PENNSAUKEN, N.J., Nov. 05, 2020 (GLOBE NEWSWIRE) -- J & J Snack Foods Corp. (NASDAQ-JJSF) today announced sales and earnings for its fourth quarter and year ended September 26, 2020.

Sales for the fourth quarter this year decreased 19% to $252.5 million from $311.9 million in last year’s fourth quarter. For the year ended September 26, 2020, sales decreased 14% to $1.022 billion from $1.186 billion last year. Net earnings decreased to $6.6 million ($.35 per diluted share) in this year’s fourth quarter compared to $26.1 million ($1.36 per diluted share) last year and for the year earnings decreased 81% to $18.3 ($.96 per diluted share) from $94.8 million ($5.00 per diluted share). Net earnings for the quarter and year benefited from an adjustment to income tax expense related to state deferred taxes.

Operating income was $3.9 million in the fourth quarter, down from $31.1 million in last year’s quarter. For the year, operating income decreased 85% to $17.2 million from $117.0 million last year.

The Company also said that it has had sequential improvement from its third quarter operations in which sales were down 34% from the year ago third quarter and in which it had an operating loss of $19.4 million as parts of the economy that impact its operations continued to open up through the fourth quarter. Approximately 2/3 of the Company’s sales are to venues and locations that have shut down or sharply curtailed their foodservice operations during COVID-19 so the Company anticipates COVID-19 will continue to have a negative impact on its business. As the Company has $278 million of cash and marketable securities on its balance sheet, up from $267 million at March 28, 2020, it does not expect to have any liquidity issues, nor does it anticipate a material amount of its assets would be impaired.

Dan Fachner, J & J’s President, commented, “Our business continues to recover from the pandemic that has affected our world. We experienced sustained growth in the Retail side of our business as well as improved sales as we closed the quarter in both Food Service and ICEE. The Company has also enjoyed some new business sales growth that will extend into this coming year. We feel a sense of recovery as we close our 2020 year and like our future growth opportunities but we continue to face the uncertainty that all of us face from prolonged COVID-19 impacts.”

In addition to historical information, this release contains forward-looking statements. 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. Important factors that might cause such a difference include, but are not limited to, those discussed in the “Results of Operations” section of this release. Readers 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 hereof.

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. J&J Snack Foods Corp. has approximately sixteen manufacturing facilities and generates more than $1 billion in annual revenue. The Company has a history of strong sales growth and financial performance and remains focused on 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 26, September 28, September 26, September 28,
   2020   2019   2020   2019 
  (13 weeks) (13 weeks) (52 weeks) (52 weeks)
         
Net Sales $252,536  $311,872  $1,022,038  $1,186,487 
Cost of goods sold  198,609   218,931   783,611   836,086 
Gross Profit  53,927   92,941   238,427   350,401 
         
Operating expenses        
Marketing and selling  16,445   26,636   84,977   96,428 
Distribution  23,111   24,367   92,759   94,888 
Administrative  8,581   10,812   36,747   40,721 
Plant shutdown impairment costs  1,315   -   6,387   - 
Other expense  546   65   363   1,408 
Total operating expenses  49,998   61,880   221,233   233,445 
Operating Income  3,929   31,061   17,194   116,956 
         
Other income (expenses)        
Investment income  1,683   1,966   4,356   7,741 
Interest expense & other  (24)  (40)  (84)  1,880 
         
Earnings before income taxes  5,588   32,987   21,466   126,577 
         
Income taxes  (996)  6,920   3,161   31,758 
         
NET EARNINGS $6,584  $26,067  $18,305  $94,819 
         
Earnings per diluted share $0.35  $1.36  $0.96  $5.00 
         
Weighted average number of diluted shares  18,955  $19,101   19,032   18,959 
         
Earnings per basic share $0.35  $1.38  $0.97  $5.04 
         
Weighted average number of basic shares  18,895  $18,867   18,901   18,812 


J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
     
  September 26, September 28,
   2020   2019 
Assets    
Current assets    
Cash and cash equivalents $195,809  $192,395 
Marketable securities held to maturity  51,151   51,091 
Accounts receivable, net  126,587   140,938 
Inventories  108,923   116,165 
Prepaid expenses and other  17,087   5,768 
Total current assets  499,557   506,357 
     
