Sales and Earnings Reported by J & J Snack Foods

11/7/2019, 10:00 PM (Source: GlobeNewswire)

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. Moore
Senior Vice President
Chief Financial Officer
(856) 532-6603     

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