Sales and Earnings reported by J & J Snack Foods

Globe Newswire 8-Nov-2018 4:00 PM

PENNSAUKEN, N.J., Nov. 08, 2018 (GLOBE NEWSWIRE) -- J & J Snack Foods Corp. (NASDAQ-JJSF) today announced sales and earnings for its fourth quarter and year ended September 29, 2018.

Because last year's fourth quarter had 14 weeks compared to 13 weeks this year, sales for the fourth quarter (13 weeks) this year decreased 5% to $300.7 million from $316.7 million in last year's fourth quarter (14 weeks). For the year ended September 29, 2018 (52 weeks), sales increased ­­­5% to $1.138 billion from $1.084 billion last year (53 weeks). Excluding sales from the extra week in 2017, sales increased approximately 3% for the fourth quarter and 7% for the year. Net earnings decreased 4% to $23.4 million ($1.24 per diluted share) in this year's fourth quarter compared to $24.3 million ($1.29 per diluted share) last year and for the year earnings increased 31% to $103.6 million ($5.51 per diluted share) from $79.2 million ($4.21 per diluted share).

Operating income decreased 16% to $31.1 million this year from $36.9 million in the year ago fourth quarter.  For the year, operating income decreased 6% to $110.8 million from $118.1 million last year.

Net earnings for the current year quarter benefited from a $1.7 million, or $0.09 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. Net earnings for the current year 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. Excluding the increase in taxes resulting from the change in New Jersey tax regulations, our effective tax rate decreased to 26.3% from 35.6% in the prior year reflecting the reduction in the federal statutory rate to 21% from 35% .

Net earnings for the current year  benefited from a $20.9 million, or $1.11 per diluted share, gain on the re-measurement 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. Net earnings were impacted by a $1.2 million, or $.06 per diluted share, provision for the one-time repatriation tax required under the new federal tax law and by a  $1.4 million, or $0.07 per diluted share, increase in income taxes because of the changes to New Jersey tax regulations. Excluding the deferred tax gain resulting from changes in federal law,  the one-time repatriation tax and the increase in taxes resulting from the change in New Jersey tax regulations , our effective tax rate decreased to 27.8% from 35.2% in the prior year reflecting the reduction in the federal statutory rate to 21% from 35% for the last three quarters of fiscal 2018. The one-time repatriation tax is a preliminary estimate. 

Gerald B. Shreiber, J & J's President and Chief Executive Officer, commented, "While we have had good overall sales growth this past year, we were impacted by higher costs and other challenges throughout our businesses. As we have said previously, we are determined to improve our operations and margins 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, PATIO Burritos and other handheld sandwiches, 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
(in thousands, except per share information)
               
    Quarter Ended     Fiscal Year Ended 
               
  September 29,   September 30,   September 29,   September 30,
  2018   2017   2018   2017
  (13 weeks)   (14 weeks)   (52 weeks)   (53 weeks)
               
Net Sales $ 300,715   $ 316,726     $ 1,138,265   $ 1,084,224  
Cost of goods sold   209,461     219,179       801,979     753,201  
Gross Profit   91,254     97,547       336,286     331,023  
               
Operating expenses              
Marketing   25,733     26,959       95,405     94,394  
Distribution   24,380     23,287       92,281     81,824  
Administrative   9,743     10,439       37,757     36,843  
Other (income) expense   261     (7 )     68     (145 )
Total operating expenses   60,117     60,678       225,511     212,916  
               
Operating Income   31,137     36,869       110,775     118,107  
               
Other income (expenses)              
Investment income   1,580     1,465       6,267     5,289  
Interest expense & other   843     (545 )     1,110     (1,196 )
               
Earnings before              
income taxes   33,560     37,789       118,152     122,200  
               
Income taxes   10,175     13,446       14,556     43,026  
               
NET EARNINGS $ 23,385   $ 24,343     $ 103,596   $ 79,174  
               
Earnings per diluted share $ 1.24   $ 1.29     $ 5.51   $ 4.21  
               
Weighted average number              
of diluted shares   18,867     18,811       18,817     18,816  
               