Property, plant and equipment, at cost  717,261   676,724 
Less accumulated depreciation and amortization  455,645   423,276 
Property, plant and equipment, net  261,616   253,448 
     
Other assets    
Goodwill  123,033   102,511 
Other intangible assets, net  80,422   54,922 
Marketable securities held to maturity  16,927   79,360 
Marketable securities available for sale  13,976   19,903 
Operating lease right-of-use assets  58,110   - 
Other  2,912   2,838 
Total other assets  295,380   259,534 
Total Assets $1,056,553  $1,019,339 
     
Liabilities and Stockholders' Equity    
Current Liabilities    
Current finance lease liabilities $349  $339 
Accounts payable  73,135   72,029 
Accrued insurance liability  13,039   10,457 
Accrued liabilities  7,420   7,808 
Current operating lease liabilities  13,173   - 
Accrued compensation expense  16,134   21,154 
Dividends payable  10,876   9,447 
Total current liabilities  134,126   121,234 
     
     
Noncurrent finance lease liabilities  368   718 
Noncurrent operating lease liabilities  47,688   - 
Deferred income taxes  64,413   61,920 
Other long-term liabilities  460   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 18,915,000 and 18,895,000 respectively  49,268   45,744 
Accumulated other comprehensive loss  (15,587)  (12,988)
Retained Earnings  775,817   800,995 
Total stockholders' equity  809,498   833,751 
Total Liabilities and Stockholders' Equity $1,056,553  $1,019,339 


J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
       
  Fiscal Year Ended
       
  September 26,September 28,September 29,
   2020   2019   2018 
  (52 weeks) (52 weeks) (52 weeks)
       
Operating activities:      
Net earnings $18,305  $94,819  $103,596 
Adjustments to reconcile net earnings to net cash provided by operating activities:       
Depreciation of fixed assets  49,830   45,225   42,939 
Amortization of intangibles and deferred costs  3,218   3,385   3,538 
Gains from disposals of property & equipment  (303)  (347)  (912)
Plant shutdown impairment costs  6,387   -   - 
Amortization of bond premiums  296   730   1,012 
Share-based compensation  4,595   4,230   3,858 
Deferred income taxes  2,622   9,637   (10,392)
Loss on sale of marketable securities  882   404   140 
Changes in assets and liabilities, net of effects from purchase of companies:      
Decrease (increase) in accounts receivable, net  14,580   (8,759)  (7,917)
Decrease (increase) in inventories  7,877   (3,231)  (9,639)
Increase in prepaid expenses and other  (11,366)  (744)  (1,120)
(Decrease) increase in accounts payable and accrued liabilities  (4,780)  2,150   (1,736)
Net cash provided by operating activities  92,143   147,499   123,367 
Investing activities:      
Payments for purchases of companies, net of cash acquired  (57,212)  (1,156)  - 
Purchases of property, plant and equipment  (57,817)  (57,128)  (60,022)
Purchases of marketable securities  (6,103)  (26,091)  (91,112)
Proceeds from redemption and sales of marketable securities  73,226   39,158   75,302 
Proceeds from disposal of property, plant and equipment  3,593   2,050   2,639 
Other  (150)  (196)  54 
Net cash used in investing activities  (44,463)  (43,363)  (73,139)
Financing activities:      
Payments to repurchase common stock  (8,972)  -   (2,794)
Proceeds from issuance of common stock  7,901   14,174   8,894 
Payments on capitalized lease obligations  (340)  (356)  (370)
Payment of cash dividend  (42,053)  (36,644)  (33,066)
Net cash used in financing activities  (43,464)  (22,826)  (27,336)
Effect of exchange rates on cash and cash equivalents  (802)  (394)  (2,375)
Net increase (decrease) in cash and cash equivalents  3,414   80,916   20,517 
Cash and cash equivalents at beginning of year  192,395   111,479   90,962 
Cash and cash equivalents at end of year $195,809  $192,395  $111,479 


J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       
  September 26,September 28,September 29,
   2020   2019   2018 
  (52 weeks) (52 weeks) (52 weeks)
       (in thousands)   
Sales to External Customers:      
Food Service      
Soft pretzels $150,786  $209,227  $208,544 
Frozen juices and ices  35,176   43,672   42,364 
Churros  46,881   65,976   61,726 
Handhelds  36,088   31,685   38,928 
Bakery  332,514   359,020   344,838 
Other  17,448   26,407   22,991 
Total Food Service $618,893  $735,987  $719,391 
       
