J & J Snack Foods Corp. (NASDAQ-JJSF) today announced sales and
earnings for its fourth quarter and year ended September 28, 2019.
Sales for the fourth quarter this year increased
4% to $311.9 million from $300.7 million in last year’s fourth
quarter. For the year ended September 28, 2019, sales increased 4%
to $1.186 billion from $1.138 billion last year. Net earnings
increased 11% to $26.1 million ($1.36 per diluted share) in this
year’s fourth quarter compared to $23.4 million ($1.24 per diluted
share) last year and for the year earnings decreased 8% to $94.8
million ($5.00 per diluted share) from $103.6 million ($5.51 per
diluted share).
Operating income was $31.1 million in both
year’s fourth quarter. For the year, operating income
increased 6% to $117.0 million from $110.8 million last year.
Net earnings for last year’s quarter were
negatively impacted by a $1.4 million, or $0.07 per diluted
share, increase in income taxes because of changes to New Jersey
tax regulations enacted in July 2018 requiring the re-measurement
of deferred tax liabilities.
Net earnings for last year benefited from
a $20.9 million, or $1.11 per diluted share, gain on the
re-measurement of deferred tax liabilities and were impacted by a
$1.2 million, or $.06 per diluted share, provision for the one-time
repatriation tax both of which resulted from the Tax Cuts and
Jobs Act enacted in December 2017 and were also impacted by a
$1.4 million, or $0.07 per diluted share, increase in income
taxes because of the changes to New Jersey tax
regulations.
Gerald B. Shreiber, J & J’s President and
Chief Executive Officer, commented, “We are pleased that all of our
business segments had increased operating income for the
year. We will continue to work diligently toward improving
revenues, margins and operating income going forward.”
J&J Snack Foods Corp. (NASDAQ: 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. With nearly twenty manufacturing
facilities, and more than $1 billion in annual revenue, J&J
Snack Foods Corp. has continued to see steady growth as a company,
reaching record sales for 48 consecutive years. The company
consistently seeks out 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.
|
|
|
J
& J SNACK FOODS CORP. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF EARNINGS |
(in
thousands, except per share information) |
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Fiscal Year Ended |
|
|
|
|
|
|
|
|
|
September
28, |
|
September
29, |
|
September
28, |
|
September
29, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
(13 weeks) |
|
(13 weeks) |
|
(52 weeks) |
|
(52 weeks) |
|
|
|
|
|
|
|
|
Net
Sales |
$ |
311,872 |
|
|
$ |
300,715 |
|
$ |
1,186,487 |
|
$ |
1,138,265 |
Cost of
goods sold |
|
218,931 |
|
|
|
209,461 |
|
|
836,086 |
|
|
801,979 |
Gross
Profit |
|
92,941 |
|
|
|
91,254 |
|
|
350,401 |
|
|
336,286 |
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
Marketing |
$ |
26,636 |
|
|
|
25,733 |
|
|
96,428 |
|
|
95,405 |
Distribution |
|
24,367 |
|
|
|
24,380 |
|
|
94,888 |
|
|
92,281 |
Administrative |
|
10,812 |
|
|
|
9,743 |
|
|
40,721 |
|
|
37,757 |
Other
expense (income) |
|
65 |
|
|
|
261 |
|
|
1,408 |
|
|
68 |
Total operating expenses |
