PENNSAUKEN, N.J., July 27, 2020 (GLOBE NEWSWIRE) -- J & J Snack Foods Corp. (NASDAQ-JJSF) today announced sales and earnings for the third quarter ended June 27, 2020.

Sales decreased 34% to $214.6 million from $326.7 million in last year’s third quarter. A net loss of $12.6 million in this year’s quarter compared to net earnings of $30.9 million in last year’s quarter.  Net loss per diluted share was $.67 for the third quarter this year and net earnings per diluted share were $1.63 last year. Operating loss of $19.4 in the current quarter compared to operating income of $39.0 million in the year ago quarter.

For the nine months ended June 27, 2020, sales decreased 12% to $769.5 million from $874.6 million in last year’s nine months.  Net earnings decreased to $11.7 million in the nine months from $68.8 million last year.  Earnings per diluted share decreased to $.62 from $3.64 last year.  Operating income decreased 85% to $13.2 million this year from $85.9 million last year.

Operating loss for the third quarter this year and operating income for the nine months include the impact of plant shutdown impairment costs of $5.1 million. 

The Company also said that sales for the last 5 weeks of the third quarter (its fiscal June) improved to being down approximately 24% from a year ago as parts of the economy that impact its operations began 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 so the Company anticipates COVID-19 will continue to have a negative impact on its business.  As the Company has $270 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, “Although we had an operating loss this quarter, we progressed nicely with each month improving from the prior month. Our Retail division was strong as that end of the business continues to outperform the previous year. Much of the Foodservice locations are slow to open but we continue to see improvement during our current quarter.  We are monitoring and making necessary adjustments to operations and expenses both for the short term and for the longer term.”

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 (LOSS) EARNINGS
	(Unaudited)
	(in thousands, except per share amounts)
	Three months ended							Nine months ended
	June 27,				June 29,			June 27,				June 29,
	2020				2019			2020				2019
Net Sales	$	214,563			$	326,701		$	769,502			$	874,615
Cost of goods sold		177,367				225,352			585,002				617,155
Gross Profit		37,196				101,349			184,500				257,460
Operating expenses
Marketing		21,952				26,398			68,532				69,792
Distribution		21,272				24,447			69,648				70,521
Administrative		8,374				10,668			28,166				29,909
Plant shutdown impairment costs		5,072				-			5,072				-
Other general (income) expense		(54	)			794			(183	)			1,343
Total operating expenses		56,616				62,307			171,235				171,565
Operating (loss) income		(19,420	)			39,042			13,265				85,895
Other income (expense)
Investment income		1,300				1,953			2,673				5,775
Interest expense & other		(7	)			1,972			(60	)			1,920
(Loss) earnings before
income taxes		(18,127	)			42,967			15,878				93,590
Income taxes		(5,480	)			12,095			4,157				24,838
NET (LOSS) EARNINGS	$	(12,647	)		$	30,872		$	11,721			$	68,752
(Loss) earnings per diluted share	$	(0.67	)		$	1.63		$	0.62			$	3.64
Weighted average number
of diluted shares		18,888				18,947			19,036				18,912
(Loss) earnings per basic share	$	(0.67	)		$	1.64		$	0.62			$	3.66
Weighted average number of
basic shares		18,888				18,823			18,902				18,794

 

