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J & J Snack Foods : 2nd Quarter Earnings Call

05/05/2021 | 10:15am EDT

50143409-J & J Snack

Foods- Second Quarter

Earnings- 04-27-2021

50143409-J & J Snack Foods- Second Quarter Earnings- 04-27-2021

Operator: Welcome to the J&J Snack Foods Second Quarter Earnings Conference Call. My name is James, and I'll be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. During the Q&A session, if you have a question, please press star one on your phone. And also note this conference is being recorded. I'd now like to turn the call over to Dan Fachner. Dan, you may begin.

Dan Fachner: Thank you very much. Good morning, everyone. I'm Dan Fachner, president of J&J Snack Foods. And we're just so excited to talk to you today about our Q2 performance. While we all are continuing to see the impacts of COVID-19 on our business and personal lives, we are starting to see some real positive momentum in the business. The environment is changing as more venues are opening, capacity restraints are being lifted. More people are getting the vaccine and overall consumer confidence is improving every month. Our J&J associates have worked so hard, and I'm really so proud of them over the past last year to manage through unprecedented year, and we are in great position to bounce back as traffic in our customers' venues and retail outlets recover. Despite the challenges of this past year, our financial position remains strong and we continue to improve our liquidity, even as profits are challenged.

Joining me today in the room are Jerry Schreiber, founder, chairman and CEO; Ken Plunk, senior vice president and CFO; Marjorie Roshkoff, vice president, and general counsel; Bob Radano and Bob Pape, senior vice president of sales. Let me take a few minutes to review our results. 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. You are cautioned not to place undue reliance on these forward- looking statements, which reflect management's analysis only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date.

So results of operations - really excited about it. Net sales were $256.2 million for the quarter, a decrease of 6%. Sales improved throughout the quarter led by venue openings, 2

50143409-J & J Snack Foods- Second Quarter Earnings- 04-27-2021

accessibility to COVID-19 vaccine, improving consumer confidence and the spring season. Both our Food Service and Frozen Beverage businesses improved substantially during the quarter due to these improving consumer trends.

Our retail business again continued to hold strong, growing at 17% in the quarter. Operating income was $7.2 million for the quarter, a decrease of $3.8 million compared to last year. Improved sales volume and a strong focus on cost efficiencies helped drive improved gross margins and profitability when compared to last year.

Now I'd like to review the results of each of our business segments. Food Service. Sales to Food Service customers decreased only 1% for the quarter, an improving trend when compared to Q1 2021 that had declined 13% versus the prior year. Traffic continues to improve as theaters are reopening, entertainment and amusement venues increased capacity, and strong growth across QSR and casual dining restaurants. Soft pretzel sales decreased 19% and frozen juices and ices the increased 12%. Churros sales were relatively flat for the quarter, and sales of bakery products declined 7%.

Our handheld business had a strong sales quarter, exceeding last year by $12.5 million, or 168%. That was driven by a new product developed for one of our wholesale club customers, as we previously discussed. Operating income in our Food Service segment decreased $1.9 million in the quarter, driven by lower sales and product mix. Gross margins improved progressively over the quarter, driving a much improved profitability versus Q1. Retail supermarkets continue to do really well for us. Our retail business continues to perform well as sales increased 17% for the quarter. Those sales were led by our SUPERPRETZEL brand, with an increase of 28% in the quarter, frozen juice and ices sales were up 22%, and sales of biscuits declined 2%. Handheld sales declined 28% for the quarter. Operating income increased 2 million or 47% in the quarter, driven by higher sales and operating income margins near 15%, over 300 basis points better than last year.

Frozen Beverage. Sales of the Frozen Beverage business segment were down 32% in the quarter. Beverage-related sales were down 42%, driven primarily by a 40% decline in gallons as traffic in theaters, amusement parks and retailers faced continued impacts from COVID-19.


50143409-J & J Snack Foods- Second Quarter Earnings- 04-27-2021

These trends are improving, though, compared to a 56% decline in gallons during our first quarter, as consumers returned to our customer venues.