|
61,880 |
|
|
|
60,117 |
|
|
233,445 |
|
|
225,511 |
Operating
Income |
|
31,061 |
|
|
|
31,137 |
|
|
116,956 |
|
|
110,775 |
|
|
|
|
|
|
|
|
Other income
(expenses) |
|
|
|
|
|
|
|
Investment income |
|
1,966 |
|
|
|
1,580 |
|
|
7,741 |
|
|
6,267 |
Interest expense & other |
|
(40 |
) |
|
|
843 |
|
|
1,880 |
|
|
1,110 |
|
|
|
|
|
|
|
|
Earnings
before |
|
|
|
|
|
|
|
income taxes |
|
32,987 |
|
|
|
33,560 |
|
|
126,577 |
|
|
118,152 |
|
|
|
|
|
|
|
|
Income
taxes |
|
6,920 |
|
|
|
10,175 |
|
|
31,758 |
|
|
14,556 |
|
|
|
|
|
|
|
|
NET
EARNINGS |
$ |
26,067 |
|
|
$ |
23,385 |
|
$ |
94,819 |
|
$ |
103,596 |
|
|
|
|
|
|
|
|
Earnings per
diluted share |
$ |
1.36 |
|
|
$ |
1.24 |
|
$ |
5.00 |
|
$ |
5.51 |
|
|
|
|
|
|
|
|
Weighted
average number |
|
|
|
|
|
|
|
of
diluted shares |
|
19,101 |
|
|
|
18,867 |
|
|
18,959 |
|
|
18,817 |
|
|
|
|
|
|
|
|
Earnings per
basic share |
$ |
1.38 |
|
|
$ |
1.25 |
|
$ |
5.04 |
|
$ |
5.54 |
|
|
|
|
|
|
|
|
Weighted
average number of |
|
|
|
|
|
|
|
basic
shares |
|
18,867 |
|
|
|
18,726 |
|
|
18,812 |
|
|
18,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J
& J SNACK FOODS CORP. AND SUBSIDIARIES |
|
CONSOLIDATED BALANCE SHEETS |
|
(in
thousands, except share amounts) |
|
|
|
|
|
|
|
September
28, |
|
September
29, |
|
|
|
2019 |
|
|
|
2018 |
|
|
Assets |
|
|
|
|
Current
assets |
|
|
|
|
Cash
and cash equivalents |
$ |
192,395 |
|
|
$ |
111,479 |
|
|
Marketable securities held to maturity |
|
51,091 |
|
|
|
21,048 |
|
|
Accounts receivable, net |
|
140,938 |
|
|
|
132,342 |
|
|
Inventories |
|
116,165 |
|
|
|
112,884 |
|
|
Prepaid expenses and other |
|
5,768 |
|
|
|
5,044 |
|
|
Total current assets |
|
506,357 |
|
|
|
382,797 |
|
|
|
|
|
|
|
Property,
plant and equipment, at cost |
|
749,532 |
|
|
|
697,517 |
|
|
Less
accumulated depreciation |
|
|
|
|
and
amortization |
|
496,084 |
|
|
|
454,844 |
|
|
Property, plant and equipment, net |
|
253,448 |
|
|
|
242,673 |
|
|
|
|
|
|
|
Other
assets |
|
|
|
|
Goodwill |
|
102,511 |
|
|
|
102,511 |
|
|
Other
intangible assets, net |
|
54,922 |
|
|
|
57,762 |
|
|
Marketable securities held to maturity |
|
79,360 |
|
|
|
118,765 |
|
|
Marketable securities available for sale |
|
19,903 |
|
|
|
24,743 |
|
|
Other |
|
2,838 |
|
|
|
2,762 |
|
|
Total other assets |
|
259,534 |
|
|
|
306,543 |
|
|
Total Assets |
$ |
1,019,339 |
|
|
$ |
932,013 |
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
Current
Liabilities |
|
|
|
|
Current obligations under capital leases |
$ |
339 |
|
|
$ |
324 |
|
|
Accounts payable |
|
72,029 |
|
|
|
69,592 |
|
|
Accrued insurance liability |
|
10,457 |
|
|
|
11,217 |
|
|
Accrued liabilities |
|
7,808 |
|
|
|
8,031 |
|
|
Accrued compensation expense |
|
21,154 |
|
|
|
20,297 |
|
|
Dividends payable |
|
9,447 |
|
|
|
8,438 |
|
|
Total current liabilities |
|
121,234 |
|
|
|
117,899 |
|
|
|
|
|
|
|
Long-term
obligations under capital leases |
|
718 |
|
|
|
753 |
|
|
Deferred
income taxes |
|
61,920 |
|
|
|
52,322 |
|
|
Other
long-term liabilities |
|
1,716 |
|
|
|
1,948 |
|
|
|
|
|
|
|
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 |
|
|
|
|
18,895,000 and 18,754,000 respectively |
|
45,744 |
|
|
|
27,340 |
|
|
Accumulated
