Sales And Earnings Reported By J & J Snack Foods

PENNSAUKEN, N.J., Nov. 03, 2016 (GLOBE NEWSWIRE) -- J & J Snack Foods Corp. (NASDAQ:JJSF) today announced sales and earnings for its fourth quarter and year ended September 24, 2016.

Sales for the fourth quarter increased 1% to $262.2 million from $259.8 million in last year's fourth quarter.  For the year ended September 24, 2016, sales increased 2% to $992.8 million from $976.3 million last year.   Net earnings increased 4% to $20.6 million ($1.10 per diluted share) in this year's fourth quarter compared to $19.8 million ($1.05 per diluted share) last year and for the year earnings increased 8% to $76.0 million ($4.05 per diluted share) from $70.2 million ($3.73 per diluted share).

Operating income decreased 9% to $30.7 million this year from $33.7 million in the year ago fourth quarter.  For the year, operating income increased 2% to $112.8 million from $110.9 million last year.

After tax investment income of $676,000 ($.04/share) in the quarter compared to an after tax investment loss of $2.3 million ($.12/share) in last year's quarter and after tax investment income of $2.7 million ($.14/share) for the year compared to an after tax investment loss of $516,000 ($.03/share) last year. 

Gerald B. Shreiber, J & J's President and Chief Executive Officer, commented, "While our frozen beverage and retail supermarket businesses performed well in the quarter, sales and operating income in our food service segment were down in the quarter.  We have made changes in our operations management to address certain manufacturing issues, including higher costs, that impacted the quarter."

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, PHILLY SWIRL, 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, CALIFORNIA CHURROS and TIO PEPE'S churros, PATIO Burritos and other handheld sandwiches, THE FUNNEL CAKE FACTORY funnel cakes, and several cookie brands within COUNTRY HOME BAKERS.  For more information, please visit us at www.jjsnack.com.

*MINUTE MAID is a registered trademark of The Coca-Cola Company
J & J SNACK FOODS CORP. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
                 
(in thousands, except per share information)  
  Quarter Ended   Fiscal Year Ended  
                 
  September 24,   September 26,   September 24,   September 26,  
    2016       2015       2016       2015    
  (13 weeks)   (13 weeks)   (52 weeks)   (52 weeks)  
  Unaudited   Unaudited   Unaudited      
Net Sales $ 262,240     $ 259,772     $ 992,781     $ 976,256    
Cost of goods sold   182,443       177,329       688,314       675,366    
Gross Profit   79,797       82,443       304,467       300,890    
                 
Operating expenses                
Marketing   22,249       22,486       85,963       85,160    
Distribution   18,330       18,575       73,114       74,158    
Administrative   8,442       7,994       32,299       30,891    
Other general expense (income)   42       (274 )     281       (207 )  
Total operating expenses   49,063       48,781       191,657       190,002    
                 
Operating Income   30,734       33,662       112,810       110,888    
                 
Other income (expenses)                
Investment income (loss)   1,014       (1,422 )     4,132       1,157    
Interest expense & other   (29 )     (38 )     (123 )     (126 )  
                 
Earnings before income taxes   31,719       32,202       116,819       111,919    
                 
Income taxes   11,101       12,374       40,844       41,736    
                 
NET EARNINGS $ 20,618     $ 19,828     $ 75,975     $ 70,183    
                 
Earnings per diluted share $ 1.10     $ 1.05     $ 4.05     $ 3.73    
                 
Weighted average number of diluted shares   18,782       18,832       18,769       18,819    
                 
Earnings per basic share $ 1.11     $ 1.06     $ 4.07     $ 3.76    
                 
Weighted average number of basic shares   18,656       18,691       18,649       18,685    
                 

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
       
  September 24,   September 26,
    2016       2015  
Assets Unaudited    
Current assets      
Cash and cash equivalents $   140,652     $   133,689  
Marketable securities held to maturity     13,539         -  
Accounts receivable, net     98,325         102,649  
Inventories     88,684         82,657  
Prepaid expenses and other     13,904         6,557  
Total current assets     355,104         325,552  
       
Property, plant and equipment, at cost     605,045       571,675  
Less accumulated depreciation and amortization           420,832         399,621  
Property, plant and equipment, net     184,213       172,054  
       
Other assets      
Goodwill   86,442       86,442  
Other intangible assets, net   41,819       45,819  
Marketable securities held to maturity   90,732       66,660  
Marketable securities available for sale   29,465       39,638  
Other   2,712       3,504  
Total other assets   251,170       242,063  
Total Assets $  790,487     $  739,669  
       
Liabilities and Stockholders' Equity      
Current Liabilities      
Current obligations under capital leases $   365     $   273  
Accounts payable   62,026       59,206  
Accrued insurance liability   10,119       10,231  
Accrued liabilities   6,161       5,365  
Accrued compensation expense   16,340       15,318  
Dividends payable   7,280       6,723  
Total current liabilities     102,291         97,116  
       
