PENNSAUKEN, N.J., Jan. 29, 2018 (GLOBE NEWSWIRE) -- J & J Snack Foods Corp. (NASDAQ:JJSF) today announced sales and earnings for the first quarter ended December 30, 2017.

Sales increased 18% to $265.2 million from $225.6 million in last year’s first quarter. Net earnings increased to $36.2 million in the current quarter from $13.6 million last year.  Earnings per diluted share increased to $1.93 for the first quarter from $.72 last year. Operating income increased 10% to $21.2 million in the current quarter from $19.3 million in the year ago quarter.

Net earnings for the current year quarter benefited from a $20.9 million, or $1.11 per diluted share, gain on the re-measurement of deferred tax liabilities and a $2.0 million, or $0.11 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 tax law.  Excluding the deferred tax gain and the one-time repatriation tax, our effective tax rate decreased to 28.6% from 34.0% in the prior year quarter reflecting the reduction in the federal statutory rate to 21% from 35% for the remaining three quarters of fiscal 2018. The gain on the re-measurement of deferred tax liabilities and the one-time repatriation tax are preliminary estimates. 

Gerald B. Shreiber, J & J’s President and Chief Executive Officer, commented, "Our retail supermarket and frozen beverages segments had strong quarters; however, our food service segment was impacted for various reasons, some of which have passed or been corrected.  We continue to focus on improving all of our business groups."

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, CALIFORNIA CHURROS and OREO** 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.
**OREO and the OREO wafer design are registered trademarks of Mondelez 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
 December 30, December 24,
  2017   2016 
    
Net Sales$  265,210   $  225,570  
    
Cost of goods sold 191,931    159,675  
  Gross Profit 73,279    65,895  
    
Operating expenses   
  Marketing  21,576    20,335  
  Distribution  21,159    18,164  
  Administrative  9,356    8,098  
  Other general income  (40)  (29)
  Total Operating Expenses  52,051    46,568  
    
Operating Income 21,228    19,327  
    
Other income (expense)   
  Investment income 1,489    1,227  
  Interest expense & other 509    (26)
    
Earnings before    
  income taxes 23,226    20,528  
    
Income tax (benefit) expense (13,023)  6,988  
    
  NET EARNINGS$  36,249   $  13,540  
    
Earnings per diluted share$  1.93   $  0.72  
    
Weighted average number    
  of diluted shares 18,778    18,787  
     
Earnings per basic share$  1.94   $  0.72  
    
Weighted average number of    
  basic shares 18,666    18,686  


J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
 December 30, September 30,
  2017   2017 
 (unaudited)
    
Assets   
Current assets   
  Cash and cash equivalents$  81,089   $  90,962  
  Marketable securities held to maturity   49,445      59,113  
  Accounts receivable, net   109,709      124,553  
  Inventories   113,049      103,268  
  Prepaid expenses and other   3,800      3,936  
  Total current assets 357,092    381,832  
    
Property, plant and equipment, at cost  
  Land   2,494      2,482  
  Buildings   26,582      26,741  
  Plant machinery and equipment   258,738      257,172  
  Marketing equipment   277,236      278,860  
  Transportation equipment   8,438      8,449  
  Office equipment   25,574      25,302  
  Improvements   37,999      38,003  
  Construction in progress   21,997      16,880  
  Total Property, plant and equipment, at cost 659,058    653,889  
  Less accumulated depreciation    
  and amortization 429,217    426,308  
  Property, plant and equipment, net 229,841    227,581  
    
Other assets   
  Goodwill 102,511    102,511  
  Other intangible assets, net 60,453    61,272  
  Marketable securities held to maturity 82,066    60,908  
  Marketable securities available for sale 30,150    30,260  
  Other  2,904    2,864  
  Total other assets 278,084    257,815  
Total Assets$  865,017   $  867,228  
    
Liabilities and Stockholders' Equity  
Current Liabilities   
  Current obligations under capital leases$  339   $  340  
  Accounts payable 68,033    72,729  
  Accrued insurance liability 11,215    10,558  
  Accrued liabilities 10,491    7,753  
  Accrued compensation expense 11,764    19,826  
  Dividends payable 8,400    7,838  
  Total current liabilities 110,242    119,044  
    
Long-term obligations under capital leases 815    904  
Deferred income taxes 44,462    62,705  
Other long-term liabilities 2,117    2,253  
    
Stockholders' Equity   
Preferred stock, $1 par value; authorized  
 10,000,000 shares; none issued  -     -  
Common stock, no par value; authorized,  
 50,000,000 shares; issued and outstanding  
 18,668,000 and 18,663,000 respectively 18,589    17,382  
Accumulated other comprehensive loss (12,872)  (8,875)
Retained Earnings  701,664    673,815  
  Total stockholders' equity   707,381      682,322  
Total Liabilities and Stockholders' Equity$  865,017   $  867,228  


J & J SNACK FOODS CORP. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF CASH FLOWS   
(Unaudited)  (in thousands) 
    