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
	June 27,
		2020				September 28,
	(unaudited)						2019
Assets
Current assets
Cash and cash equivalents	$	169,961				$	192,395
Marketable securities held to maturity		58,268					51,091
Accounts receivable, net		116,488					140,938
Inventories		120,564					116,165
Prepaid expenses and other		13,660					5,768
Total current assets		478,941					506,357
Property, plant and equipment, at cost
Land		2,494					2,494
Buildings		26,582					26,582
Plant machinery and equipment		331,481					315,360
Marketing equipment		253,533					240,681
Transportation equipment		9,905					9,725
Office equipment		34,935					31,217
Improvements		42,291					40,626
Construction in progress		16,199					10,039
Total Property, plant and equipment, at cost		717,420					676,724
Less accumulated depreciation
and amortization		452,707					423,276
Property, plant and equipment, net		264,713					253,448
Long-term assets
Goodwill		123,033					102,511
Other intangible assets, net		81,117					54,922
Marketable securities held to maturity		28,863					79,360
Marketable securities available for sale		13,232					19,903
Operating lease right-of-use assets		64,615					-
Other		2,772					2,838
Total long-term assets		313,632					259,534
Total Assets	$	1,057,286				$	1,019,339
Liabilities and Stockholders' Equity
Current Liabilities
Current finance lease liabilities	$	329				$	339
Accounts payable		68,829					72,029
Accrued insurance liability		12,131					10,457
Accrued liabilities		6,951					7,808
Current operating lease liabilities		13,913					-
Accrued compensation expense		14,814					21,154
Dividends payable		10,873					9,447
Total current liabilities		127,840					121,234
Noncurrent finance lease liabilities		456					718
Noncurrent operating lease liabilities		56,570					-
Deferred income taxes		61,348					61,920
Other long-term liabilities		472					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
18,888,000 and 18,895,000 respectively		46,560					45,744
Accumulated other comprehensive loss		(16,058	)				(12,988	)
Retained Earnings		780,098					800,995
Total stockholders' equity		810,600					833,751
Total Liabilities and Stockholders' Equity	$	1,057,286				$	1,019,339

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)                  (in thousands)
	Nine months ended
	June 27,				June 29,
		2020				2019
Operating activities:
Net earnings	$	11,721			$	68,752
Adjustments to reconcile net
earnings to net cash
provided by operating activities:
Depreciation of property, plant and equipment		37,353				33,374
Amortization of intangibles
and deferred costs		2,516				2,586
Share-based compensation		3,421				3,006
Deferred income taxes		(426	)			690
Loss on marketable securities		1,746				410
Plant shutdown impairment costs		5,072				-
Other		(309	)			350
Changes in assets and liabilities
net of effects from purchase of companies
Decrease (increase) in accounts receivable		24,634				(14,289	)
Increase in inventories		(3,751	)			(6,257	)
(Increase) decrease in prepaid expenses		(7,879	)			957
(Decrease) increase in accounts payable
and accrued liabilities		(7,478	)			11,584
Net cash provided by operating activities		66,620				101,163
Investing activities:
Payment for purchases of companies, net of cash acquired		(57,197	)			(1,155	)
Purchases of property, plant
and equipment		(47,637	)			(42,136	)
Purchases of marketable securities		(6,103	)			(24,056	)
Proceeds from redemption and sales of
marketable securities		54,125				29,721
Proceeds from disposal of property, plant and
equipment		2,852				1,463
Other		(72	)			(212	)
Net cash used in investing activities		(54,032	)			(36,375	)
Financing activities:
Payments to repurchase common stock		(8,972	)			-
Proceeds from issuance of stock		6,300				7,426
Payments on capitalized lease obligations		(272	)			(33	)
Payment of cash dividend		(31,193	)			(27,230	)
Net cash used in financing activities		(34,137	)			(19,837	)
Effect of exchange rate on cash
and cash equivalents		(885	)			(333	)
Net (decrease) increase in cash
and cash equivalents		(22,434	)			44,618
Cash and cash equivalents at beginning
of period		192,395				111,479
Cash and cash equivalents at end
of period	$	169,961			$	156,097

 

