J&J Snack Foods' Record Second Quarter Net Sales Increase 10% to $281.5M

PENNSAUKEN, N.J., May 02, 2022 (GLOBE NEWSWIRE) -- J&J Snack Foods Corp. JJSF today reported financial results for the second quarter ended March 26, 2022.        

 Second Quarter
Actuals% vs. LY
   
Net Sales$281.5M9.9%
Operating Income$4.1M(43.5%)
Net Earnings$3.3M(46.0%)
Earnings per Diluted Share (EPS)$0.17(46.3%)


Dan Fachner, J&J Snack Foods President and CEO, commented, "J&J Snack Foods' record second quarter net sales increased 10% year-over-year and by 2% versus the same period in fiscal 2019, exceeding pre-COVID levels for the third consecutive quarter. We had a number of accomplishments throughout the quarter including new customer wins, successful product launches and expanding product distribution. We delivered our best second quarter sales in company history despite the unexpected challenges related to the early-February implementation of a new enterprise resource planning ("ERP") system. This system implementation only affected our Food Service and Retail segments and was intentionally planned at this time since it's our slowest volume quarter. This investment is a critical step in our long-term strategy to automate our business establishing the foundation for transforming our supply chain. It provides a seamless, integrated process from raw materials through production, warehousing, inventory management, and electronic order fulfillment. We did experience operational and supply chain challenges due to this implementation and estimate that these issues had a negative, one-time impact on fiscal second quarter sales of approximately $20 million and on fiscal second quarter operating income of approximately $4.5 million. I am proud of how the team worked tirelessly to resolve these issues and already see our business bouncing back in April. We do not anticipate any further material impact going forward."

"Consumer spending remains healthy despite macroeconomic challenges, and we continue to see strong demand for our products as a growing number of consumers return to their favorite amusement parks, restaurants, retailers and outdoor venues. Second quarter net sales in our Frozen Beverages segment, which was not impacted by the ERP transition, increased 50% year-over-year, driven by over 90% growth in frozen beverage sales, which is an indirect indicator of the demand opportunity we are experiencing across our core products."

"As was the case last quarter, sustained significant inflationary pressures continue driving up prices across the entire supply and production chain, including raw materials, packaging, and distribution. We are taking aggressive measures to offset these cost challenges, including strategic cost reduction initiatives in procurement, R&D, production and distribution. We are confident these actions, combined with our most recent price increases, which became effective in early April, will begin to help offset the impact of these costs increases in the back half of the year."

"These initiatives will strengthen our operating infrastructure and standardize processes across key business functions resulting in increased efficiencies, reduced costs and improved margins. Our commitment to driving operational excellence across the business is a key part of our long-term growth strategy and will deliver meaningful benefits to our customers and shareholders today and for many years to come."

"In summary, we are grateful to our customers for their patience and loyalty as we worked to resolve the ERP transition issues in the second quarter. The experience of our team, investments in our operating discipline and the strength of our brands, have us well positioned in the snack food marketplace to accelerate growth and continue enhancing shareholder value. Looking ahead, the overall industry environment and consumer spending remain very strong despite rising prices, and we expect the operating and financial benefits of our recent initiatives will become more visible as we move into the second half of fiscal 2022."

Total Company Second Quarter Highlights

Net sales increased 10% to $281.5 million in Q2 of fiscal 2022, compared to Q2 of fiscal 2021, and by 1.9%, compared of Q2 of fiscal 2019.

Key highlights include:

  • Sales were driven by growth in core products including pretzels, churros and frozen beverages.
  • Food Service sales exceeded Q2 '21 by 4% and by 1%, versus Q2 '19.
  • Retail segment sales declined versus Q2 '21 by 7%, but grew by 19%, compared to Q2 '19.
  • Frozen Beverage segment sales beat Q2 '21 sales by 50%, led by frozen beverages growing over 90%, but declined by 4%, versus Q2 '19.

Gross profit as a percentage of sales was 23.2% in Q2 '22, compared to 23.8% in Q2 '21, reflecting the significant cost headwinds our industry continues to face. Inflation continued to build over the quarter increasing over 10% from our recent Q1, and further pressuring margins. This impact was especially pronounced in key raw material purchases like flour, oils, eggs, dairy, chocolates, and meats, as well as packaging and fuel. We have pricing and cost initiatives in place to offset these cost pressures, though we do not expect to see most of the benefits on our margins until Q3 and beyond.

Total operating expenses were 21.8% of sales for the quarter, an increase of 81 bps, compared to Q2 '21. Expenses continued to be negatively impacted by industry-wide freight and distribution cost increases. Distribution costs were 10.1% of sales in the quarter, versus 9.9% in the prior year period, while marketing and selling expenses remained at 7.5% of sales. Administrative expenses were 4.2% of sales in Q2 '22, compared to 3.6% in Q2 '21.
        