other comprehensive loss |
|
(12,988 |
) |
|
|
(11,994 |
) |
|
Retained
Earnings |
|
800,995 |
|
|
|
743,745 |
|
|
Total stockholders' equity |
|
833,751 |
|
|
|
759,091 |
|
|
Total Liabilities and Stockholders' Equity |
$ |
1,019,339 |
|
|
$ |
932,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
J
& J SNACK FOODS CORP. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(in
thousands) |
|
|
|
|
|
|
|
Fiscal Year
Ended |
|
|
|
|
|
|
|
September
28, |
September
29, |
September
30, |
|
|
2019 |
|
|
|
2018 |
|
|
|
2017 |
|
|
(52 weeks) |
|
(52 weeks) |
|
(53 weeks) |
|
|
|
|
|
|
Operating activities: |
|
|
|
|
|
Net
earnings |
$ |
94,819 |
|
|
$ |
103,596 |
|
|
$ |
79,174 |
|
Adjustments to reconcile net earnings to net cash provided
by |
|
|
|
|
|
operating activities: |
|
|
|
|
|
Depreciation of fixed assets |
|
45,225 |
|
|
|
42,939 |
|
|
|
38,211 |
|
Amortization of intangibles and deferred costs |
|
3,385 |
|
|
|
3,538 |
|
|
|
4,234 |
|
Gains from disposals of property & equipment |
|
(347 |
) |
|
|
(912 |
) |
|
|
(346 |
) |
Amortization of bond premiums |
|
730 |
|
|
|
1,012 |
|
|
|
1,189 |
|
Share-based compensation |
|
4,230 |
|
|
|
3,858 |
|
|
|
3,048 |
|
Deferred income taxes |
|
9,637 |
|
|
|
(10,392 |
) |
|
|
7,847 |
|
Loss (gain) on sale of marketable securities |
|
404 |
|
|
|
140 |
|
|
|
(14 |
) |
Changes in assets and liabilities, net of effects from
purchase |
|
|
|
|
|
of companies: |
|
|
|
|
|
Increase in accounts receivable, net |
|
(8,759 |
) |
|
|
(7,917 |
) |
|
|
(20,370 |
) |
Increase in inventories |
|
(3,231 |
) |
|
|
(9,639 |
) |
|
|
(7,410 |
) |
(Increase) decrease in prepaid expenses and
other |
|
(744 |
) |
|
|
(1,120 |
) |
|
|
10,265 |
|
Increase (decrease) in accounts payable and
accrued liabilities |
|
2,150 |
|
|
|
(1,736 |
) |
|
|
9,521 |
|
Net
cash provided by operating activities |
|
147,499 |
|
|
|
123,367 |
|
|
|
125,349 |
|
Investing activities: |
|
|
|
|
|
Payments for purchases of companies, net of cash
acquired |
|
(1,156 |
) |
|
|
- |
|
|
|
(47,698 |
) |
Purchases of property, plant and equipment |
|
(57,128 |
) |
|
|
(60,022 |
) |
|
|
(72,180 |
) |
Purchases of marketable securities |
|
(26,091 |
) |
|
|
(91,112 |
) |
|
|
(39,923 |
) |
Proceeds from redemption and sales of marketable
securities |
|
39,158 |
|
|
|
75,302 |
|
|
|
22,997 |
|
Proceeds from disposal of property, plant and
equipment |
|
2,050 |
|
|
|
2,639 |
|
|
|
1,935 |
|
Other |
|
(196 |
) |
|
|
54 |
|
|
|
(450 |
) |
Net
cash used in investing activities |
|
(43,363 |
) |
|
|
(73,139 |
) |
|
|
(135,319 |
) |
Financing activities: |
|
|
|
|
|
Payments to repurchase common stock |
|
- |
|
|
|
(2,794 |
) |
|
|
(18,229 |
) |
Proceeds from issuance of common stock |
|
14,174 |
|
|
|
8,894 |
|
|
|
7,231 |
|
Payments on capitalized lease obligations |
|
(356 |
) |
|
|
(370 |
) |
|
|
(356 |
) |
Payment of cash dividend |
|
(36,644 |
) |
|
|
(33,066 |
) |
|
|
(30,859 |
) |
Net
cash used in financing activities |
|
(22,826 |
) |
|
|
(27,336 |
) |
|
|
(42,213 |
) |
Effect of exchange rates on cash and cash
equivalents |
|
(394 |
) |
|
|
(2,375 |
) |
|
|
2,493 |
|
Net
increase (decrease) in cash and cash equivalents |
|
80,916 |
|
|
|
20,517 |
|
|