Long-term obligations under capital leases   1,235       1,196  
Deferred income taxes   48,186       40,523  
Other long-term liabilities   801       915  
       
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 18,668,000 and 18,676,000 respectively   25,332       31,653  
Accumulated other comprehensive loss   (13,415 )     (10,897 )
Retained Earnings   626,057       579,163  
Total stockholders' equity     637,974         599,919  
Total Liabilities and Stockholders' Equity $   790,487     $   739,669  
       

 
           
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
           
  Fiscal Year Ended
           
  September 24,   September 26,   September 27,
    2016       2015       2014  
  (52 weeks)   (52 weeks)   (52 weeks)
  Unaudited        
Operating activities:          
Net earnings $ 75,975     $ 70,183     $ 71,814  
Adjustments to reconcile net earnings to net cash provided by operating activities:          
Depreciation of fixed assets     34,536         32,356         31,660  
Amortization of intangibles and deferred costs     5,587         5,915         5,433  
Gains from disposals of property & equipment     (398 )       (334 )       (119 )
Amortization of bond premiums     1,011         103         -  
Share-based compensation     2,375         2,166         2,076  
Deferred income taxes     7,700         (121 )       (8 )
Loss on sale of marketable securities     661         4,319         361  
Changes in assets and liabilities, net of effects from purchase of companies:          
Decrease (increase) in accounts receivable, net   3,571       (3,123 )     (8,913 )
Increase in inventories   (6,295 )     (4,959 )     (1,857 )
Increase in prepaid expenses and other   (7,386 )     (2,871 )     (182 )
Increase in accounts payable and accrued liabilities   3,888       287       6,831  
Net cash provided by operating activities   121,225       103,921       107,096  
Investing activities:          
Payments for purchases of companies, net of cash acquired     -         (615 )       (28,360 )
Purchases of property, plant and equipment     (48,709 )       (48,641 )       (39,385 )
Purchases of marketable securities     (41,786 )       (90,240 )       (26,932 )
Proceeds from redemption and sales of marketable securities     13,224         110,117         7,245  
Proceeds from disposal of property, plant and equipment     2,294         1,786         1,572  
Other     375         (898 )       (806 )
Net cash used in investing activities     (74,602 )       (28,491 )       (86,666 )
Financing activities:          
Payments to repurchase common stock   (15,265 )     (8,011 )     (7,505 )
Proceeds from issuance of common stock   6,570       4,663       3,320  
Payments on capitalized lease obligations   (355 )     (243 )     (326 )
Payment of cash dividend   (28,523 )     (26,154 )     (20,924 )
Net cash used in financing activities   (37,573 )     (29,745 )     (25,435 )
Effect of exchange rates on cash and cash equivalents   (2,087 )     (3,756 )     (580 )
Net increase (decrease) in cash and cash equivalents   6,963       41,929       (5,585 )
Cash and cash equivalents at beginning of year   133,689       91,760       97,345  
Cash and cash equivalents at end of year $ 140,652     $ 133,689     $ 91,760  
           

 
J & J SNACK FOODS CORP. AND SUBSIDIARIES  
             
Fiscal year ended  
             
  September 24,   September 26,   September 27,  
    2016       2015       2014    
  (52 weeks)   (52 weeks)   (52 weeks)  
  Unaudited   (in thousands)      
Sales to External Customers:            
Food Service            
Soft pretzels $   170,155     $   168,970     $   164,680    
Frozen juices and ices     51,798         54,454         53,888    
Churros     57,318         56,602         55,929    
Handhelds     27,427         21,817         24,248    
Bakery     294,518         301,135         281,556    
Other     20,313         13,657         11,597    
Total Food Service $   621,529     $   616,635     $   591,898    
             
Retail Supermarket            
Soft pretzels $   33,279     $   35,727     $   34,830    
Frozen juices and ices     68,924         72,174         59,404    
Handhelds     15,347         18,957         21,354    
Coupon redemption     (4,430 )       (4,725 )       (3,807 )  
Other     4,469         1,244         863    
Total Retail Supermarket $   117,589     $   123,377     $   112,644    
             
Frozen Beverages            
Beverages $   150,118     $   142,705     $   133,283    
Repair and maintenance service       71,123         65,765         59,805    
Machines sales     31,155         26,413         20,224    
Other     1,267         1,361         1,597    
Total Frozen Beverages $   253,663     $   236,244     $   214,909    
             
Consolidated Sales $   992,781     $   976,256     $   919,451    
             
Depreciation and Amortization:            
Food Service $   22,912     $   21,289     $   20,882    
Retail Supermarket     1,031         1,132         492    
Frozen Beverages     16,180         15,850         15,719    
Total Depreciation and Amortization   $   40,123     $   38,271     $   37,093    
             