Operating income was $4.1 million in the second quarter of fiscal 2022, compared to $7.2 million in the prior year period, largely driven by the ERP conversion challenges and the continued historic inflationary environment. Net earnings in Q2 '22 was $3.3 million, compared to $6.1 million in Q2 '21. Our effective tax rate was 22% in Q2 '22.

Food Services Segment Second Quarter Highlights

  • Q2 '22 food service sales exceeded Q2 '21 by $7.0 million, or an increase of 4%.
  • Theaters, stadiums, amusement parks as well as schools and restaurants and strategic accounts continued to experience an increase in foot traffic and visitation driving strong sales in our core products, including 18% increase in soft pretzel sales to $43.3 million, churro sales growth of 19% to $17.4 million led by customer expansion and growing menu penetration, while frozen novelties sales declined 31% due to short term production and shipping delays. Handheld and bakery sales both remained relatively flat at $20.5 million and $84.0 million, respectively.
  • Sales of new products were approximately $2 million driven primarily by a new empanada product with a major convenience customer and expanded bakery items.
  • Q2 '22 operating income declined 91% to $0.5 million reflecting the significant increase in ingredients, production and shipping costs as well as by the impacts from the Company's ERP implementation.

Retail Segment Second Quarter Highlights

  • Q2 '22 retail sales decreased 7%, compared to Q2 '21.
  • Soft pretzels remained relatively flat, compared to Q2 '21, while frozen novelty sales decreased 2% lapping a 22% increase in the same quarter last year. Biscuit and handheld sales decreased 12% and 52%, respectively, versus the prior year period.
  • New product innovation contributed approximately $0.5 million in the quarter driven by three new Luigi's gelato items.
  • Operating income decreased 83% to $1.1 million, versus the prior year period driven by higher cost of goods sold and inefficiencies created by the delays in the Company's ERP implementation.

Frozen Beverages Segment Second Quarter Highlights      

  • Frozen beverage segment sales beat Q2 '21 sales by 50% led by beverage sales.
  • Beverage sales grew over 91%, or $16.8 million higher than in Q2 '21 reflecting the growing momentum across theaters, amusement parks, convenience, and restaurant channels. In the amusement parks channel, we continue to see strong growth as visitation numbers continue to exceed pre-Covid levels.   Theater sales are improving as better content is released and consumers are spending more for snacks but continues to lag 2019 volumes.
  • Service revenues increased 15%, led by an acceleration in maintenance calls and additional growth in one of our larger customers. Equipment sales increased 33% driven mainly by growth from large QSR and convenience customers.
  • Q2 '22 operating income improved to $2.5 million, compared to a Q2 '21 operating loss of $5.2 million, as strong sales drove leverage across the business.

About J&J Snack Foods Corp.
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.

Certain Definitions
Adjusted EBITDA consists of net earnings adjusted to exclude: income taxes (benefit); investment income; interest expense; depreciation and amortization; share-based compensation expense; COVID-19 related expenses; net (gain) loss on sale or disposal of assets; impairment charges, and restructuring costs.

Non-GAAP Financial Measures
It is important to note that Adjusted EBITDA is not a measure of performance calculated in accordance with generally accepted accounting principles ("GAAP"). Management believes that this measure is useful as a way to evaluate the Company and the means for Management to evaluate our performance and operations. Management believes that this measure is useful to an investor in evaluating our performance because it is widely used in the food and beverage industry.

A certain adjusted non-GAAP financial measure is presented in this release. Management believes this adjusted non-GAAP measure provides useful information to Management and investors by excluding certain income, expenses, and gains and losses that may not be indicative of the Company's core operating and financial results. Similarly, Management believes this adjusted measure is a useful performance measure because certain items included in the calculation of net earnings may either mask or exaggerate trends in the Company's ongoing operating performance. Further, the reconciliation corresponding to this adjusted measure, by identifying individual adjustments, provides a useful mechanism for investors to consider this adjusted measure with some, or all, of the identified adjustments.

Management uses this non-GAAP financial measure on an ongoing basis to help track and assess the Company's financial performance. You, however, should not consider non-GAAP measures in isolation or as a substitute for net earnings, operating income, or any other measure for determining our operating performance that is calculated in accordance with generally accepted accounting principles. This non-GAAP measure is not necessarily comparable to similarly titled measures employed by other companies. The accompanying financial tables provide reconciliations to the nearest GAAP measure of all non-GAAP measures provided in this release.