 Three months ended
 December 30,December 24,
  2017   2016 
Operating activities:   
  Net earnings$  36,249   $  13,540  
Adjustments to reconcile net    
  earnings to net cash   
  provided by operating activities:   
  Depreciation of fixed assets 11,152    8,728  
  Amortization of intangibles    
  and deferred costs 834    1,183  
  Share-based compensation 953    748  
  Deferred income taxes (18,265)  (74)
  Loss on sale of marketable securities     (8)    -  
  Other (317)  222  
  Changes in assets and liabilities    
  net of effects from purchase of companies  
  Decrease in accounts receivable 14,547    5,849  
  Increase in inventories (9,933)  (6,727)
  Decrease in prepaid expenses 111    5,747  
  Decrease in accounts payable and   
  accrued liabilities (9,216)  (2,816)
  Net cash provided by operating activities 26,107    26,400  
Investing activities:   
 Purchases of property, plant    
  and equipment (14,623)  (11,399)
 Purchases of marketable securities (30,865)  (8,550)
 Proceeds from redemption and sales of    
  marketable securities 19,096    475  
 Proceeds from disposal of property and    
  equipment 1,046    645  
 Other  27    (20)
  Net cash used in investing activities   (25,319)  (18,849)
Financing activities:   
  Payments to repurchase common stock   -      -  
  Proceeds from issuance of stock 253    980  
  Payments on capitalized lease obligations (90)  (90)
  Payment of cash dividend (7,838)  (7,280)
  Net cash used in financing activities (7,675)  (6,390)
  Effect of exchange rate on cash    
  and cash equivalents (2,986)  (847)
 Net (decrease)increase in cash     
  and cash equivalents (9,873)  314  
 Cash and cash equivalents at beginning    
  of period 90,962    140,652  
 Cash and cash equivalents at end    
  of period$  81,089   $  140,966  


 Three months ended
 December 30, December 24,
  2017   2016 
                                                 (unaudited)
                                               (in thousands)
Sales to External Customers:   
  Food Service   
  Soft pretzels$  50,131   $  41,494  
  Frozen juices and ices 7,184    7,479  
  Churros 14,592    14,438  
  Handhelds 10,252    7,479  
  Bakery 94,933    75,279  
  Other 5,172    4,128  
  Total Food Service$  182,264   $  150,297  
    
  Retail Supermarket   
  Soft pretzels$  10,512   $  8,944  
  Frozen juices and ices 9,727    9,851  
  Handhelds 3,026    3,450  
  Coupon redemption   (751)    (1,259)
  Other 562    633  
  Total Retail Supermarket$  23,076   $  21,619  
    
  Frozen Beverages   
  Beverages$  34,303   $  28,276  
  Repair and    
  maintenance service 19,004    18,091  
  Machines sales 6,313    7,039  
  Other 250    248  
  Total Frozen Beverages$  59,870   $  53,654  
    
Consolidated Sales$  265,210   $  225,570  
    
Depreciation and Amortization:   
  Food Service$  7,098   $  5,732  
  Retail Supermarket   290      278  
  Frozen Beverages 4,598    3,901  
Total Depreciation and Amortization$  11,986   $  9,911  
    
Operating Income :   
  Food Service$  15,900   $  17,054  
  Retail Supermarket 2,558    1,046  
  Frozen Beverages 2,770    1,227  
Total Operating Income $  21,228   $  19,327  
    
Capital Expenditures:   
  Food Service$  9,441   $  6,587  
  Retail Supermarket   -      82  
  Frozen Beverages 5,182    4,730  
Total Capital Expenditures$  14,623   $  11,399  
    
Assets:   
  Food Service$  635,988  $  594,963  
  Retail Supermarket 21,531   22,128  
  Frozen Beverages 207,498    177,082  
Total Assets$  865,017   $  794,173  

Results of Operations

Net sales increased $39,640,000 or 18% to $265,210,000 for the three months ended December 30, 2017 compared to the three months ended December 24, 2016.  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, sales increased approximately 7% for the quarter.

FOOD SERVICE

Sales to food service customers increased $ 31,967,000 or 21% in the first quarter to $182,264,000.  Excluding sales of Hill & Valley and Labriola, sales increased $9,569,000 or 6% for the first quarter.  Soft pretzel sales to the food service market increased 21% to $50,131,000 in the quarter and about 14% without Labriola sales.  In addition to Labriola sales, soft pretzel sales increased significantly to restaurant chains and movie theatres and we had strong sales of our recently introduced BRAUHAUS pretzels.  

Frozen juices and ices sales decreased 4% to $7,184,000 in the three months with sales increases and decreases across our customer base.

Churro sales to food service customers were up 1% in the quarter to $14,592,000.

Sales of bakery products increased $19,654,000 or 26% in the first quarter to $94,933,000.  Excluding sales of Hill & Valley, bakery sales were essentially flat for the quarter.

Sales of handhelds increased $2,773,000 or 37% in the quarter with all of the increase coming from sales to three customers.  Sales of funnel cake increased $911,000 or 23% in the quarter to $4,794,000 as we continue to increase sales to school food service.