Operating Income:            
Food Service $   76,539     $   75,286     $   73,731    
Retail Supermarket     9,618         11,020         11,201    
Frozen Beverages     26,653         24,582         21,916    
Total Operating Income $   112,810     $   110,888     $   106,848    
             
Capital Expenditures:            
Food Service $   24,759     $   28,228     $   21,594    
Retail Supermarket     369         112         26    
Frozen Beverages     23,581         20,301         17,765    
Total Capital Expenditures $   48,709     $   48,641     $   39,385    
             
Assets:            
Food Service $   589,854     $   543,851     $   516,916    
Retail Supermarket     22,090         24,209         25,917    
Frozen Beverages     178,543         171,609         161,940    
Total Assets $   790,487     $   739,669     $   704,773    
             

RESULTS OF OPERATIONS:

Fiscal 2016 (52 weeks) Compared to Fiscal Year 2015 (52 weeks)

Net sales increased $16,525,000, or 2%, to $992,781,000 in fiscal 2016 from $976,256,000 in fiscal 2015.

FOOD SERVICE

Sales to food service customers increased $4,894,000 or less than 1%, to $621,529,000 in fiscal 2016.  Soft pretzel sales to the food service market increased 1% to $170,155,000 for the year with sales increases and decreases throughout our customer base.  Soft pretzel sales to restaurant chains were about the same this year and last year.  Frozen juice bar and ices sales decreased $2,656,000, or 5%, to $51,798,000 for the year due primarily to lower sales to two customers.  Churro sales to food service customers were up 1% to $57,318,000 for the year with sales increases and decreases throughout our customer base.  Sales of bakery products decreased $6,617,000, or 2%, for the year with sales to one customer down $7.0 million as the customer added a secondary supplier.  Handheld sales to food service customers were up 26% to $27,427,000 in 2016 with sales increases to one customer accounting for about 80% of the increase.  Sales of funnel cake increased $7,000,000, or 57% to $19,179,000 due primarily to increased sales to school food service and $4.0 million of sales to a new restaurant chain customer.  Sales of new products in the first twelve months since their introduction were approximately $32 million for the year. Price increases accounted for approximately $5 million of sales for the year and net volume, including new product sales as defined above, was essentially unchanged from last year.  Operating income in our Food Service segment increased from $75,286,000 in 2015 to $76,539,000 in 2016.  Operating income for the year benefitted from lower marketing expenses, lower ingredient costs, significantly increased volume of our handhelds and funnel cake products, pricing and more favorable product mix and was hurt by higher group health insurance costs and lower volume of our frozen juices and ices and bakery products. However, operating income in the fourth quarter decreased from $23,665,000 in 2015 to $17,498,000 in 2016 primarily because of a 2% decline in sales and higher manufacturing expenses.  We anticipate that these issues will continue to affect us into the first quarter of fiscal year 2017. Additionally, approximately 1/4 of the decrease of $6,167,000 in operating income resulted from costs related to certain bakery products that were withdrawn from the market due to quality issues.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets decreased $5,788,000 or 5% to $117,589,000 in fiscal year 2016.  Soft pretzel sales to retail supermarkets were $33,279,000 compared to $35,727,000 in 2015, a decrease of 7%.  About 1/2 of the pretzel sales decline was due to the discontinuance of SUPERPRETZEL BAVARIAN Soft Pretzel bread which was introduced in 2015.  Sales of frozen juices and ices decreased $3,250,000 or 5% to $68,924,000.  Increased trade spending to introduce WHOLE FRUIT Organic juice tubes and new PHILLY SWIRL products and general declines in sales of our existing PHILLY SWIRL products accounted for all of the sales decline in frozen juices and ices.  PHILLY SWIRL sales were down primarily because of lower sales to a customer in Canada due to the stronger US dollar, lower sales to one warehouse club store which carried fewer SKUs this year and decreased sales to one retail supermarket customer of a product that is being discontinued.  Although sales were down for the year, PHILLY SWIRL sales were marginally higher in the fourth quarter.  Coupon redemption costs, a reduction of sales, which were higher in the first six months a year ago supporting the introduction of the SUPERPRETZEL BAVARIAN Soft Pretzel Bread, decreased 6% to $4,430,000 for the year.  Handheld sales to retail supermarket customers decreased 19% to $15,347,000 for the year.  Roughly 37% of the handhelds sales decline in the year resulted from increased trade spending to introduce PILLSBURY mini dessert pies.  The balance of the sales decline was spread over our customer base.  Sales of OREO churros, introduced this year, were approximately $4.0 million for the year, with about ½ of the sales coming in the fourth quarter.    

