GlobeNewswire Inc | Jul 27, 2020 04:00PM EDT

July 27, 2020

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 years third quarter. A net loss of $12.6 million in this years quarter compared to net earnings of $30.9 million in last years 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 years 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 Companys 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 & Js 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 currentquarter. 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, LUIGIS, MINUTE MAID* frozen juice bars and ices, WHOLE FRUIT sorbet and frozen fruit bars, MARY BS biscuits and dumplings, DADDY RAYS fig and fruit bars, TIO PEPES 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 5,072 - 5,072 -impairment costs Other general (54 ) 794 (183 ) 1,343(income) expense Total 56,616 62,307 171,235 171,565operating expenses Operating (loss) (19,420 ) 39,042 13,265 85,895income Other income (expense) Investment income 1,300 1,953 2,673 5,775 Interest expense (7 ) 1,972 (60 ) 1,920& other (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) $ (12,647 ) $ 30,872 $ 11,721 $ 68,752EARNINGS (Loss) earnings per $ (0.67 ) $ 1.63 $ 0.62 $ 3.64diluted share Weighted average number of diluted shares 18,888 18,947 19,036 18,912 (Loss) earnings per $ (0.67 ) $ 1.64 $ 0.62 $ 3.66basic share 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 717,420 676,724 equipment, at cost 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 SUBSIDIARIESCONSOLIDATED 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 (57,197 ) (1,155 ) cash acquiredPurchases 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 toExternal Customers: Food Service Soft $ 21,384 $ 55,867 $ 116,985 $ 154,670 pretzels Frozenjuices and 8,688 13,862 25,222 30,336 ices 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 $ 116,621 $ 193,356 $ 471,401 $ 548,449 Service Retail Supermarket Soft $ 12,716 $ 7,294 $ 34,874 $ 28,309 pretzels Frozenjuices and 33,322 26,515 59,279 52,179 ices Biscuits 8,151 5,215 21,759 19,437 Handhelds 3,257 3,063 9,135 8,110 Coupon (807 ) (962 ) (2,216 ) (2,163 ) redemption Other 863 642 1,668 1,341 TotalRetail $ 57,502 $ 41,767 $ 124,499 $ 107,213 Supermarket Frozen Beverages Beverages $ 16,456 $ 56,937 $ 83,606 $ 121,976 Repair and

maintenance 17,259 22,514 61,524 62,291 service Machines 6,363 11,810 27,254 33,875 revenue Other 362 317 1,218 811 TotalFrozen $ 40,440 $ 91,578 $ 173,602 $ 218,953 Beverages Consolidated $ 214,563 $ 326,701 $ 769,502 $ 874,615 Sales Depreciationand Amortization: Food $ 7,050 $ 6,973 $ 21,208 $ 19,911 Service Retail 468 335 1,156 990 Supermarket Frozen 5,864 5,015 17,505 15,059 BeveragesTotalDepreciation $ 13,382 $ 12,323 $ 39,869 $ 35,960 andAmortization Operating(Loss) Income: Food $ (18,242 ) $ 21,030 $ 7,743 $ 57,909 Service Retail 7,910 3,775 14,464 9,025 Supermarket Frozen (9,088 ) 14,237 (8,942 ) 18,961 BeveragesTotalOperating $ (19,420 ) $ 39,042 $ 13,265 $ 85,895 (Loss) Income Capital Expenditures: Food $ 7,865 $ 8,665 $ 26,599 $ 23,346 Service Retail 390 597 1,625 1,730 Supermarket Frozen 2,397 6,523 19,413 17,060 BeveragesTotal Capital $ 10,652 $ 15,785 $ 47,637 $ 42,136 Expenditures Assets: Food $ 729,331 $ 751,641 $ 729,331 $ 751,641 Service Retail 33,766 24,825 33,766 24,825 Supermarket Frozen 294,189 219,224 294,189 219,224 BeveragesTotal Assets $ 1,057,286 $ 995,690 $ 1,057,286 $ 995,690



Netsales 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 Companys 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 years 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 years 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 years 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 years third quarter compared to $3,775,000 in last years quarter, a 110% increase and increased to $14,464,000 in this years nine months compared to $9,025,000 in last years 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 years 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 years operating income was also impacted by relocation costs of our ICEEs 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 years quarter from 8.1% last year and were 8.9% in the nine months compared to 8.0% of sales in last years nine months. Distribution expenses were 9.9% of sales in the third quarter and 7.5% of sales in last years quarter and were 9.1% in this years nine months compared to 8.1% in last years 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 years nine months compared to 3.4% of sales in last years 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 years 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 years 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 years nine months. Our effective tax rate was 26.2% in this years 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 managements 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