|
(49,690 |
) |
Cash and
cash equivalents at beginning of year |
|
111,479 |
|
|
|
90,962 |
|
|
|
140,652 |
|
Cash and
cash equivalents at end of year |
$ |
192,395 |
|
|
$ |
111,479 |
|
|
$ |
90,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J
& J SNACK FOODS CORP. AND SUBSIDIARIES |
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
28, |
September
29, |
September
30, |
|
|
|
|
2019 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
(52 weeks) |
|
(52 weeks) |
|
(53 weeks) |
|
|
|
|
Sales to
External Customers: |
|
|
|
|
|
|
|
Food
Service |
|
|
|
|
|
|
|
Soft pretzels |
|
$ |
209,227 |
|
|
$ |
208,544 |
|
|
$ |
180,138 |
|
|
Frozen juices and ices |
|
|
43,672 |
|
|
|
42,364 |
|
|
|
49,469 |
|
|
Churros |
|
|
65,976 |
|
|
|
61,726 |
|
|
|
62,809 |
|
|
Handhelds |
|
|
31,685 |
|
|
|
38,928 |
|
|
|
36,913 |
|
|
Bakery |
|
|
384,636 |
|
|
|
371,391 |
|
|
|
351,357 |
|
|
Other |
|
|
26,407 |
|
|
|
22,991 |
|
|
|
21,108 |
|
|
Total
Food Service |
|
$ |
761,603 |
|
|
$ |
745,944 |
|
|
$ |
701,794 |
|
|
|
|
|
|
|
|
|
|
Retail Supermarket |
|
|
|
|
|
|
|
Soft pretzels |
|
$ |
36,264 |
|
|
$ |
36,438 |
|
|
$ |
35,081 |
|
|
Frozen juices and ices |
|
|
73,751 |
|
|
|
74,435 |
|
|
|
71,325 |
|
|
Handhelds |
|
|
10,902 |
|
|
|
12,419 |
|
|
|
14,892 |
|
|
Coupon redemption |
|
|
(3,596 |
) |
|
|
(4,439 |
) |
|
|
(4,898 |
) |
|
Other |
|
|
1,955 |
|
|
|
2,086 |
|
|
|
2,847 |
|
|
Total
Retail Supermarket |
|
$ |
119,276 |
|
|
$ |
120,939 |
|
|
$ |
119,247 |
|
|
|
|
|
|
|
|
|
|
Frozen Beverages |
|
|
|
|
|
|
|
Beverages |
|
$ |
171,820 |
|
|
$ |
160,937 |
|
|
$ |
154,157 |
|
|
Repair and |
|
|
|
|
|
|
|
maintenance service |
|
|
85,103 |
|
|
|
78,805 |
|
|
|
74,594 |
|
|
Machines revenue |
|
|
45,811 |
|
|
|
28,652 |
|
|
|
31,497 |
|
|
Other |
|
|
2,874 |
|
|
|
2,988 |
|
|
|
2,935 |
|
|
Total
Frozen Beverages |
|
$ |
305,608 |
|
|
$ |
271,382 |
|
|
$ |
263,183 |
|
|
|
|
|
|
|
|
|
|
Consolidated
Sales |
|
$ |
1,186,487 |
|
|
$ |
1,138,265 |
|
|
$ |
1,084,224 |
|
|
|
|
|
|
|
|
|
|
Depreciation
and Amortization: |
|
|
|
|
|
|
|
Food
Service |
|
$ |
26,978 |
|
|
$ |
25,983 |
|
|
$ |
24,629 |
|
|
Retail Supermarket |
|
|
1,418 |
|
|
|
1,313 |
|
|
|
949 |
|
|
Frozen Beverages |
|
|
20,214 |
|
|
|
19,181 |
|
|
|
16,867 |
|
|
Total Depreciation and Amortization |
$ |
48,610 |
|
|
$ |
46,477 |
|
|
$ |
42,445 |
|
|
|
|
|
|
|
|
|
|
Operating
Income: |
|
|
|
|
|
|
|
Food
Service |
|
$ |
78,130 |
|
|
$ |
74,056 |
|
|
$ |
81,208 |
|
|
Retail Supermarket |
|
|
8,876 |
|
|
|
8,304 |
|
|
|
10,627 |
|
|
Frozen Beverages |
|
|
29,950 |
|
|
|
28,415 |
|
|
|
26,272 |
|
|
Total
Operating Income |
|
$ |
116,956 |
|
|
$ |
110,775 |
|
|
$ |
118,107 |
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures: |
|
|
|
|
|
|
|
Food
Service |
|
$ |
29,197 |
|
|
$ |
36,325 |
|
|
$ |
44,067 |
|
|
Retail Supermarket |
|
|
1,979 |
|
|
|
928 |
|
|
|
239 |
|
|
Frozen Beverages |
|
|
25,952 |
|
|
|
22,769 |
|
|
|
27,874 |
|
|
Total
Capital Expenditures |
|
$ |
57,128 |
|
|
$ |
60,022 |
|
|
$ |
72,180 |
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
Food
Service |
|
$ |
772,777 |
|
|
$ |
693,098 |
|
|
$ |
635,709 |
|
|
Retail Supermarket |
|
|
22,673 |
|
|
|
21,366 |
|
|
|