Cautionary Statement Regarding Forward-Looking Information

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding the Company's expected future financial position, results of operations, revenue and profit levels, cash flows, business strategy, budgets, projected costs, capital expenditures, products, competitive positions, growth opportunities, plans and objectives of management for future operations, as well as statements that include words such as "anticipate," "if," "believe," "plan," "goals," "estimate," "expect," "intend," "may," "could," "should," "will," and other similar expressions are forward-looking statements. This includes, without limitation, our statements and expectations regarding any current or future recovery in our industry and the future impact of the Company's enterprise resource planning system implementation. Such forward-looking statements are inherently uncertain, and readers must recognize that actual results may differ materially from the expectations of management. We do not undertake a duty to update such forward-looking statements. Factors that may cause actual results to differ materially from those in the forward-looking statements include consumer spending, price competition, acceptance of new products, the pricing and availability of raw materials, transportation costs, changes in the competitive marketplace the uncertainty and ultimate economic impact of the COVID-19 pandemic, and other risks identified in our annual report on Form 10-K, and our other filings with the Securities and Exchange Commission. Many of these factors are outside of the Company's control.

Investor Contact:
Joseph Jaffoni, Norberto Aja or Jennifer Neuman
JCIR
(212) 835-8500
jjsf@jcir.com

 
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
 
  Three months ended Six months ended
  March 26, March 27, March 26, March 27,
   2022   2021   2022   2021 
         
Net Sales $281,513  $256,178  $600,003  $497,175 
         
Cost of goods sold  216,165   195,282   455,280   386,154 
Gross Profit  65,348   60,896   144,723   111,021 
         
Operating expenses        
Marketing  21,036   19,192   41,943   36,493 
Distribution  28,349   25,443   61,664   48,332 
Administrative  11,719   9,216   22,088   18,656 
Other general expense (income)  156   (185)  95   (268)
Total Operating Expenses  61,260   53,666   125,790   103,213 
         
Operating Income  4,088   7,230   18,933   7,808 
         
Other income (expense)        
Investment income  160   579   431   1,949 
Interest (expense) & other  (57)  4   (75)  (11)
         
Earnings before        
income taxes  4,191   7,813   19,289   9,746 
         
Income tax expense  920   1,752   4,927   1,907 
         
NET EARNINGS $3,271  $6,061  $14,362  $7,839 
         
Earnings per diluted share $0.17  $0.32  $0.75  $0.41 
         
Weighted average number        
of diluted shares  19,206   19,130   19,180   19,081 
         
Earnings per basic share $0.17  $0.32  $0.75  $0.41 
         
Weighted average number of        
basic shares  19,134   19,006   19,110   18,971 


J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
     
  March 26,  
   2022  September 25,
  (unaudited)  2021 
Assets    
Current assets    
Cash and cash equivalents $221,017  $283,192 
Marketable securities held to maturity  4,530   7,980 
Accounts receivable, net  187,933   162,939 
Inventories  158,991   123,160 
Prepaid expenses and other  11,805   7,498 
Total current assets  584,276   584,769 
     
Property, plant and equipment, at cost  782,148   757,242 
Less accumulated depreciation    
and amortization  504,249   490,055 
Property, plant and equipment, net  277,899   267,187 
     
Other assets    
Goodwill  121,833   121,833 
Other intangible assets, net  76,599   77,776 
Marketable securities held to maturity  -   4,047 
Marketable securities available for sale  5,951   10,084 
Operating lease right-of-use assets  53,892   54,555 
Other  2,878   1,968 
Total other assets  261,153   270,263 
Total Assets $1,123,328  $1,122,219 
     
Liabilities and Stockholders' Equity    
Current Liabilities    
Current finance lease liabilities $127  $182 
Accounts payable  101,238   96,789 
Accrued insurance liability  15,525   16,260 
Accrued liabilities  6,456   10,955 
Current operating lease liabilities  13,747   13,395 
Accrued compensation expense  16,487   17,968 
Dividends payable  12,136   12,080 
Total current liabilities  165,716   167,629 
     
Noncurrent finance lease liabilities  336   392 
Noncurrent operating lease liabilities  45,501   46,557 
Deferred income taxes  61,339   61,578 
Other long-term liabilities  455   409 
     
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    
19,173,000 and 19,084,000 respectively  87,688   73,597 
Accumulated other comprehensive loss  (13,281)  (13,383)
Retained Earnings  775,574   785,440 
Total stockholders' equity  849,981   845,654 
Total Liabilities and Stockholders' Equity $1,123,328  $1,122,219 


J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in thousands)
     