Service revenue declined 16%, almost entirely from a cancellation at one of our key customer's preventative maintenance programs. Machine revenues decreased 36%, due mainly slower customer expansion and replacement during another COVID-19 impacted period. Our Frozen Beverage segment incurred an operating loss for the quarter of $5.2 million, as the COVID-19 restrictions continued to pressure sales. While these sales challenges to impact gross margin mix and efficiency, margins improved steadily across the quarter, and operating and profits improved over $5 million when compared to Q1.

Consolidated. Gross profit as a percentage of sales was 23.8% this quarter, down from 25.5% last year. Gross profit percentage decreased because of the previously-mentionedCOVID-19 sales pressure on our Food Service and Frozen Beverage segments. Total operating expense as a percentage of sales was 20.9% in the quarter, leveraging 60 basis points compared to last year's 21.5%. Total expenses were $4.8 million, below last year, through diligent management of some variable expenses in our operations - really proud of that accomplishment and what we were able to do. Net earnings for the quarter was $6.1 million, down from $7.3 million last year.

Our capital spending and cash flow. Our cash and investment securities balance was $280 million as of 27th March, 2021; an increase of $2 million from our September year end. We continue to drive positive cash flow and our balance sheet and liquidity remain strong in this challenging COVID-19 environment. We continue to look for acquisitions and remain focused on the long-term growth and opportunities of our business. We spent $19 million in capital expenditures through six months ended 27th March, 2021, as we continue to invest in our plant efficiency and growing our business. We estimate our spending for the year to be about consistent with prior years.

A cash dividend of $0.575 a share was declared by our board of directors and paid on 13th April, 2021. We didn't buy back any shares of our stock during the quarter. Our investment income this year was $0.6 million, $1 million greater than prior year's second quarter, due to 4

50143409-J & J Snack Foods- Second Quarter Earnings- 04-27-2021

improved market conditions. We are really encouraged by this quarter and look forward with great anticipation to the rest of the year. We want to thank you for your continued interest in J&J Snack Foods. And I will now open it up for any questions and answers. Thank you very much.

Operator: Thank you. We can begin our question-and-answer session. If you have a question, please press star one on your phone. If you wish to be removed from the question queue, you may press the pound sign or the hash key. There may be a slight delay before the question is announced. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star one on your phone. Our first question comes from Ryan Bell[?].

Ryan Bell: Hey - good morning, everyone.

Dan Fachner: Good morning, Brian. How are you?

Ryan Bell: Ryan - good. Could you provide some details about the trajectory of the improvements throughout the quarter? You'd highlighted that in some of your comments. And then maybe give an indication of where performance stands for Food Service and the Frozen Beverage business in the current month?

Dan Fachner: Sure, Ryan. I'll take a crack at that, and then I'll let Ken Plunk answer some of the questions as well. But the quarter - continued to grow as we went throughout the quarter. So January and February were pretty much the same, but March really started to take off, and we're starting to see that continue through the next quarter. On the Frozen Beverage business side of the business, we saw a great increase from quarter one to quarter two, and as we ended Q2 with the Frozen Beverage business, we even saw a profit in that business, which was really encouraging as we look forward through the rest of the year.

Ken Plunk: Yeah. Hey, Ryan. Ken Plunk here. I would just add - so I think your question kind of is how did things progress through the month of the quarter? I would say February quarter today, particularly if you look at Food Service, it was still considerably better than Q1. So I think we ended quarter-to-date through February, probably at 50% improvement over


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J&J Snack Foods Corporation published this content on 05 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 May 2021 14:14:04 UTC.

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Sales 2021 1 132 M - -
Net income 2021 61,0 M - -
Net Debt 2021 - - -
P/E ratio 2021 51,2x
Yield 2021 -
Capitalization 3 116 M 3 116 M -
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Capi. / Sales 2022 2,55x
Nbr of Employees 4 100
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Technical analysis trends J & J SNACK FOODS CORP.
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Income Statement Evolution
Mean consensus HOLD
Number of Analysts 5
Last Close Price 163,46 $
Average target price 176,67 $
Spread / Average Target 8,08%
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Managers and Directors
Daniel J. Fachner President & Chief Executive Officer
Ken A. Plunk Chief Financial Officer & Senior Vice President
Gerald B. Shreiber Chairman
Peter G. Stanley Independent Director
Sidney R. Brown Independent Director
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