J & J Snack Foods Reports Second Quarter Sales and Earnings

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

Sales decreased 2% to $272.0 million from $276.3 million in last year’s second quarter. Net earnings decreased 64% to $7.3 million in the current quarter from $20.4 million last year.  Earnings per diluted share decreased 65% to $.38 for the second quarter from $1.08 last year.  Operating income decreased 56% to $11.0 million in the current quarter from $24.8 million in the year ago quarter.

For the six months ended March 28, 2020, sales increased 1% to $554.9 million from $547.9 million in last year’s first half.  Net earnings decreased 36% to $24.4 million in the six months from $37.9 million last year.  Earnings per diluted share decreased 36% to $1.28 from $2.00 last year. Operating income decreased 30% to $32.7 million this year from $46.9 million last year.

The Company also said that sales for the first 4 weeks of its third quarter that will end June 27, 2020 were down approximately 45% from a year ago.  Although it cannot estimate whether  sales will continue to be down at the same rate for the balance of the quarter, the Company said that it might have an operating loss in the quarter which would compare to operating income of $39 million in the year ago June quarter if sales continue to be down at the same rate. Approximately 2/3 of the Company’s sales are to venues and locations that have shut down or sharply curtailed their foodservice operations so the Company anticipates COVID-19 will continue to have a negative impact on its business. As the Company has $267 million of cash and marketable securities on its balance sheet, it does not expect to have any liquidity issues, nor does it anticipate a material amount of its assets would be impaired.   

Gerald B. Shreiber, J & J’s President and Chief Executive Officer, commented, “We have good management in place, strong brands and a broad base of highly respected customers. We continue to monitor and adjust our costs and expenses as we evaluate our business on a daily, weekly, and monthly basis. We are monitoring consumer behavior, customer shifts, and industry needs to adapt our product and marketing mix for the post pandemic landscape.  In what is the true JJSF entrepreneurial spirit, we are ready to fight our way back to sales growth and business performance when customers begin to re-open this summer.   We are being careful not to reduce our costs so much that we won’t be able service our customers when they return, making sure that we have the proper staffing and resources in place for when business opens up again. And at the same, we are working around the clock updating preventative measures to keep our employees safe. We have always been a company that has been cautious in the way we spend and use our cash. Today we have $267 million in cash and securities, we are protecting it and using it to prepare for the future as we monitor and shape what that looks like in this changing landscape.”

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 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 28,				March 30,				March 28,				March 30,
	2020				2019				2020				2019
Net Sales	$	272,042			$	276,302			$	554,939			$	547,914
Cost of goods sold		202,599				197,054				407,635				391,803
Gross Profit		69,443				79,248				147,304				156,111
Operating expenses
Marketing		23,848				21,952				46,580				43,394
Distribution		24,834				22,122				48,376				46,074
Administrative		10,174				9,998				19,792				19,241
Other general (income) expense		(395	)			405				(129	)			549
Total Operating Expenses		58,461				54,477				114,619				109,258
Operating Income		10,982				24,771				32,685				46,853
Other (expense)income
Investment(loss)income		(413	)			2,782				1,373				3,822
Interest expense & other		(27	)			(25	)			(53	)			(52	)
Earnings before
income taxes		10,542				27,528				34,005				50,623
Income taxes		3,233				7,174				9,637				12,743
NET EARNINGS	$	7,309			$	20,354			$	24,368			$	37,880
Earnings per diluted share	$	0.38			$	1.08			$	1.28			$	2.00
Weighted average number
of diluted shares		19,014				18,891				19,079				18,894
Earnings per basic share	$	0.39			$	1.08			$	1.29			$	2.02
Weighted average number of
basic shares		18,921				18,795				18,910				18,780

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
	March 28,
	2020					September 28,
	(unaudited)					2019
Assets
Current assets
Cash and cash equivalents	$	142,969				$	192,395
Marketable securities held to maturity		69,337					51,091
Accounts receivable, net		134,746					140,938
Inventories		128,090					116,165
Prepaid expenses and other		7,352					5,768
Total current assets		482,494					506,357
Property, plant and equipment, at cost
Land		2,494					2,494
Buildings		26,582					26,582
Plant machinery and equipment		331,535					315,360
Marketing equipment		256,502					240,681
Transportation equipment		9,839					9,725
Office equipment		32,271					31,217
Improvements		41,774					40,626
Construction in progress		10,050					10,039
Total Property, plant and equipment, at cost		711,047					676,724
Less accumulated depreciation
and amortization		441,886					423,276
Property, plant and equipment, net		269,161					253,448
Other assets
Goodwill		123,033					102,511
Other intangible assets, net		81,948					54,922
Marketable securities held to maturity		41,091					79,360
Marketable securities available for sale		12,947					19,903
Operating lease right-of-use assets		64,502					-
Other		2,761					2,838
Total other assets		326,282					259,534
Total Assets	$	1,077,937				$	1,019,339
Liabilities and Stockholders' Equity
Current Liabilities
Current finance lease liabilities	$	345				$	339
Accounts payable		67,494					72,029
Accrued insurance liability		12,940					10,457
Accrued liabilities		6,945					7,808
Current operating lease liabilities		13,109					-
Accrued compensation expense		16,345					21,154
Dividends payable		10,879					9,447
Total current liabilities		128,057					121,234
Noncurrent finance lease liabilities		544					718
Noncurrent operating lease liabilities		54,267					-
Deferred income taxes		61,464					61,920
Other long-term liabilities		537					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
18,888,000 and 18,895,000 respectively		45,549					45,744
Accumulated other comprehensive loss		(16,099	)				(12,988	)
Retained Earnings		803,618					800,995
Total stockholders' equity		833,068					833,751
Total Liabilities and Stockholders' Equity	$	1,077,937				$	1,019,339