Retail Supermarket      
Soft pretzels $49,157  $36,264  $36,438 
Frozen juices and ices  88,743   73,751   74,435 
Biscuits  28,317   25,316   26,553 
Handhelds  12,303   10,902   12,419 
Coupon redemption  (3,569)  (3,596)  (4,439)
Other  2,214   1,955   2,086 
Total Retail Supermarket $177,165  $144,592  $147,492 
       
Frozen Beverages      
Beverages $107,004  $171,820  $160,937 
Repair and maintenance service  83,420   85,834   78,805 
Machines revenue  33,986   45,811   28,652 
Other  1,570   2,143   2,988 
Total Frozen Beverages $225,980  $305,608  $271,382 
       
Consolidated Sales $1,022,038  $1,186,187  $1,138,265 
       
Depreciation and Amortization:      
Food Service $28,111  $26,978  $25,983 
Retail Supermarket  1,577   1,418   1,313 
Frozen Beverages  23,360   20,214   19,181 
Total Depreciation and Amortization$53,048  $48,610  $46,477 
       
Operating Income:      
Food Service $6,458  $76,546  $71,285 
Retail Supermarket  23,202   10,460   11,075 
Frozen Beverages  (12,466)  29,950   28,415 
Total Operating Income $17,194  $116,956  $110,775 
       
Capital Expenditures:      
Food Service $34,798  $29,197  $36,325 
Retail Supermarket  1,763   1,979   928 
Frozen Beverages  21,256   25,952   22,769 
Total Capital Expenditures $57,817  $57,128  $60,022 
       
Assets:      
Food Service $738,033  $766,081  $693,098 
Retail Supermarket  31,704   29,369   27,586 
Frozen Beverages  286,816   223,889   217,549 
Total Assets $1,056,553  $1,019,339  $938,233 

 


RESULTS OF OPERATIONS:

Fiscal Year 2020 (52 weeks) Compared to Fiscal Year 2019 (52 weeks)

Net sales decreased $164,149,000, or 14%, to $1,022,038,000 in fiscal 2020 from $1,186,187,000 in fiscal 2019. Excluding sales from the acquisition of ICEE Distributors in October 2019 and BAMA ICEE in February 2020, sales decreased 15% the year. Sales for our fourth quarter improved to being down approximately 19% from a year ago compared to being down 34% from a year ago in our third quarter as parts of the economy that impact our operations continue to open up. Approximately 2/3 of the Company’s sales are to venues and locations that have shut down or sharply curtailed their foodservice operations, and therefore we anticipate COVID-19 will continue to have a negative impact on our business. As we have $278 million of cash and marketable securities on our balance sheet, up from $267 million at March 28, 2020, we do not expect to have any liquidity issues, nor do we anticipate a material amount of our assets would be impaired.

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 decreased $117,094,000, or 16%, to $618,893,000 in fiscal 2020. Soft pretzel sales to the food service market decreased 28% to $150,786,000 for the year. Frozen juice bar and ices sales decreased $8,496,000, or 19%, to $35,176,000 for the year. Churro sales to food service customers were down 29% to $46,881,000 for the year. Sales of bakery products decreased $26,506,000, or 7%, to $332,514,000 for the year. Handheld sales to food service customers were up 14% to $36,088,000 in 2020 with sales of a new product to a warehouse club store customer accounting for all of the increase. Sales of funnel cake decreased $8,170,000, or 33% to $16,623,000. Sales were down across all product lines excepting handhelds as many of the venues and locations where our products are sold have been shut down or operating at reduced capacity for some or all of the third and fourth quarters due to COVID-19.

Sales of new products in the first twelve months since their introduction were approximately $5 million for the year. Operating income in our Food Service segment decreased from $76,546,000 in 2019 to $6,458,000 in 2020 primarily because of lower production and sales volume due to COVID-19. This year’s operating income were impacted by plant shutdown impairment costs of $6,387,000 for the shutdown of one of our manufacturing plants. We expect to reduce manufacturing overhead and distribution costs by about $7-8 million annually as a result of this plant closure. This year also included approximately $6 million of costs for employee safety and increased COVID-19 compensation as well as increased expense of about $3.5 million for accounts receivable allowances and inventory losses due to the impact of COVID-19 on some of our customers and on sales of some of our products.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $32,573,000 or 23% to $177,165,000 in fiscal year 2020. Soft pretzel sales to retail supermarkets were $49,157,000, an increase of $12,893,000, or 36%, from sales in 2019. Sales of frozen juices and ices increased $14,992,000 or 20% to $88,743,000. Sales of biscuits and dumplings increased 12% to $28,317,000 for the year. Coupon redemption costs, a reduction of sales, of $3,569,000 were down less than 1 % from 2019. Handheld sales to retail supermarket customers increased 13% to $12,303,000 for the year. 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 since mid-March 2020 due to COVID-19.

