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J & J Snack Foods Reports First Quarter Sales and Earnings
Source: Nasdaq GlobeNewswire / 25 Jan 2021 15:00:00 America/Chicago
PENNSAUKEN, N.J., Jan. 25, 2021 (GLOBE NEWSWIRE) -- J & J Snack Foods Corp. (NASDAQ-JJSF) today announced sales and earnings for the first quarter ended December 26, 2020.
Sales decreased 15% to $241 million from $282.9 million in last year’s first quarter. Net earnings were $1.8 million in the current quarter down from $17.1 million last year. Earnings per diluted share was $.09 for the first quarter down from $.89 last year. Operating income decreased 97% to $578 thousand in the current quarter from $21.7 million last year. Operating income was impacted by approximately $730 thousand of COVID-19 related costs as we remain focused on the safety and protection of our associates. This year’s quarter benefited from a $420,000 tax benefit related to share based compensation contributing to an effective tax rate of 8%. We are estimating an effective tax rate of 25% for the full year 2021.
Our sales remain challenged by the lingering impacts of COVID-19 on both our consumers and our customers. Traffic in key food service venues that comprise 2/3 of our sales continue to operate at substantially reduced and limited capacity. This was especially pronounced during the Christmas holiday season where many of these venues rely on seasonally higher traffic and sales. Relative to our 2020 fourth quarter where sales were 19% below last year, we did see improvement in the 2021 first quarter where sales were 15% below last year. Our business remains strong, liquid and well positioned for growth with $285 million in cash and marketable securities up from $278 million on September 26, 2020. We do, however, anticipate that the virus will continue to have a negative impact on the foodservice industry in the short term.
Dan Fachner, J&J’s President, commented, “These are unprecedented times, and I’m so proud of our employees, and their commitment to this Company and serving our customers and consumers each and every day. Consumers continue to stay at home which has driven strong growth in our retail segment, but closures and limited capacity food service venues are challenging sales in other parts of our business. Our balance sheet is strong, and we will continue to focus on driving cost efficiencies across our operations. We continue to be optimistic and remain confident that we are well positioned for future growth.”
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 twenty 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 (Unaudited) (in thousands, except per share amounts) Three months ended December 26, December 28, 2020 2019 Net Sales $ 240,997 $ 282,897 Cost of goods sold 190,872 205,036 Gross Profit 50,125 77,861 Operating expenses Marketing 17,301 22,732 Distribution 22,889 23,542 Administrative 9,440 9,618 Other general expense (83 ) 266 Total Operating Expenses 49,547 56,158 Operating Income 578 21,703 Other income (expense) Investment income 1,370 1,786 Interest expense & other (15 ) (26 ) Earnings before income taxes 1,933 23,463 Income tax expense 155 6,404 NET EARNINGS $ 1,778 $ 17,059 Earnings per diluted share $ 0.09 $ 0.89 Weighted average number of diluted shares 19,031 19,144 Earnings per basic share $ 0.09 $ 0.90 Weighted average number of basic shares 18,935 18,898 J & J SNACK FOODS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) December 26, 2020 September 26, (unaudited) 2020 Assets Current assets Cash and cash equivalents $ 228,335 $ 195,809 Marketable securities held to maturity 34,286 51,151 Accounts receivable, net 113,210 126,587 Inventories 114,882 108,923 Prepaid expenses and other 17,942 17,087 Total current assets 508,655 499,557 Property, plant and equipment, at cost Land 2,494 2,494 Buildings 26,582 26,582 Plant machinery and equipment 331,357 330,168 Marketing equipment 249,440 250,914 Transportation equipment 10,251 9,966 Office equipment 34,095 33,878 Improvements 43,994 43,264 Construction in progress 23,874 19,995 Total Property, plant and equipment, at cost 722,087 717,261 Less accumulated depreciation and amortization 462,873 455,645 Property, plant and equipment, net 259,214 261,616 Other assets Goodwill 121,833 121,833 Other intangible assets, net 80,947 81,622 Marketable securities held to maturity 8,595 16,927 