Earnings per basic share $ 1.25   $ 1.30     $ 5.54   $ 4.23  
               
Weighted average number of              
basic shares   18,726     18,705       18,694     18,707  
               


 
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
 
  September 29,   September 30,
  2018   2017
Assets      
Current assets      
Cash and cash equivalents $ 111,479     $ 90,962  
Marketable securities held to maturity   21,048       59,113  
Accounts receivable, net   132,342       124,553  
Inventories   112,884       103,268  
Prepaid expenses and other   5,044       3,936  
Total current assets   382,797       381,832  
       
Property, plant and equipment, at cost   697,517       653,889  
Less accumulated depreciation      
and amortization   454,844       426,308  
Property, plant and equipment, net   242,673       227,581  
       
Other assets      
Goodwill   102,511       102,511  
Other intangible assets, net   57,762       61,272  
Marketable securities held to maturity   118,765       60,908  
Marketable securities available for sale   24,743       30,260  
Other   2,762       2,864  
Total other assets   306,543       257,815  
Total Assets $ 932,013     $ 867,228  
       
Liabilities and Stockholders' Equity      
Current Liabilities      
Current obligations under capital leases $ 324     $ 340  
Accounts payable   69,592       72,729  
Accrued insurance liability   11,217       10,558  
Accrued liabilities   8,031       7,753  
Accrued compensation expense   20,297       19,826  
Dividends payable   8,438       7,838  
Total current liabilities   117,899       119,044  
       
Long-term obligations under capital leases   753       904  
Deferred income taxes   52,322       62,705  
Other long-term liabilities   1,948       2,253  
       
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      
18,754,000 and 18,663,000 respectively   27,340       17,382  
Accumulated other comprehensive loss   (11,994 )     (8,875 )
Retained Earnings   743,745       673,815  
Total stockholders' equity   759,091       682,322  
Total Liabilities and Stockholders' Equity $ 932,013     $ 867,228  
       
The accompanying notes are an integral part of these statements.    
     


 
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
   
  Fiscal Year Ended
           
  September 29,   September 30,   September 24,
  2018   2017   2016
  (52 weeks)   (53 weeks)   (52 weeks)
           
Operating activities:          
Net earnings $ 103,596     $ 79,174     $ 75,975  
Adjustments to reconcile net earnings to net cash provided by          
operating activities:          
Depreciation of fixed assets   42,939       38,211       34,536  
Amortization of intangibles and deferred costs   3,538       4,234       5,587  
Gains from disposals of property & equipment   (912 )     (346 )     (398 )
Amortization of bond premiums   1,012       1,189       1,011  
Share-based compensation   3,858       3,048       2,375  
Deferred income taxes   (10,392 )     7,847       7,700  
Loss (gain) on sale of marketable securities   140       (14 )     661  
Changes in assets and liabilities, net of effects from purchase          
of companies:          
(Increase) decrease in accounts receivable, net   (7,917 )     (20,370 )     3,571  
Increase in inventories   (9,639 )     (7,410 )     (6,295 )
(Increase) decrease in prepaid expenses and other   (1,120 )     10,265       (7,386 )
(Decrease) increase in accounts payable and accrued liabilities   (1,736 )     9,521       3,888  
Net cash provided by operating activities   123,367       125,349       121,225  
Investing activities:          
Payments for purchases of companies, net of cash acquired   -       (47,698 )     -  
Purchases of property, plant and equipment   (60,022 )     (72,180 )     (48,709 )
Purchases of marketable securities   (91,112 )     (39,923 )     (41,786 )
Proceeds from redemption and sales of marketable securities   75,302       22,997       13,224  
Proceeds from disposal of property, plant and equipment   2,639       1,935       2,294  
Other   54       (450 )     375  
Net cash used in investing activities   (73,139 )     (135,319 )     (74,602 )
Financing activities:          
Payments to repurchase common stock   (2,794 )     (18,229 )     (15,265 )
Proceeds from issuance of common stock   8,894       7,231       6,570  
Payments on capitalized lease obligations   (370 )     (356 )     (355 )
Payment of cash dividend   (33,066 )     (30,859 )     (28,523 )
Net cash used in financing activities   (27,336 )     (42,213 )     (37,573 )
Effect of exchange rates on cash and cash equivalents   (2,375 )     2,493       (2,087 )
Net increase (decrease) in cash and cash equivalents   20,517       (49,690 )     6,963  
Cash and cash equivalents at beginning of year   90,962       140,652       133,689  
Cash and cash equivalents at end of year $ 111,479     $ 90,962     $ 140,652  
           