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in thousands)
	Six Months Ended
	March 28,				March 30,
	2020				2019
Operating activities:
Net earnings	$	24,368			$	37,880
Adjustments to reconcile net
earnings to net cash
provided by operating activities:
Depreciation of fixed assets		24,810				21,890
Amortization of intangibles
and deferred costs		1,677				1,747
Share-based compensation		2,432				1,931
Deferred income taxes		(298	)			615
Loss on marketable securities		2,070				284
Other		(286	)			268
Changes in assets and liabilities
net of effects from purchase of companies
Decrease in accounts receivable		6,343				2,003
Increase in inventories		(11,328	)			(10,186	)
(Increase) decrease in prepaid expenses		(1,598	)			172
Decrease in accounts payable
and accrued liabilities		(5,920	)			(6,345	)
Net cash provided by operating activities		42,270				50,259
Investing activities:
Payments for purchases of companies,
net of cash acquired		(57,197	)			-
Purchases of property, plant
and equipment		(36,985	)			(26,351	)
Purchases of marketable securities		(6,103	)			(19,531	)
Proceeds from redemption and sales of
marketable securities		30,938				23,137
Proceeds from disposal of property and
equipment		1,853				878
Other		(63	)			(207	)
Net cash used in investing activities		(67,557	)			(22,074	)
Financing activities:
Payments to repurchase common stock		(8,972	)			-
Proceeds from issuance of stock		6,300				5,926
Payments on capitalized lease obligations		(168	)			(167	)
Payment of cash dividend		(20,314	)			(17,825	)
Net cash used in financing activities		(23,154	)			(12,066	)
Effect of exchange rate on cash
and cash equivalents		(985	)			(943	)
Net (decrease) increase in cash
and cash equivalents		(49,426	)			15,176
Cash and cash equivalents at beginning
of period		192,395				111,479
Cash and cash equivalents at end
of period	$	142,969			$	126,655

	Three months ended								Six months ended
	March 28,				March 30,				March 28,				March 30,
	2020				2019				2020				2019
Sales to External Customers:
Food Service
Soft pretzels	$	45,660			$	49,812			$	95,601			$	98,803
Frozen juices and ices		9,491				8,947				16,534				16,474
Churros		14,754				15,770				31,145				30,905
Handhelds		7,447				7,987				14,636				16,789
Bakery		89,407				84,406				185,779				178,651
Other		4,573				8,145				11,085				13,471
Total Food Service	$	171,332			$	175,067			$	354,780			$	355,093
Retail Supermarket
Soft pretzels	$	12,332			$	10,829			$	22,158			$	21,015
Frozen juices and ices		15,864				14,668				25,957				25,664
Biscuits		6,630				6,358				13,608				14,222
Handhelds		3,117				2,479				5,878				5,047
Coupon redemption		(866	)			(507	)			(1,409	)			(1,201	)
Other		494				340				805				699
Total Retail Supermarket	$	37,571			$	34,167			$	66,997			$	65,446
Frozen Beverages
Beverages	$	31,895			$	33,603			$	67,150			$	65,039
Repair and
maintenance service		21,779				20,034				44,265				39,777
Machines revenue		8,910				13,161				20,891				22,065
Other		555				270				856				494
Total Frozen Beverages	$	63,139			$	67,068			$	133,162			$	127,375
Consolidated Sales	$	272,042			$	276,302			$	554,939			$	547,914
Depreciation and Amortization:
Food Service	$	7,240			$	6,616			$	14,158			$	12,938
Retail Supermarket		329				320				688				655
Frozen Beverages		6,188				5,066				11,641				10,044
Total Depreciation and Amortization	$	13,757			$	12,002			$	26,487			$	23,637
Operating Income :
Food Service	$	7,951			$	19,182			$	25,985			$	36,879
Retail Supermarket		4,337				3,039				6,554				5,250
Frozen Beverages		(1,306	)			2,550				146				4,724
Total Operating Income	$	10,982			$	24,771			$	32,685			$	46,853
Capital Expenditures:
Food Service	$	10,331			$	8,403			$	18,734			$	14,681
Retail Supermarket		275				581				1,235				1,133
Frozen Beverages		8,774				5,530				17,016				10,537
Total Capital Expenditures	$	19,380			$	14,514			$	36,985			$	26,351
Assets:
Food Service	$	740,318			$	699,028			$	740,318			$	699,028
Retail Supermarket		31,636				30,034				31,636				30,034
Frozen Beverages		305,983				223,650				305,983				223,650
Total Assets	$	1,077,937			$	952,712			$	1,077,937			$	952,712