Marketable securities available for sale 13,734 13,976 Operating lease right-of-use assets 55,989 58,110 Other 2,876 2,912 Total other assets 283,974 295,380 Total Assets $ 1,051,843 $ 1,056,553 Liabilities and Stockholders' Equity Current Liabilities Current finance lease liabilities $ 332 $ 349 Accounts payable 76,325 73,135 Accrued insurance liability 13,842 13,039 Accrued liabilities 6,924 7,420 Current operating lease liabilities 12,981 13,173 Accrued compensation expense 11,387 16,134 Dividends payable 10,900 10,876 Total current liabilities 132,691 134,126 Noncurrent finance lease liabilities 299 368 Noncurrent operating lease liabilities 45,641 47,688 Deferred income taxes 64,469 64,413 Other long-term liabilities 454 460 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 18,956,000 and 18,915,000 respectively 54,902 49,268 Accumulated other comprehensive loss (13,308 ) (15,587 ) Retained Earnings 766,695 775,817 Total stockholders' equity 808,289 809,498 Total Liabilities and Stockholders' Equity $ 1,051,843 $ 1,056,553 The accompanying notes are an integral part of these statements. J & J SNACK FOODS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three months ended December 26, December 28, 2020 2019 Operating activities: Net earnings $ 1,778 $ 17,059 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation of fixed assets 12,269 11,887 Amortization of intangibles and deferred costs 679 843 Share-based compensation 1,244 1,299 Deferred income taxes (8 ) (231 ) Loss on marketable securities (681 ) 9 Other (80 ) 14 Changes in assets and liabilities net of effects from purchase of companies Decrease in accounts receivable 13,701 10,254 Increase in inventories (5,641 ) (8,524 ) (Increase) decrease in prepaid expenses (889 ) 1,922 Decrease in accounts payable and accrued liabilities (1,068 ) (963 ) Net cash provided by operating activities 21,304 33,569 Investing activities: Payments for purchases of companies, net of cash acquired 0 (44,970 ) Purchases of property, plant and equipment (9,676 ) (17,605 ) Purchases of marketable securities 0 (4,000 ) Proceeds from redemption and sales of marketable securities 26,148 18,782 Proceeds from disposal of property and equipment 880 898 Other 15 38 Net cash provided by (used in) investing activities 17,367 (46,857 ) Financing activities: Proceeds from issuance of stock 4,390 468 Payments on finance lease obligations (86 ) (86 ) Payment of cash dividend (10,876 ) (9,447 ) Net cash used in financing activities (6,572 ) (9,065 ) Effect of exchange rate on cash and cash equivalents 427 285 Net increase (decrease) in cash and cash equivalents 32,526 (22,068 ) Cash and cash equivalents at beginning of period 195,809 192,395 Cash and cash equivalents at end of period $ 228,335 $ 170,327 The accompanying notes are an integral part of these statements. Three months ended December 26, December 28, 2020 2019 (unaudited) (in thousands) Sales to External Customers: Food Service Soft pretzels $ 32,687 $ 49,941 Frozen juices and ices 6,295 7,043 Churros 11,542 16,391 Handhelds 17,611 7,189 Bakery 88,964 96,372 Other 3,326 6,512 Total Food Service $ 160,425 $ 183,448 Retail Supermarket Soft pretzels $ 13,888 $ 9,826 Frozen juices and ices 15,316 10,093 Biscuits 7,660 6,978 Handhelds 2,780 2,761 Coupon redemption (1,075 ) (543 ) Other 525 311 Total Retail Supermarket $ 39,094 $ 29,426 Frozen Beverages Beverages $ 15,855 $ 35,255 Repair and maintenance service 18,896 22,486 Machines revenue 6,489 11,981 Other 238 301 Total Frozen Beverages $ 41,478 $ 70,023 Consolidated Sales $ 240,997 $ 282,897 Depreciation and Amortization: Food Service $ 6,786 $ 6,918 Retail Supermarket 386 359 Frozen Beverages 5,776 5,453 Total Depreciation and Amortization $ 12,948 $ 12,730 Operating Income : Food Service $ 6,180 $ 18,034 Retail Supermarket 4,723 2,217 Frozen Beverages (10,325 ) 1,452 Total Operating Income $ 578 $ 21,703 Capital Expenditures: Food Service $ 8,286 $ 8,403 Retail Supermarket 21 960 Frozen Beverages 1,369 8,242 Total Capital Expenditures $ 9,676 $ 17,605 Assets: Food Service $ 749,508 $ 760,852 Retail Supermarket 31,668 30,963 Frozen Beverages 275,898 304,291 Total Assets $ 1,057,074 $ 1,096,106 RESULTS OF OPERATIONS
Net sales decreased $41,900,000 or 15% to $240,997,000 for the three months ended December 26, 2020. Operating income decreased $21,125,000 or 97% for the quarter to $578,000.