21,129 |
|
|
Frozen Beverages |
|
|
223,889 |
|
|
|
217,549 |
|
|
|
210,390 |
|
|
Total
Assets |
|
$ |
1,019,339 |
|
|
$ |
932,013 |
|
|
$ |
867,228 |
|
|
|
|
|
|
|
|
|
|
RESULTS OF OPERATIONS:
Fiscal 2019 (52 weeks) Compared to
Fiscal Year 2018 (52 weeks)
Net sales increased $48,222,000, or 4%, to
$1,186,487,000 in fiscal 2019 from $1,138,265,000 in fiscal
2018.
We have three reportable segments, as disclosed
in the accompanying notes to the consolidated financial statements:
Food Service, Retail Supermarkets and Frozen Beverages.
The Chief Operating Decision Maker for Food
Service and Retail Supermarkets and the Chief Operating Decision
Maker for Frozen Beverages monthly review detailed operating income
statements and sales reports in order to assess performance and
allocate resources to each individual segment. Sales and operating
income are the key variables monitored by the Chief Operating
Decision Makers and management when determining each segment’s and
the Company’s financial condition and operating performance.
In addition, the Chief Operating Decision Makers review and
evaluate depreciation, capital spending and assets of each segment
on a quarterly basis to monitor cash flow and asset needs of each
segment.
FOOD SERVICE
Sales to food service customers increased
$15,659,000, or 2 percent, to $761,603,000 in fiscal 2019.
Soft pretzel sales to the food service market increased about 1/3
of 1 percent to $209,227,000 for the year with higher sales to
convenience store chains offset by lower sales to restaurant chains
and with sales increases and decreases throughout our customer
base. Our line of BRAUHAUS pretzels contributed to the
increased sales. Frozen juice bar and ices sales increased
$1,308,000, or 3%, to $43,672,000 for the year due primarily to
higher sales to warehouse club stores. Churro sales to food
service customers were up 7% to $65,976,000 for the year with sales
increases and decreases across our customer base but with
particularly strong sales to warehouse club stores. Sales of
bakery products increased $13,245,000, or 4%, to $384,636,000 for
the year with increased sales to one customer accounting for all of
the increase. Handheld sales to food service customers were
down 19% to $31,685,000 in 2019 with sales decreases to three
customers accounting for all of the decrease. Sales of funnel
cake increased $3,223,000, or 15% to $24,793,000 due primarily to
increased sales to a quick service restaurant under a limited time
offer in our second quarter. Overall food service sales to
restaurant chains were down about 2% for the year. Sales of
new products in the first twelve months since their introduction
were approximately $13.5 million for the year. Price increases
accounted for approximately $15 million of sales for the year and
net volume including new product sales were essentially flat.
Operating income in our Food Service segment increased from
$74,056,000 in 2018 to $78,130,000 in 2019 resulting from benefits
of improved operations at several of our manufacturing facilities
and increased pricing.
RETAIL SUPERMARKETS
Sales of products to retail supermarkets
decreased $1,663,000 or 1% to $119,276,000 in fiscal year 2019.
