J & J Snack Foods Reports Second Quarter Sales and Earnings

PENNSAUKEN, N.J., April 26, 2021 (GLOBE NEWSWIRE) -- J & J Snack Foods Corp. (NASDAQ-JJSF) today announced sales and earnings for the second quarter ended March 27th, 2021.

Sales decreased 6% to $256.2 million from $272.0 million in last year's second quarter. Net earnings were $6.1 million in the current quarter down from $7.3 million last year. Earnings per diluted share was $0.32 for the second quarter down from $0.38 last year. Operating income decreased 34% to $7.2 million in the current quarter from $11.0 million last year. Operating income was impacted by approximately $0.7 million of Covid-19 related costs as we remain focused on the safety and protection of our associates.

For the six months ended March 27, 2021, sales were $497.2 million, a 10% decline from the same period last year when sales were $554.9 million. Net earnings decreased 68% to $7.8 million for the six months compared to $24.4 million last year. Earnings per diluted share decreased 68% to $0.41 from $1.28 last year. Operating income decreased 76% to $7.8 million this year from $32.7 million last year. Operating income was impacted by $1.5 million of Covid-19 related costs during this six-month period.

Sales consistently improved throughout the quarter led by venue openings, accessibility to the Covid-19 vaccine, improving consumer confidence and the spring season. This year's Q2 sales decline was only 6% versus the prior year compared to a decline of 15% in our recently reported Q1 results. For the quarter, Food Service fell just 1% below prior year moving closer to pre-Covid sales performance, and Retail remained strong at 17% growth even as our food service business started to rebound. The Frozen Beverages business was 32% below prior year for the quarter which was a significant improvement when compared to Q1 of this year where sales were 41% below the prior year. Improved sales volume and a strong focus on cost efficiencies helped drive improved gross margins and profitability.

Dan Fachner, J&J's President, commented, "I am starting to see some momentum in our business as key venues like theaters, amusement parks, sports arenas and schools start to open and increase capacity. Consumers are starting to get out of their homes with more confidence and enjoying experiences they have missed over the last year. Our products are well positioned for these encouraging trends, and we are excited about the opportunities ahead of us."

J&J Snack Foods Corp. 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.

RESULTS OF OPERATIONS

Consolidated J&J Snack Foods net sales decreased $15.9 million or 6% to $256.2 million for the three months ended March 27^th, 2021.

FOOD SERVICE

Sales to food service customers decreased $2.0 million or 1% in the second quarter to $169.3 million. Traffic across our food service customers continues to improve as theatres re-open, more schools open their doors, entertainment and amusement venues increase capacity and stronger growth across QSR and casual dining restaurants. Soft pretzel sales to food service decreased 19% to $36.8 million. Frozen juices and ices sales increased 12% to $10.6 million and Churro sales were relatively flat in the quarter at $14.7 million.

Sales of bakery products decreased $6.5 million or 7% in the second quarter to $82.9 million.

Sales of handhelds increased $12.5 million or 168% 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 $14.9 million 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 $1.9 million in the quarter to $6.1 million driven by lower sales. This is an improving trend as profit margins improved throughout the quarter due to improved mix and manufacturing efficiencies.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $6.3 million or 17% to $43.9 million in the second quarter. Our SUPERPRETZEL brand performed well in the quarter driving an increase in soft pretzel sales of 28% to $15.8 million. Sales of frozen juices and ices were up 22% to $19.4 million, and sales of biscuits declined 2% to $6.5 million. Handheld sales to retail supermarket customers decreased 28% in the quarter. Sales from new products were approximately $0.2 million 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 $2.0 million or 47% to $6.4 million in this year's second quarter driven by sales increases and operating income margins of approaching 15%, approximately 300 basis points better than last year.

FROZEN BEVERAGES

Frozen beverage and related product sales decreased $20.2 million or 32% to $42.9 million in the second quarter. Beverage related sales declined 42% to $18.5 million. Gallon sales were down 40% for the three months which was a significant improvement from the first quarter when gallons were down 56% compared with prior year. This improvement was led by theaters and entertainment/amusement venues which opened across the country, and traffic at mass merchandisers continued to improve as more consumers got out of the house. Service revenue decreased 16% to $18.2 million which was primarily related to the cancellation of a key customer's planned maintenance program. Machine revenue (primarily sales of frozen beverage machines) was $5.7 million, a decrease of 36% due mainly from slower customer expansion and replacement during the period.

Our Frozen Beverage segment incurred an operating loss for the quarter of $5.2 million compared to an operating loss of $1.3 million last year. Profits improved significantly in comparison to the first quarter's loss of $10.3 million led by stronger sales and profit margins.

CONSOLIDATED

Gross profit as a percentage of sales was 23.8% in the three-month period this year and 25.5% last year but did improve every month throughout the quarter. Covid-19 is still impacting our business, but we are encouraged by the improving trends in the second quarter.

Total operating expenses decreased $4.8 million in the second quarter as we leveraged expenses by 54 bps. Marketing expenses decreased to 7.5% of sales in this year's quarter from 8.8% last year. Distribution expenses were 9.9% of sales in this year's quarter compared to 9.1% of sales last year. Administrative expenses were 3.6% of sales this quarter compared to 3.7% last year.

Operating income decreased $3.8 million or 34% to $7.2 million in the second quarter as a result of the aforementioned items.

Our investments generated before tax income of $0.6 million this quarter, an increase of $1.0 million compared to last year due to improved market conditions.

Net earnings decreased $1.2 million, or 17%, in the current three-month period to $6.1 million. Our effective tax rate was 22% 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.