  Six months ended
  March 26, March 27,
   2022   2021 
Operating activities:    
Net earnings $14,362  $7,839 
Adjustments to reconcile net    
earnings to net cash    
provided by operating activities:    
Depreciation of fixed assets  23,868   24,253 
Amortization of intangibles and deferred costs  1,183   1,457 
Loss from disposals of property & equipment  100   - 
Share-based compensation  2,350   2,270 
Deferred income taxes  (251)  (4)
Loss (Gain) on marketable securities  69   (768)
Other  (184)  (163)
Changes in assets and liabilities    
net of effects from purchase of companies    
Increase in accounts receivable  (25,031)  (10,884)
Increase in inventories  (36,538)  (6,432)
Increase in prepaid expenses  (4,308)  (118)
(Decrease) increase in accounts payable and    
accrued liabilities  (2,055)  9,331 
Net cash (used in) provided by operating activities  (26,435)  26,781 
Investing activities:    
Purchases of property, plant and equipment  (35,306)  (18,829)
Proceeds from redemption and sales of marketable securities  11,526   41,337 
Proceeds from disposal of property and equipment  589   1,262 
Other  -   18 
Net cash (used in) provided by investing activities  (23,191)  23,788 
Financing activities:    
Proceeds from issuance of stock  11,741   13,582 
Payments on finance lease obligations  (111)  (173)
Payment of cash dividend  (24,163)  (21,776)
Net cash used in financing activities  (12,533)  (8,367)
Effect of exchange rate on cash    
and cash equivalents  (16)  375 
Net (decrease) increase in cash    
and cash equivalents  (62,175)  42,577 
Cash and cash equivalents at beginning    
of period  283,192   195,809 
Cash and cash equivalents at end    
of period $221,017  $238,386 


J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in thousands)
         
  Three months ended Six months ended
  March 26, March 27, March 26, March 27,
   2022   2021   2022   2021 
         
         
Sales to External Customers:        
Food Service        
Soft pretzels $43,261  $36,776  $93,682  $69,463 
Frozen novelties  7,305   10,590   15,762   16,885 
Churros  17,447   14,720   36,936   26,262 
Handhelds  20,506   19,992   39,001   37,603 
Bakery  83,967   82,910   191,798   171,874 
Other  3,854   4,336   10,893   7,662 
Total Food Service $176,340  $169,324  $388,072  $329,749 
         
Retail Supermarket        
Soft pretzels $15,752  $15,789  $31,946  $29,677 
Frozen novelties  18,919   19,386   36,721   34,702 
Biscuits  5,687   6,495   13,958   14,155 
Handhelds  1,069   2,243   2,345   5,023 
Coupon redemption  (726)  (608)  (1,622)  (1,683)
Other  56   601   104   1,126 
Total Retail Supermarket $40,757  $43,906  $83,452  $83,000 
         
Frozen Beverages        
Beverages $35,365  $18,529  $69,128  $34,384 
Repair and        
maintenance service  21,000   18,218   43,011   37,114 
Machines revenue  7,542   5,663   15,389   12,152 
Other  509   538   951   776 
Total Frozen Beverages $64,416  $42,948  $128,479  $84,426 
         
Consolidated Sales $281,513  $256,178  $600,003  $497,175 
         
Depreciation and Amortization:        
Food Service $6,670  $7,116  $13,339  $13,902 
Retail Supermarket  386   384   752   770 
Frozen Beverages  5,484   5,648   10,960   11,424 
Total Depreciation and Amortization $12,540  $13,148  $25,051  $26,096 
         
Operating Income :        
Food Service $536  $6,055  $9,537  $12,235 
Retail Supermarket  1,091   6,364   6,075   11,087 
Frozen Beverages  2,461   (5,189)  3,321   (15,514)
Total Operating Income $4,088  $7,230  $18,933  $7,808 
         
Capital Expenditures:        
Food Service $13,851  $7,246  $24,084  $15,532 
Retail Supermarket  1,094   80   3,623   101 
Frozen Beverages  4,261   1,827   7,599   3,196 
Total Capital Expenditures $19,206  $9,153  $35,306  $18,829 
         
Assets:        
Food Service $799,710  $760,557  $799,710  $760,557 
Retail Supermarket  33,206   33,395   33,206   33,395 
Frozen Beverages  290,412   270,963   290,412   270,963 
Total Assets $1,123,328  $1,064,915  $1,123,328  $1,064,915 


J & J SNACK FOODS CORP. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
(Unaudited) (in thousands)
         
  Three Months Ended Six Months Ended
         
  March 26, March 27, March 26, March 27,
   2022   2021   2022   2021 
         
         
Reconciliation of GAAP Net Earnings to Adjusted EBITDA        
         
Net Earnings $3,271  $6,061  $14,362  $7,839 
Income Taxes  920   1,752   4,927   1,907 
Investment Income  (160)  (579)  (431)  (1,949)
Interest Expense  57   (4)  75   11 
Depreciation and Amortization  12,540   12,762   25,051   25,710 
Share-Based Compensation  1,267   1,026   2,350   2,270 
COVID-19 Expenses (Recoveries)  -   762   (874)  1,507 
Net Loss on Sale or Disposal of Assets  127   -   100   - 
Adjusted EBITDA $18,022  $21,780  $45,560  $37,295 
         

Posted In: EarningsPress Releases

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