Sales of new products in the first twelve months since their introduction were approximately $8 million in this quarter.  Price increases had no impact on sales in the quarter and net volume increases, including new product sales as defined above and Hill & Valley and Labriola sales, accounted for approximately $32 million of sales in the quarter.
     
Operating income in our Food Service segment decreased from $17,054,000 to $15,900,000 in the quarter. Hill & Valley contributed $1,384,000 to operating income in the quarter; however, operating income in the balance of our food service business was impacted by generally higher costs for payroll and insurance, added personnel in the selling function, inefficiencies in our recently acquired Labriola production facility (compounded by the integration of products previously manufactured at other facilities), product mix changes and significantly lower volume concentrated in specific facilities, shutdown costs of our Chambersburg, PA production facility and higher ingredients costs. There was no benefit of pricing to offset these higher costs.   

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $1,457,000 or 7% to $23,076,000 in the first quarter.  Soft pretzel sales for the first quarter were up 18% to $10,512,000 primarily due to sales of AUNTIE ANNE’S Soft Pretzels*** under a license agreement entered into in 2017.  Sales of frozen juices and ices decreased $124,000 or 1% to $9,727,000 in the first quarter.  Handheld sales to retail supermarket customers decreased 12% to $3,026,000 in the quarter as the sales of this product line continues their long term decline.

Sales of new products in the first quarter were approximately $1.9 million.  Price increases had no impact on sales in the quarter and net volume increases, including new product sales as defined above accounted for $1.5 million of sales in the quarter.

Operating income in our Retail Supermarkets segment was $2,558,000 in this year’s first quarter compared to $1,046,000 in last year’s quarter, a 145% increase.  Lower coupon expense of $508,000 and lower media spending of $543,000 along with the 18% increase in soft pretzel sales were the major reasons for the increase in operating income. 

FROZEN BEVERAGES

Frozen beverage and related product sales increased 12% to $59,870,000 in the first quarter and excluding sales of the acquired ICEE distributor were up about 10%.  Beverage related sales alone were up 21% to $34,303,000 in the quarter and were up about 19% without the sales of the acquired ICEE distributor.  Gallon sales were up 15% for the three months with higher sales to movie theatres and across our customer base.  Service revenue increased 5% to $19,004,000 in the first quarter 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, were $6,313,000, a decrease of 10%.     Operating income in our Frozen Beverage segment increased to $2,770,000 in this quarter compared to $1,227,000 last year as a result of significantly higher beverage sales.  

CONSOLIDATED

Gross profit as a percentage of sales was 27.63% in the three month period this year and 29.21% last year.  About 20% of the gross profit percentage decrease in the quarter resulted from the lower gross profit percentage of the Hill & Valley business. The balance of the decrease was caused by higher costs for payroll and insurance, inefficiencies in our recently acquired Labriola production facility (compounded by the integration of products previously manufactured at other facilities), product mix changes, significantly lower volume concentrated in specific facilities, shutdown costs of our Chambersburg, PA production facility and higher ingredients costs. There was no benefit of pricing to offset these higher costs.  

Total operating expenses increased $5,483,000 in the first quarter but as a percentage of sales decreased to 19.6% from 20.6% last year.    Marketing expenses decreased to 8.14% of sales in this year’s quarter from 9.01% last year primarily because of lower media spending in our retail supermarket business and lower marketing expenses of the acquired Hill & Valley and Labriola businesses.  Distribution expenses were 7.98% of sales in this year’s quarter and 8.05% of sales in last year’s quarter.  Administrative expenses were 3.53% of sales this quarter compared to 3.59% of sales last year in the first quarter

     
Operating income increased $1,901,000 or 10% to $21,228,000 in the first quarter as a result of the aforementioned items.       

Investment income increased by $262,000 in the first quarter resulting from higher amounts invested and slightly higher interest rates.
     
Other income this quarter includes a $520,000 gain on a sale of property. 
       
Net earnings increased $22,709,000, or 168%, in the current three month period to $36,249,000.  Net earnings for the current year quarter benefited from a $20.9 million, or $1.11 per diluted share, gain on the remeasurement of deferred tax liabilities and a $2.0 million, or $0.11 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 tax law.  Excluding the deferred tax gain and the one time repatriation tax, our effective tax rate decreased to 28.6% from 34.0% in the prior year quarter reflecting the reduction in the federal statutory rate to 21% from 35% for the remaining three quarters of fiscal 2018. Last year’s quarter’s effective tax rate benefitted from an unusually high tax benefit on shared based compensation of $783,000 which compares to this year’s quarter’s tax benefit of $137,000. We are presently estimating an effective tax rate of 28-29% for the last three quarters of our fiscal year 2018 and 26-27% for our fiscal year 2019.
     
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.

***AUNTIE ANNE’S is a registered trademark of Auntie Anne’s LLC

Contact:
Dennis G. Moore
Senior Vice President
Chief Financial Officer
(856) 532-6603

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