FOOD SERVICE
Sales to food service customers decreased $23,023,000 or 13% in the first quarter to $160,425,000. Key customer venues and channels like theme parks, schools and theaters continue to operate at limited capacity impacting food service sales. Soft pretzel sales to food service decreased 35% to $32,687,000. Frozen juices and ices sales decreased 11% to $6,295,000 and Churro sales were down 30% in the quarter to $11,542,000. Sales of funnel cake decreased $3,050,000 or 49% in the quarter.
Sales of bakery products decreased $7,408,000 or 8% in the first quarter to $88,964,000, as the virus impacted traffic, purchase choices and frequency in this part of our business.
Sales of handhelds increased $10,422,000 or 145% in the quarter led by the continued success of a new product developed for one of our larger wholesale club customers.
Sales of new products in the first twelve months since their introduction were approximately $12,200,000 in this quarter led by the previously noted handheld item. Price increases had a marginal impact on results in the quarter as traffic and volume drove almost all the sales decline compared to last year.
Operating income in our Food Service segment decreased $11,854,000 in the quarter to $6,180,000 primarily because of sales declines which impacted margin efficiencies and expense leverage.
RETAIL SUPERMARKETS
Sales of products to retail supermarkets increased $9,668,000 or 33% to $39,094,000 in the first quarter. Our SUPERPRETZEL brand performed well in the quarter driving an increase in soft pretzel sales of 41% to $13,888,000. Sales of frozen juices and ices were up 52% to $15,316,000 in the first quarter and sales of biscuits were up 10% to $7,660,000. Handheld sales to retail supermarket customers increased 1% in the quarter. Sales from new products increased an estimated $400,000 in the quarter driven by frozen novelty items.
Price increases had minimum impact on growth in the quarter as sales were driven by increased consumer traffic and volume in retail outlets.
Operating income in our Retail Supermarkets segment increased $2,506,000 or 113% to $4,723,000 in this year’s first quarter driven by sales increases and operating income margins of 12%, over 400 basis points better than last year.
FROZEN BEVERAGES
Frozen beverage and related product sales decreased $28,545,000 or 41% to $41,478,000 in the first quarter. Beverage related sales declined 55% to $15,855,000. Gallon sales were down 56% for the three months as we continue to see traffic impacted from Covid-19 related concerns in theaters, amusement venues and key retailers. These venues also rely on incremental seasonal sales in December that was impacted from reduced operating capacity and consumers staying home. Service revenue decreased 16% to $18,896,000 in the first quarter driven almost entirely from cancellation of a key customer’s planned maintenance program. Machine revenue (primarily sales of frozen beverage machines) was $6,489,000, a decrease of 46% due mainly from lapping $5,000,000 in non-recurring sales in last year's quarter.
Our Frozen Beverage segment incurred an operating loss for the quarter of $10,325,000 compared to operating income of $1,452,000 last year due to the challenging COVID-19 sales environment which also impacts our gross margin efficiency and ability to leverage fixed expenses.
CONSOLIDATED
Gross profit as a percentage of sales was 20.8% in the three-month period this year and 27.5% last year. Gross profit percentage decreased because of continued Covid-19 sales pressure from our food service and frozen beverages segments. This creates margin leverage challenges as we manage lower production volumes on businesses with large-fixed expense bases.
Total operating expenses decreased $6,611,000 in the first quarter but as a percentage of sales increased to 20.6% from 19.9% last year. Marketing expenses decreased to 7.2% of sales in this year’s quarter from 8% last year. Distribution expenses were 9.5% of sales in this year’s quarter compared to 8.3% of sales last year. Administrative expenses were 3.9% of sales this quarter compared to 3.4% last year.
Operating income decreased $21,125,000 or 97% to $578,000 in the first quarter as a result of the aforementioned items.
Our investments generated before tax income of $1,370,000 this quarter, down from $1,760,000 last year due to decreases in the amount of investments and lower interest rates.
Net earnings decreased $15,281,000, or 90%, in the current three-month period to $1,778,000. Our effective tax rate was 8% in this year’s quarter.
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:
Ken Plunk
Senior Vice President
Chief Financial Officer
(615) 587-4374