The accompanying notes are an integral part of these statements.          
           


 
J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           
           
           
  Fiscal year ended 
           
  September 29,   September 30,   September 24,
  2018   2017   2016
  (52 weeks)   (53 weeks)   (52 weeks)
           
  (in thousands)
Sales to External Customers:          
Food Service          
Soft pretzels $ 208,544     $ 180,138     $ 170,155  
Frozen juices and ices   42,364       49,469       51,798  
Churros   61,726       62,809       57,318  
Handhelds   38,928       36,913       27,427  
Bakery   371,391       351,357       294,518  
Other   22,991       21,108       20,313  
Total Food Service $ 745,944     $ 701,794     $ 621,529  
           
Retail Supermarket          
Soft pretzels $ 36,438     $ 35,081     $ 33,279  
Frozen juices and ices   74,435       71,325       68,924  
Handhelds   12,419       14,892       15,347  
Coupon redemption   (4,439 )     (4,898 )     (4,430 )
Other   2,086       2,847       4,469  
Total Retail Supermarket $ 120,939     $ 119,247     $ 117,589  
           
Frozen Beverages          
Beverages $ 167,713     $ 160,243     $ 150,118  
Repair and          
maintenance service   78,805       74,594       71,123  
Machines sales   23,781       27,073       31,155  
Other   1,083       1,273       1,267  
Total Frozen Beverages $ 271,382     $ 263,183     $ 253,663  
           
Consolidated Sales $ 1,138,265     $ 1,084,224     $ 992,781  
           
Depreciation and Amortization:          
Food Service $ 25,983     $ 24,629     $ 22,912  
Retail Supermarket   1,313       949       1,031  
Frozen Beverages   19,181       16,867       16,180  
Total Depreciation and Amortization $ 46,477     $ 42,445     $ 40,123  
           
Operating Income:          
Food Service $ 74,056     $ 81,208     $ 76,539  
Retail Supermarket   8,304       10,627       9,618  
Frozen Beverages   28,415       26,272       26,653  
Total Operating Income $ 110,775     $ 118,107     $ 112,810  
           
Capital Expenditures:          
Food Service $ 36,325     $ 44,067     $ 24,759  
Retail Supermarket   928       239       369  
Frozen Beverages   22,769       27,874       23,581  
Total Capital Expenditures $ 60,022     $ 72,180     $ 48,709  
           
Assets:          
Food Service $ 693,098     $ 635,709     $ 589,854  
Retail Supermarket   21,366       21,129       22,090  
Frozen Beverages   217,549       210,390       178,543  
Total Assets $ 932,013     $ 867,228     $ 790,487  
           
           

RESULTS OF OPERATIONS:

Fiscal 2018 (52 weeks) Compared to Fiscal Year 2017 (53 weeks)

Net sales increased $54,041,000, or 5%, to $1,138,265,000 in fiscal 2018 from $1,084,224,000 in fiscal 2017. Excluding sales from the extra week in 2017, sales increased approximately 7% from 2017 to 2018.