Soft pretzel sales to retail supermarkets were $36,264,000
compared to $36,438,000 in 2018. Strong pretzel sales
increases from sales of AUNTIE ANNE’S products were offset by lower
sales of our SUPER PRETZEL products. Sales of frozen juices
and ices decreased $684,000 or 1% to $73,751,000 as we lost some
volume and placements due to price increases. Coupon
redemption costs, a reduction of sales, decreased 19% to $3,596,000
for the year. Handheld sales to retail supermarket customers
decreased 12% to $10,902,000 for the year as sales of this product
line in retail supermarkets continues its long-term
decline.
Sales of new products in the first twelve months
since their introduction were approximately $1 million in
fiscal year 2019. Price increases provided about $4 million
of sales for the year and net volume decreased about $5.5 million
for the year. Operating income in our Retail Supermarkets segment
increased from $8,304,000 to $8,876,000 for the year. The primary
contribution to the higher operating income this year was increased
pricing.
FROZEN BEVERAGES
Frozen beverage and related product sales
increased 13% to $305,608,000 in fiscal 2019. Beverage sales alone
increased 7% or $10,883,000 for the year with increases and
decreases throughout our customer base. About one third of
the beverage sales increase was from increased flow through sales
to one distributor which did not benefit operating income. Gallon
sales were up 3% in our base ICEE business, with sales increases
spread throughout our customer base. Service revenue
increased 8% to $85,103,000 for the year with sales increases and
decreases spread throughout our customer base. Machines
revenue, primarily sales of machines, increased from $28,652,000 in
2018 to $45,811,000 in 2019. The estimated number of Company
owned frozen beverage dispensers was 26,000 and 25,000 at September
28, 2019 and September 29, 2018, respectively. Operating
income in our Frozen Beverage segment increased from $28,415,000 in
2018 to $29,950,000 in 2019 as a result of higher sales.
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 was
essentially unchanged at 29.53% in 2019 and 29.54% in 2018 as the
benefits of improved operations at several of our manufacturing
facilities and increased pricing were offset by increases in lower
margin sales of machines in our frozen beverages segment and
increases in lower margin sales of bakery products in our food
service segment.
Total operating expenses increased $7,934,000 to
$233,445,000 in fiscal 2019 and as a percentage of sales decreased
to 19.68% of sales from 19.81% in 2018. Marketing expenses
decreased to 8.13% this year from 8.38% of sales in 2018 because of
modest spending increases in all of our businesses. Distribution
expenses as a percent of sales decreased to 8.00% from 8.11% in
2018 because freight rates have dropped from last year.
Administrative expenses were 3.43% and 3.32% of sales in 2019 and
2018, respectively.
Operating income increased $6,181,000 or 6% to
$116,956,000 in fiscal year 2019 as a result of the aforementioned
items.
Our investments generated before tax income of
$7.7 million this year, up from $6.3 million last year due to
increases in the amount of investments and higher interest
rates. Other income in 2019 includes
a $2.0 million payment received from a customer due to cancellation
of production under a co-manufacturing
agreement. Other income in 2018 includes
$520,000 gain on a sale of property and $869,000 reimbursement of
business interruption losses due to the MARY B’s biscuits recall in
January 2018.
Net earnings for the year ended September 29,
2018 benefited from a $20.9 million gain, or $1.11 per diluted
share, on the remeasurement of deferred tax liabilities and a $8.8
million, or $0.47 per diluted share, reduction in income taxes
related primarily to the lower corporate tax rate enacted under the
Tax Cuts and Jobs Act in December 2017 which was partially offset
by a $1.2 million, or $.06 per diluted share, provision for the one
time repatriation tax, both of which resulted from the Tax Cuts and
Jobs Act enacted in December 2017. Net earnings for the year
were also impacted by a $1.4 million, or $.07 per diluted share,
expense on the remeasurement of deferred tax liabilities due to
changes in New Jersey tax regulations effective July 2018.
Excluding the deferred tax gain, the deferred tax expense and the
one-time repatriation tax, our effective tax rate was 27.8% in the
year ended September 29, 2018. Net earnings this year benefitted by
a reduction of approximately $900,000 in tax as the provision for
the one-time repatriation tax was reduced as the amount recorded
last year was an estimate. Excluding the reduction in
the provision for the one-time repatriation tax, our effective tax
rate was 25.8% for this year.
Net earnings decreased $8,777,000 or 8%, in
fiscal 2019 to $94,819,000, or $5.00 per diluted share, from
$103,596,000, or $5.51 per diluted share, in fiscal 2018 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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