Sales of new products in the first twelve months since their introduction were approximately $1 million in fiscal year 2020. Operating income in our Retail Supermarkets segment increased from $10,460,000 to $23,202,000 for the year primarily due to higher volume.

FROZEN BEVERAGES

Total frozen beverage segment sales decreased 26% to $225,980,000 in fiscal 2020 and beverage sales decreased 38% or $64,816,000 for the year. Excluding sales from the acquisition of ICEE Distributors in October 2019 and BAMA ICEE in February 2020, total frozen beverage segment sales decreased 30% for the year and beverage sales decreased 45% for the year. Gallon sales were down 41% from last year exclusive of ICEE Distributors’ gallons. Service revenue decreased 3% to $83,420,000 for the year with sales increases and decreases spread throughout our customer base with additional sales to existing customers and to new customers to largely offset declines in sales business to customers due to COVID-19. Machines revenue, primarily sales of machines, decreased from $45,811,000 in 2019 to $33,986,000 in 2020 with the decrease due to two significant install projects during the prior fiscal year, as well as the slowdown due to COVID-19. Sales are down across all product lines as many of the venues and locations where our products are sold have been shut down or operating at reduced capacity for some or all of the third and fourth quarters due to COVID-19.

The estimated number of Company owned frozen beverage dispensers was 27,000 and 26,000 at September 26, 2020 and September 28, 2019, respectively. Our Frozen Beverage segment had an operating loss of $12,466,000 in 2020 compared to operating income of $29,950,000 in 2019 primarily as a result of lower sales volume due to COVID-19. This year’s operating income was also impacted by relocation costs of our ICEE’s headquarters of $2.5 million.

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 23.33% in 2020 from 29.53% in 2019. Gross profit percentage decreased because of lower volume in our food service and frozen beverages segments, higher costs related to production disruptions due to volume mix changes, expenses related to employee safety and increased COVID-19 compensation and increased costs compared to last year of about $4.5 million for the writedown and disposal of inventory.

Total operating expenses decreased $12,212,000 to $221,233,000 in fiscal 2020 but as a percentage of sales increased to 21.64% of sales from 19.68% in 2019. Operating expenses this year included $6,387,000 of plant shutdown impairment costs for the shutdown of one of our manufacturing plants. Marketing and selling expenses increased to 8.31% this year from 8.13% of sales in 2019. Distribution expenses as a percent of sales increased to 9.08% from 8.00% in 2019. Administrative expenses were 3.60% and 3.43% of sales in 2020 and 2019, respectively. The percentage increases mentioned above were because of the drop in sales (lower denominators) and our inability to reduce expenses in line with the decrease in sales because of fixed costs that do not fluctuate with sales.

Operating income decreased $99,762,000 or 85% to $17,194,000 in fiscal year 2020 as a result of the aforementioned items. 

Our investments generated before tax income of $4,356,000 million this year, down from $7,741,000 last year due to decreases in the amount of investments and lower 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.

Net earnings in 2019 benefitted by a reduction of approximately $900,000 in tax as the provision for the one-time repatriation tax under the Tax Cuts and Jobs Act recorded in 2018 was reduced as the amount recorded in 2018 was an estimate. Excluding the reduction in the provision for the one-time repatriation tax, our effective tax rate was 25.8% for 2019. Net earnings for the 2020 year benefited from a reduction in income tax expense related to state deferred taxes of approximately $2.2 million. Excluding this adjustment, our effective tax rate in our fiscal 2020 year was 25.0%. 

Net earnings decreased $76,514,000 or 81%, in fiscal 2020 to $18,305,000, or $.96 per diluted share, from $94,819,000 or $5.00 per diluted share, in fiscal 2019 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
(856) 532-6603

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