,186,487     $ 1,138,265     $ 1,084,224    
               
Depreciation and Amortization:              
  Food Service   $ 26,978     $ 25,983     $ 24,629    
  Retail Supermarket     1,418       1,313       949    
  Frozen Beverages     20,214       19,181       16,867    
Total Depreciation and Amortization $ 48,610     $ 46,477     $ 42,445    
               
Operating Income:              
  Food Service   $ 78,130     $ 74,056     $ 81,208    
  Retail Supermarket     8,876       8,304       10,627    
  Frozen Beverages     29,950       28,415       26,272    
Total Operating Income   $ 116,956     $ 110,775     $ 118,107    
               
Capital Expenditures:              
  Food Service   $ 29,197     $ 36,325     $ 44,067    
  Retail Supermarket     1,979       928       239    
  Frozen Beverages     25,952       22,769       27,874    
Total Capital Expenditures   $ 57,128     $ 60,022     $ 72,180    
               
Assets:              
  Food Service   $ 772,777     $ 693,098     $ 635,709    
  Retail Supermarket     22,673       21,366       21,129    
  Frozen Beverages     223,889       217,549       210,390    
Total Assets   $ 1,019,339     $ 932,013     $ 867,228    
               

 

RESULTS OF OPERATIONS:

Fiscal 2019 (52 weeks) Compared to Fiscal Year 2018 (52 weeks)

Net sales increased $48,222,000, or 4%, to $1,186,487,000 in fiscal 2019 from $1,138,265,000 in fiscal 2018.

We have three reportable segments, as disclosed in the accompanying notes to the consolidated financial statements: Food Service, Retail Supermarkets and Frozen Beverages.

The Chief Operating Decision Maker for Food Service and Retail Supermarkets and the Chief Operating Decision Maker for Frozen Beverages monthly review detailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales and operating income are the key variables monitored by the Chief Operating Decision Makers and management when determining each segment’s and the Company’s financial condition and operating performance.  In addition, the Chief Operating Decision Makers review and evaluate depreciation, capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment.

FOOD SERVICE

Sales to food service customers increased $15,659,000, or 2 percent, to $761,603,000 in fiscal 2019.  Soft pretzel sales to the food service market increased about 1/3 of 1 percent to $209,227,000 for the year with higher sales to convenience store chains offset by lower sales to restaurant chains and with sales increases and decreases throughout our customer base.  Our line of BRAUHAUS pretzels contributed to the increased sales.  Frozen juice bar and ices sales increased $1,308,000, or 3%, to $43,672,000 for the year due primarily to higher sales to warehouse club stores.  Churro sales to food service customers were up 7% to $65,976,000 for the year with sales increases and decreases across our customer base but with particularly strong sales to warehouse club stores.  Sales of bakery products increased $13,245,000, or 4%, to $384,636,000 for the year with increased sales to one customer accounting for all of the increase.  Handheld sales to food service customers were down 19% to $31,685,000 in 2019 with sales decreases to three customers accounting for all of the decrease.  Sales of funnel cake increased $3,223,000, or 15% to $24,793,000 due primarily to increased sales to a quick service restaurant under a limited time offer in our second quarter.  Overall food service sales to restaurant chains were down about 2% for the year.  Sales of new products in the first twelve months since their introduction were approximately $13.5 million for the year. Price increases accounted for approximately $15 million of sales for the year and net volume including new product sales were essentially flat.  Operating income in our Food Service segment increased from $74,056,000 in 2018 to $78,130,000 in 2019 resulting from benefits of improved operations at several of our manufacturing facilities and increased pricing.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets decreased $1,663,000 or 1% to $119,276,000 in fiscal year 2019. Soft pretzel sales to retail supermarkets were $36,264,000  compared to $36,438,000 in 2018.  Strong pretzel sales increases from sales of AUNTIE ANNE’S products were offset by lower sales of our SUPER PRETZEL products.  Sales of frozen juices and ices decreased $684,000 or 1% to $73,751,000 as we lost some volume and placements due to price increases.  Coupon redemption costs, a reduction of sales, decreased 19% to $3,596,000 for the year.  Handheld sales to retail supermarket customers decreased 12% to $10,902,000 for the year as sales of this product line in retail supermarkets continues its long-term decline. 