Excluding sales from Hill & Valley, Inc., acquired in January 2017, an ICEE distributor located in the Southeast acquired in June 2017 and Labriola Bakery which was acquired in August 2017 and the extra week in 2017, sales increased approximately 4% for the year.
    
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 $44,150,000 or 6%, to $745,944,000 in fiscal 2018.  Excluding the extra week in 2017, sales increased approximately 9% from 2017 to 2018. Excluding Hill & Valley and Labriola sales and the extra week in 2017, sales increased approximately 4% for the year. Soft pretzel sales to the food service market increased 16% to $208,544,000 for the year with strong sales to restaurant chains and movie theatres and with sales increases and decreases throughout our customer base. Our new line of BRAUHAUS pretzels contributed to the increased sales.  Excluding Labriola sales, soft pretzel sales increased 10%. Frozen juice bar and ices sales decreased $7,105,000, or 14%, to $42,364,000 for the year due primarily to lower sales to warehouse club stores because of a loss of a promotion and because of reduced distribution.  Churro sales to food service customers were down 2% to $61,726,000 for the year with sales increases and decreases across our customer base but with particularly low sales to one warehouse club store which last year had sales of a new product since discontinued.  Sales of bakery products increased $20,034,000, or 6%, for the year. Excluding Hill & Valley and Labriola sales, bakery sales were down about 1/4 of 1% for the year with sales increases and decreases spread across our customer base.  Handheld sales to food service customers were up 5% to $38,928,000 in 2018 with sales increases to two customers accounting all of the increase.  Sales of funnel cake increased $1,611,000, or 8% to $21,570,000 due primarily to increased sales to school food service.  Overall food service sales to restaurant chains were strong for the year.  Sales of new products in the first twelve months since their introduction were approximately $20 million for the year.  Price increases accounted for approximately $8.5 million of sales for the year and net volume increases including new product sales and sales of the acquired businesses accounted for approximately $36 million of sales for the year.  Operating income in our Food Service segment decreased from $81,208,000 in 2017 to $74,056,000 in 2018. Operating income this year was impacted by approximately $5.3 million of higher distribution expenses primarily due to higher fuel costs and the January 2018 implementation of the electronic logging device mandate. Additionally, lower sales of our MARY B's biscuits and related costs due to our recall in early January impacted our operating income by approximately $1.8 million for the year. Operating income was also impacted by generally higher costs for payroll and insurance, added personnel in the selling function, product mix changes and significantly lower volume concentrated in specific facilities and higher cost of ingredients. Operating income in the first quarter was impacted by inefficiencies at our Labriola production facility which was acquired in the fourth quarter 2017 (compounded by the integration of products previously manufactured at other facilities) and shutdown costs of our Chambersburg facility. Operating income was also impacted by idle overhead during an upgrade of one of our production facilities. Hill & Valley contributed improved operating income of $1.7 million compared to last year.  Last year's operating income included a $1.8 million gain on an insurance recovery related to product quality issues in our 2016 fiscal year which was recorded as a reduction of cost of goods sold.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $1,692,000 or 1% to $120,939,000 in fiscal year 2018. Excluding sales from the extra week in 2017, sales increased approximately 3% from 2017 to 2018. Soft pretzel sales to retail supermarkets were $36,438,000 compared to $35,081,000 in 2017, an increase of 4%.  All of the pretzel sales increase was from sales of AUNTIE ANNE'S products, under a license agreement entered into midway in our 2017 year.  Sales of frozen juices and ices increased $3,110,000 or 4% to $74,435,000 primarily because of sales of SOUR PATCH KIDS frozen novelties under a new license agreement.  Coupon redemption costs, a reduction of sales, decreased 9% to $4,439,000 for the year.  Handheld sales to retail supermarket customers decreased 17% to $12,419,060 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 $6 million in fiscal year 2018.  Price increases were negligible in 2018. Operating income in our Retail Supermarkets segment decreased from $10,627,000 to $8,304,000 for the year. The primary contributions to the lower operating income this year were increases in trade spending, distribution costs and product costs which offset a major contribution from the sales of SOUR PATCH KIDS frozen novelties. 

