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