Sales of new products in the first twelve months since their introduction were approximately $1 million in fiscal year 2019.  Price increases provided about $4 million of sales for the year and net volume decreased about $5.5 million for the year. Operating income in our Retail Supermarkets segment increased from $8,304,000 to $8,876,000 for the year. The primary contribution to the higher operating income this year was increased pricing.

FROZEN BEVERAGES

Frozen beverage and related product sales increased 13% to $305,608,000 in fiscal 2019. Beverage sales alone increased 7% or $10,883,000 for the year with increases and decreases throughout our customer base.  About one third of the beverage sales increase was from increased flow through sales to one distributor which did not benefit operating income. Gallon sales were up 3% in our base ICEE business, with sales increases spread throughout our customer base.  Service revenue increased 8% to $85,103,000 for the year with sales increases and decreases spread throughout our customer base.  Machines revenue, primarily sales of machines, increased from $28,652,000 in 2018 to $45,811,000 in 2019.  The estimated number of Company owned frozen beverage dispensers was 26,000 and 25,000 at September 28, 2019 and September 29, 2018, respectively.  Operating income in our Frozen Beverage segment increased from $28,415,000 in 2018 to $29,950,000 in 2019 as a result of higher sales.

CONSOLIDATED

Other than as commented upon above by segment, there are no material specific reasons for the reported sales increases or decreases.  Sales levels can be impacted by the appeal of our products to our customers and consumers and their changing tastes, competitive and pricing pressures, sales execution, marketing programs, seasonal weather, customer stability and general economic conditions.

Gross profit as a percentage of sales was essentially unchanged at 29.53% in 2019 and 29.54% in 2018 as the benefits of improved operations at several of our manufacturing facilities and increased pricing were offset by increases in lower margin sales of machines in our frozen beverages segment and increases in lower margin sales of bakery products in our food service segment.

Total operating expenses increased $7,934,000 to $233,445,000 in fiscal 2019 and as a percentage of sales decreased to 19.68% of sales from 19.81% in 2018.  Marketing expenses decreased to 8.13% this year from 8.38% of sales in 2018 because of modest spending increases in all of our businesses. Distribution expenses as a percent of sales decreased to 8.00% from 8.11% in 2018 because freight rates have dropped from last year. Administrative expenses were 3.43% and 3.32% of sales in 2019 and 2018, respectively.

Operating income increased $6,181,000 or 6% to $116,956,000 in fiscal year 2019 as a result of the aforementioned items. 

Our investments generated before tax income of $7.7 million this year, up from $6.3 million last year due to increases in the amount of investments and higher interest rates.      Other income in 2019 includes a $2.0 million payment received from a customer due to cancellation of production under a co-manufacturing agreement.     Other income in 2018 includes $520,000 gain on a sale of property and $869,000 reimbursement of business interruption losses due to the MARY B’s biscuits recall in January 2018.

Net earnings for the year ended September 29, 2018 benefited from a $20.9 million gain, or $1.11 per diluted share, on the remeasurement of deferred tax liabilities and a $8.8 million, or $0.47 per diluted share, reduction in income taxes related primarily to the lower corporate tax rate enacted under the Tax Cuts and Jobs Act in December 2017 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. Net earnings for the year were also impacted by a $1.4 million, or $.07 per diluted share, expense on the remeasurement of deferred tax liabilities due to changes in New Jersey tax regulations effective July 2018. Excluding the deferred tax gain, the deferred tax expense and the one-time repatriation tax, our effective tax rate was 27.8% in the year ended September 29, 2018. Net earnings this year 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 25.8% for this year.  

Net earnings decreased $8,777,000 or 8%, in fiscal 2019 to $94,819,000, or $5.00 per diluted share, from $103,596,000, or $5.51 per diluted share, in fiscal 2018 as a result of the aforementioned items.

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.

Contact: Dennis G. MooreSenior Vice PresidentChief Financial Officer(856) 532-6603     

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