	Three months ended								Nine months ended
	June 27,				June 29,				June 27,				June 29,
		2020				2019				2020				2019
(in thousands)
Sales to External Customers:
Food Service
Soft pretzels	$	21,384			$	55,867			$	116,985			$	154,670
Frozen juices and ices		8,688				13,862				25,222				30,336
Churros		7,321				18,888				38,466				49,793
Handhelds		7,448				8,550				22,084				25,339
Bakery		69,237				90,084				255,016				268,735
Other		2,543				6,105				13,628				19,576
Total Food Service	$	116,621			$	193,356			$	471,401			$	548,449
Retail Supermarket
Soft pretzels	$	12,716			$	7,294			$	34,874			$	28,309
Frozen juices and ices		33,322				26,515				59,279				52,179
Biscuits		8,151				5,215				21,759				19,437
Handhelds		3,257				3,063				9,135				8,110
Coupon redemption		(807	)			(962	)			(2,216	)			(2,163	)
Other		863				642				1,668				1,341
Total Retail Supermarket	$	57,502			$	41,767			$	124,499			$	107,213
Frozen Beverages
Beverages	$	16,456			$	56,937			$	83,606			$	121,976
Repair and
maintenance service		17,259				22,514				61,524				62,291
Machines revenue		6,363				11,810				27,254				33,875
Other		362				317				1,218				811
Total Frozen Beverages	$	40,440			$	91,578			$	173,602			$	218,953
Consolidated Sales	$	214,563			$	326,701			$	769,502			$	874,615
Depreciation and Amortization:
Food Service	$	7,050			$	6,973			$	21,208			$	19,911
Retail Supermarket		468				335				1,156				990
Frozen Beverages		5,864				5,015				17,505				15,059
Total Depreciation and Amortization	$	13,382			$	12,323			$	39,869			$	35,960
Operating (Loss) Income:
Food Service	$	(18,242	)		$	21,030			$	7,743			$	57,909
Retail Supermarket		7,910				3,775				14,464				9,025
Frozen Beverages		(9,088	)			14,237				(8,942	)			18,961
Total Operating (Loss) Income	$	(19,420	)		$	39,042			$	13,265			$	85,895
Capital Expenditures:
Food Service	$	7,865			$	8,665			$	26,599			$	23,346
Retail Supermarket		390				597				1,625				1,730
Frozen Beverages		2,397				6,523				19,413				17,060
Total Capital Expenditures	$	10,652			$	15,785			$	47,637			$	42,136
Assets:
Food Service	$	729,331			$	751,641			$	729,331			$	751,641
Retail Supermarket		33,766				24,825				33,766				24,825
Frozen Beverages		294,189				219,224				294,189				219,224
Total Assets	$	1,057,286			$	995,690			$	1,057,286			$	995,690

 

Net sales decreased $112,138,000 or 34% to $214,563,000 for the three months and decreased $105,113,000 or 12% to $769,502,000 for the nine months ended June 27, 2020 compared to the three and nine months ended June 29, 2019, respectively.  Excluding sales from the acquisition of ICEE Distributors in October 2019 and BAMA ICEE in February 2020, sales decreased 35% for the quarter and decreased about 13% for the nine months.

Sales for the last 5 weeks of the third quarter (our fiscal June) improved to being down approximately 24% from a year ago as parts of the economy that impact our operations began 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 $270 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.   

FOOD SERVICE

Sales to food service customers decreased $76,735,000 or 40% in the third quarter to $116,621,000 and decreased $77,048,000 or 14% to $471,401,000 for the nine months. Soft pretzel sales to the food service market decreased 62% to $21,384,000 in the three months and 24% to $116,985,000 in the nine months. Frozen juices and ices sales decreased 37% to $8,688,000 in the three months and decreased 17% to $25,222,000 in the nine months. Churro sales to food service customers were down 61% in the quarter to $7,321,000 and were down 23% to $38,466,000 in the nine months. Sales of bakery products decreased $20,847,000 or 23% in the third quarter and decreased $13,719,000 or 5% to $255,016,000 for the nine months.  Sales of handhelds decreased $1,102,000 or 13% in the quarter and $3,255,000 or 13% in the nine months. Sales of funnel cake decreased 57%, or $3,181,000, to $2,435,000 in the quarter and $5,311,000, or 29%, to $12,997,000 in the nine months. Sales are down across all product lines as many of the venues and locations where our products are sold have been shut down for some or all of the third quarter due to COVID-19.

Sales of new products in the first twelve months since their introduction were approximately $600,000 in this quarter and $4.7 million in the nine months.
      
We had an operating loss in the quarter in our Food Service segment of $18,242,000 compared to operating income of $21,030,000 last year and operating income decreased to $7,743,000 from $57,909,000 in the nine months primarily because of lower production and sales volume due to COVID-19.  This year’s three months operating loss and nine months operating income were impacted by plant shutdown impairment costs of $5.1 million for the pending 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’s quarter and nine months also included approximately $5 million of costs for employee safety and increased COVID-19 compensation.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $15,735,000 or 38% to $57,502,000 in the third quarter and increased $17,286,000 or 16% in the nine months.  Soft pretzel sales for the third quarter were up 74% to $12,716,000 and up 23% to $34,874,000 for the nine months. Sales of frozen juices and ices increased $6,807,000 or 26% to $33,322,000 in the third quarter and increased $7,100,000 or 14% in the nine months.  Handheld sales to retail supermarket customers increased 6% to $3,257,000 in the quarter and 13% to $9,135,000 in the nine months. Biscuit sales for the third quarter were up 56% to $8,151,000 and 12% to $21,759,000 for the nine months. 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 third quarter were approximately $500,000 and were approximately $1.0 million for the nine months. 