Sales of new products in the first twelve months since their introduction were approximately $8 million in fiscal year 2016.  Price increases accounted for approximately $2 million of sales for the year but higher trade spending of $6 million and volume decreases of $2 million resulted in an overall sales decline of $5.7 million.  Operating income in our Retail Supermarkets segment decreased from $11,020,000 to $9,618,000 for the year primarily because of approximately $2 million of increased trade spending related to the introduction of WHOLE FRUIT Organic juice tubes, OREO churros, PILLSBURY mini dessert pies and other new products and lower soft pretzels and frozen juices and ices sales volume. However, operating income in the fourth quarter increased from $1,413,000 in 2015 to $1,793,000 in 2016 primarily because of a 4% increase in overall sales.

FROZEN BEVERAGES

Frozen beverage and related product sales increased 7% to $253,663,000 in fiscal 2016.  Beverage sales alone increased 5% to $150,118,000 for the year with increases and decreases throughout our customer base.  Gallon sales were up 6% in our base ICEE business, with sales to movie theaters accounting for about 3/4 of the increase.  Service revenue increased 8% to $71,123,000 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, increased from $26,413,000 in 2015 to $31,155,000 in 2016.  The estimated number of Company owned frozen beverage dispensers was 52,000 and 49,000 at September 24, 2016 and September 26, 2015, respectively.  Operating income in our Frozen Beverage segment increased from $24,582,000 in 2015 to $26,653,000 in 2016 due primarily to higher sales in all areas of the business.

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 30.67% in 2016 from 30.82% in 2015.  Gross profit percentage benefitted from lower ingredient costs, pricing and increased food service handhelds and funnel cake business which was more than offset by higher costs in our frozen beverages business and increased trade spending related to the introduction of WHOLE FRUIT Organic juice tubes, OREO churros, PILLSBURY mini dessert pies and new PHILLY SWIRL products in our retail supermarket business, as well as by lower volume in most of our food service segment and in our retail supermarket business and the product withdrawal in our food service segment mentioned previously.

Total operating expenses increased $1,655,000 to $191,657,000 in fiscal 2016 and as a percentage of sales decreased to 19.31% of sales from 19.46% in 2015.  Marketing expenses were 8.66% and 8.72% of sales in 2016 and 2015, respectively.  Distribution expenses as a percent of sales decreased to 7.36% from 7.60% in 2015 due in part to lower fuel costs and shipping efficiencies.  Administrative expenses were 3.25% and 3.16% of sales in 2016 and 2015, respectively.  Other general expense of $281,000 this year compared to other general income of $207,000 in 2015.

Operating income increased $1,922,000 or 2% to $112,810,000 in fiscal year 2016 as a result of the aforementioned items. 

Our investments generated before tax income of $4.1 million this year, up from $1.2 million last year as sales of our mutual fund investments, net of capital gain distributions, generated a realized loss of $598,000 this year compared to a realized loss of $3.9 million last year.   Although we recognized losses as we decreased our investments in mutual funds, our overall return on the mutual funds has been positive since we first made the investments in October 2012.  We have reduced our investments in mutual funds over the past year to $13 million at September 2016 from $19 million at September 2015 and $128 million at September 2014. The remaining unrealized losses of $520,000 are spread over 4 funds with total fair market value of $12.5 million. The remaining mutual funds presently generate income of 4.9% per year. We have invested $17 million in Fixed-to-Floating Perpetual Preferred Stock which generates fixed income to call dates in 2018, 2019 and 2025 and then income is based on a spread above LIBOR if the securities are not called.  The annual yield from these investments is presently 5.5%, of which 70% is not subject to income tax.  The mutual funds and the Fixed-to-Floating Perpetual Preferred Stock investment securities do not have contractual maturities; however, we classify them as long term assets as it is our intent to hold them for a period of over one year, although we may sell some or all of them depending on presently unanticipated needs for liquidity or market conditions.  We have invested $103 million in corporate bonds which generate fixed income to maturity dates in 2017 through 2021, with $67 million maturing prior to the end of our fiscal year 2018.  The bonds presently generate income of about 2.2% per year. Our expectation is that we will hold the corporate bonds to their maturity dates and redeem them at our amortized cost.   

The effective income tax rate decreased to 35.0% from 37.3% last year because the realized losses on sales of our mutual fund investments in 2015 and 2016 are not deductible as we do not have capital gains to offset the losses and our income tax expense for 2016 benefitted by $885,000 related to share base compensation.  We expect the effective income tax rate for 2017 to be between 35% and 35-1/2%.    

Net investment after tax income for the year of $2.7 million, or $.14 per share, compared to last year's net investment after tax loss of $516,000, or $.03 per share.

Net earnings increased $5,792,000 or 8%, in fiscal 2016 to $75,975,000, or $.32 per diluted share 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. MooreSenior Vice PresidentChief Financial Officer(856) 532-6603

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