RESULTS OF OPERATIONS
         
Net sales decreased $4,260,000 or 2% to $272,042,000 for the three months and increased $7,025,000 or 1% to $554,939,000 for the six months ended March 28, 2020 compared to the three and six months ended March 30, 2019, respectively. Excluding sales from the acquisition of ICEE Distributors in October 2019 and BAMA ICEE in February 2020, sales decreased 2% for the quarter and increased about 1/3 of 1% for the six months. Sales for the first 11 weeks of our second quarter increased approximately 2% and decreased approximately 20% in the last 2 weeks of the quarter due to the slowdown in the economy. 

Net Sales for the first 4 weeks of our third quarter ending June 27, 2020 were down approximately 45% from a year ago. Although we cannot estimate whether  net sales will continue to be down at the same rate for the balance of the quarter, we estimate that we may have an operating loss in the quarter which would compare to operating income of $39 million in the year ago June quarter if sales continue to be down at the same rate. Approximately 2/3 of our sales are to venues and locations that have shut down or sharply curtailed their foodservice operations so we anticipate COVID-19 will continue to have a negative impact on our business. As we have $267 million of cash and marketable securities on our balance sheet, we do not expect to have any liquidity issues, nor do we anticipate a material amount of our assets would be impaired.            

FOOD SERVICE

Sales to food service customers decreased $3,735,000 or 2% in the second quarter to $171,332,000 and decreased $313,000 or 1% to $354,780,000 for the six months. For the first 11 weeks of the quarter, sales increased approximately 2% and sales decreased approximately 24% in the last 2 weeks of the quarter.  Soft pretzel sales to the food service market decreased 8% to $45,660,000 in the three months and 3% to $95,601,000 in the six months.  Prior to COVID-19, soft pretzel sales were strong to convenience store chains and schools in the quarter.

Frozen juices and ices sales increased 6% to $9,491,000 in the three months and were essentially the same as last year at $16,534,000 in the six months as sales to warehouse club stores were strong in the quarter.

Churro sales to food service customers were down 6% in the quarter to $14,754,000 and were up less than 1% to $31,145,000 in the six months due to the dropoff in sales due to COVID-19.

Sales of bakery products increased $5,001,000 or 6% in the second quarter and increased $7,128,000 or 4% to $185,779,000 for the six months with significant offsetting increases and decreases in sales to particular customers.

Sales of handhelds decreased $540,000 or 7% in the quarter and $2,153,000 or 13% in the six months with the decrease primarily coming from lower sales to co-pack customers.  

Sales of funnel cake decreased $3,370,000 or 44%, to $4,362,000 in the quarter and $2,130,000, or 17%, to $10,562,000 in the six months due primarily to lower sales to one quick service restaurant chain that ran a limited time offer in last year’s quarter.

Sales of new products in the first twelve months since their introduction were approximately $1.6 million in this quarter and $4.1 million in the six months.   
       
Operating income in our Food Service segment decreased to $7,951,000 from $19,182,000 in the quarter and decreased to $25,985,000 from $36,879,000 in the six months primarily because of lower volume and higher operating expenses throughout the quarter and a significant dropoff in sales and production due to COVID-19. 

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $3,404,000 or 10% to $37,571,000 in the second quarter and increased $1,551,000 or 2% in the six months.  For the first 11 weeks of the quarter, sales increased approximately 4% and increased approximately 45% in the last 2 weeks of the quarter. Soft pretzel sales for the second quarter were up 14% to $12,332,000 and up 5% to $22,158,000 for the six months. Sales of frozen juices and ices increased $1,196,000 or 8% to $15,864,000 in the second quarter and increased $293,000 or 1% in the six months.  Handheld sales to retail supermarket customers increased 26% to $3,117,000 in the quarter and 16% to $5,878,000 in the six months. Biscuit sales for the second quarter were up 4% to $6,630,000 and down 4% to $13,608,000 for the six months. Sales were generally higher for all product lines as sales in the year ago periods were impacted by lost volume and placements due the price increases implemented in last year’s first quarter and because of increased sales to supermarkets generally in the last 2 weeks of the quarter due to COVID-19.