FROZEN BEVERAGES

Frozen beverage and related product sales increased 3% to $271,382,000 in fiscal 2018. Excluding sales from the extra week in 2017, sales increased approximately 5% from 2017 to 2018. Excluding the acquired ICEE distributor and the extra week in 2017, sales increased approximately 4% for the year. Beverage sales alone increased 5% or $7,470,000 for the year with increases and decreases throughout our customer base.  Gallon sales were up 6% in our base ICEE business, with sales increases spread throughout our customer base.  Service revenue increased 6% to $78,805,000 for the year with sales increases and decreases spread throughout our customer base.  Sales of beverage machines, which tend to fluctuate from year to year while following no specific trend, decreased from $27,073,000 in 2017 to $23,781,000 in 2018.  The estimated number of Company owned frozen beverage dispensers was 26,000 and 25,000 at September 29, 2018 and September 30, 2017, respectively.  Operating income in our Frozen Beverage segment increased from $26,272,000 in 2017 to $28,415,000 in 2018 as a result of higher beverage sales and service revenue.

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 decreased to 29.54% in 2018 from 30.53% in 2017.  Although higher sales benefited our gross margin, the decrease in gross profit margin was caused by a number of factors including higher costs for payroll and workers compensation insurance, inefficiencies at our Labriola production facility, shutdown costs of our Chambersburg facility, lower sales of our MARY B'S biscuits and related costs, idle overhead during an upgrade of one of our production facilities as well as by about $500,000 of costs related to Hurricane Florence's impact on our North Carolina plant.  Last year's gross profit margin percentage benefitted from $1.8 million gain on an insurance recovery related to product quality issues in our 2016 fiscal year which was recorded as a reduction of cost of goods sold.
  
Total operating expenses increased $12,595,000 to $225,511,000 in fiscal 2018 and as a percentage of sales increased to 19.81% of sales from 19.64% in 2017.  Marketing expenses decreased to 8.38% this year from 8.71% of sales in 2017 primarily because of lower spending to support warehouse club store sales in our foodservice business and lower marketing expenses of the acquired Hill & Valley and Labriola businesses.  Distribution expenses as a percent of sales increased to 8.11% from 7.55% in 2018.  Distribution expenses have increased due to higher fuel costs and the recent implementation of the electronic logging device mandate. We expect distribution expenses to remain higher through at least the first quarter of our 2019 fiscal year. Administrative expenses were 3.32% and 3.40% of sales in 2018 and 2017, respectively.

Operating income decreased $7,332,000 or 6% to $110,775,000 in fiscal year 2018 as a result of the aforementioned items.

Our investments generated before tax income of $6.3 million this year, up from $5.3 million last year due in increases in the amount of investments and higher interest rates.

Other income this year 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.

Other expenses in 2017 include $1,070,000 of expenses incurred to acquire Hill & Valley, the ICEE distributor and Labriola Bakery.

Net earnings for the year ended September 29, 2018 benefited from a $20.9 million, or $1.11 per diluted share, gain 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.  Net earnings for the year were impacted by a $1.2 million, or $.06 per diluted share, provision for the one-time repatriation tax required under the new federal tax law and 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 decreased to 27.8% from 35.2% in the prior year reflecting the reduction in the federal statutory rate to 21% from 35% on January 1, 2018.  Last year's effective tax rate benefited from an unusually high tax benefit on share based compensation of $3,061,000 which compares to this year's tax benefit of $1,935,000.  We are presently estimating an effective tax rate of 26-27% for our fiscal year 2019.

Net earnings increased $24,422,000 or 31%, in the 52 weeks fiscal 2018 to $103,596,000, or $5.51 per diluted share, from $79,174,000, or $4.21 per diluted share, in the 53 weeks fiscal 2017 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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