Operating income in our Retail Supermarkets segment was $7,910,000 in this year’s third quarter compared to $3,775,000 in last year’s quarter, a 110% increase and increased to $14,464,000 in this year’s nine months compared to $9,025,000 in last year’s nine months primarily due to higher volume. 

FROZEN BEVERAGES
    
Total frozen beverage segment sales decreased 56% in the three months to $40,440,000 and 21% to $173,602,000 for the nine months. Beverage sales were down 71% to $16,456,000 in the quarter and down 31% to $83,606,000 in the nine months. Excluding sales from the acquisition of ICEE Distributors in October 2019 and BAMA ICEE in February 2020, total frozen beverage segment sales decreased 60% in the quarter and were down 25% for the nine months and beverage sales decreased 78% for the quarter and 39% for the nine months. Gallon sales were down 72% in the quarter and down 36% in the nine months exclusive of ICEE Distributors’ gallons.  Service revenue decreased 23% to $17,259,000 in the third quarter and was down 1% at $61,524,000 in the nine months. Machines revenue (primarily sales of frozen beverage machines) were $6,363,000, a decrease of $5,447,000 in the quarter and $27,254,000, a decrease of $6,621,000, in the nine months, 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 for some or all of the third quarter due to COVID-19.

Our Frozen Beverage segment had an operating loss of $9,088,000 compared to operating income of $14,237,000 in last year’s quarter and an operating loss of $8,942,000 for the nine months compared to operating income of $18,961,000 last year 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 in the nine months.

CONSOLIDATED

Gross profit as a percentage of sales was 17.34% in the third quarter and 31.02% last year.  Gross profit as a percentage of sales was 23.98% in the nine month period this year and 29.44% last year.  Gross profit percentage decreased for both periods 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 reserves of approximately $1.5 million for inventory.

Total operating expenses decreased $5,691,000 in the third quarter and as a percentage of sales increased to 26.4% from 19.1% last year.  For the nine months, operating expenses decreased $330,000 and as a percentage of sales increased to 22.3% from 19.6% last year.   Operating expenses for both periods this year included $5.1 million of plant shutdown impairment costs for the pending shutdown of one of our manufacturing plants. Marketing expenses increased to 10.2% of sales in this year’s quarter from 8.1% last year and were 8.9% in the nine months compared to 8.0% of sales in last year’s nine months.  Distribution expenses were 9.9% of sales in the third quarter and 7.5% of sales in last year’s quarter and were 9.1% in this year’s nine months compared to 8.1% in last year’s nine months. Administrative expenses were 3.9% of sales in the third quarter compared to 3.3% of sales last year in the third quarter and were 3.7% in this year’s nine months compared to 3.4% of sales in last year’s nine months. 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. 

We had an operating loss of $19,420,000 in the three months and operating income of $13,265,000 in the nine months this year compared to operating income of $39,042,000 and $85,895,000 in last year's three and nine months, respectively.

Investment income decreased to $1,300,000 from $1,953,000 in last year’s quarter due primarily to lower interest rates. Investment income decreased to $2,673,000 from $5,775,000 in the nine month period due to lower interest rates and because of an increase in unrealized losses to $1,708,000 this year from $385,000 last year.
    
We had a net loss of $12,647,000 in the current three month period compared to net earnings of $30,872,000 last year and net earnings decreased $57,031,000, or 83%, to $11,721,000 for the nine month period this year compared to $68,752,000 for the nine month period last year. 

Net earnings in last year’s nine months benefitted by a reduction of approximately $900,000 in tax as the provision for the one time repatriation tax as a result of the Tax Cuts and Job Act of 2017 was reduced as the amount recorded the year prior was an estimate.  Excluding the reduction in the provision for the one time repatriation tax, our effective tax rate was 27.5% in last year’s nine months.  Our effective tax rate was 26.2% in this year’s nine months.
      
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:		Dennis G. Moore
		Senior Vice President
		Chief Financial Officer
		(856) 532-6603