Sales of new products in the second quarter were approximately $300,000 and were approximately $400,000 for the six months. 

Operating income in our Retail Supermarkets segment was $4,337,000 in this year’s second quarter compared to $3,039,000 in last year’s quarter, a 43% increase and increased to $6,554,000 in this year’s six months compared to $5,250,000 in last year’s six months due to higher volume and higher prices.   

FROZEN BEVERAGES
     
Frozen beverage and related product sales decreased 6% to $63,139,000 in the second quarter and increased 5% to $133,162,000 in the six months.   For the first 11 weeks of the quarter, sales increased approximately 1% and decreased approximately 38% in the last 2 weeks of the quarter. Beverages sales were down 5% to $31,895,000 in the quarter and up 5% to $67,150,000 in the six months. Excluding sales from the acquisition of ICEE Distributors in October 2019 and BAMA ICEE in February 2020, frozen beverages and related product sales decreased 10% in the quarter and were up less than 1% for the six months and beverages sales decreased 14% for the quarter and 3% for the six months. Gallon sales were down 12% in the quarter and down 6% in the six months exclusive of ICEE Distributors’ gallons.  Service revenue increased 9% to $21,779,000 in the second quarter and increased 10% to $44,265,000 in the six months with sales increases and decreases spread throughout our customer base.

Machines revenue (primarily sales of frozen beverage machines) were $8,910,000, a decrease of $4,251,000 in the quarter and $20,891,000, a decrease of $1,174,000 in the six months, with the decrease because of a significant install project at one quick service restaurant chain in last year’s quarter.  Our Frozen Beverage segment had an operating loss of $1,306,000 compared to operating income of $2,550,000 in last year’s quarter and operating income for the six months was $146,000 this year and $4,724,000 last year primarily as a result of lower volume due to COVID-19 and  relocation costs of our ICEE’s headquarters of about $1.5 million in our second quarter and $2.3 million in the six months.   

CONSOLIDATED

Gross profit as a percentage of sales was 25.53% in the second quarter and 28.68% last year.  Gross profit as a percentage of sales was 26.54% in the six month period this year and 28.49% last year.  Gross profit percentage decreased for both periods because of lower volume in our food service and frozen beverages segments in the second quarter, product mix changes and significant dropoff in production at the end of the second quarter due to COVID-19, although gross profit as a percentage of sales was lower prior to COVID-19 for both the quarter and six months. 

Total operating expenses increased $3,984,000 in the second quarter and as a percentage of sales increased to 21.5% from 19.7% last year.  For the first half, operating expenses increased $5,361,000 and as a percentage of sales increased to 20.7% from 19.9% last year.   Marketing expenses increased to 8.8% of sales in this year’s quarter from 7.9% last year and were 8.4% in the six months compared to 7.9% of sales in last year’s six months primarily because of increased spending in our retail supermarket and frozen beverages segments and because of lower sales in the second quarter (lower denominator) .  Distribution expenses were 9.1% of sales in the second quarter and 8.0% of sales in last year’s quarter and were 8.7% in this year’s six months compared to 8.4% of sales in last year’s six months primarily due to higher freight and storage costs and because of lower sales in the second quarter (lower denominator).    Administrative expenses were 3.7% of sales in the second quarter compared to 3.6% of sales last year in the second quarter and were 3.6% in this year’s six months compared to 3.5% of sales in last year’s six months.

Operating income decreased $13,789,000 or 56% to $10,982,000 in the three months and decreased $14,168,000 or 30% to $32,685,000 in the first six months as a result of the aforementioned items. About $6.5 million of the decrease in operating income in the second quarter was in January and February primarily due to higher costs and lower volume in our foodservice segment and the relocation costs in our frozen beverages segment.

We had an investment loss, net of income, of $413,000 in this year’s quarter compared to investment income of $2,782,000 in last year’s quarter. Investment income decreased to $1,373,000 from $3,822,000 in the six month periods. We had unrealized losses of $1,993,000 and $267,000 in the six months ended March 28, 2020 and March 30, 2019 respectively. We had unrealized losses of $2,064,000 in the three months ended March 28, 2020 and unrealized gains of $760,000 in the three months ended March 30, 2019.

Net earnings decreased $13,045,000, or 64%, in the current three month period to $7,309,000 and decreased $13,512,000, or 36%, to 24,368,000 for the six month period this year compared to $37,880,000 for the six month period last year. 

Net earnings in last year’s six months 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 27.0% in last year’s six months.  Our effective tax rate was 28.3% in this year’s six months.    
      
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
[phone]