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8-K - FORM 8-K - J&J SNACK FOODS CORPjjsf_8k-110812.htm
 
FOR IMMEDIATE RELEASE
FOR: 
 Contact: 
Dennis G. Moore
Senior Vice President
Chief Financial Officer
(856) 532-6603
 
                                                                                                                                                              
6000 Central Highway
Pennsauken, NJ 08109

 SALES AND EARNINGS
REPORTED BY J & J SNACK FOODS

Pennsauken, NJ, November 8, 2012 - - J & J Snack Foods Corp. (NASDAQ-JJSF) today announced sales and earnings for its fourth quarter and year ended September 29, 2012.

Sales for the fourth quarter (14 weeks) increased 10% to $242.2 million from $219.4 million in last year’s fourth quarter (13 weeks).  For the year ended September 29, 2012 (53 weeks), sales increased 12% to $830.8 million from $744.1 million last year (52 weeks).   Excluding sales from the extra week in 2012, sales increased approximately 3% for the fourth quarter and 10% for the year.   Last year’s third quarter net earnings included a $6.6 million gain on bargain purchase of a business.  Net earnings increased 22% to $19.5 million ($1.03 per diluted share) in this year’s fourth quarter compared to $16.0 million ($0.85 per diluted share) last year and for the year, without the benefit of the bargain gain last year, earnings increased 12% to $54.2 million ($2.86 per diluted share) from $48.5 million ($2.58 per diluted share).

Last year’s reported net earnings, which included the $6.6 million gain in the third quarter, were $16.0 million ($.85 per diluted share) for the fourth quarter and $55.1 million ($2.93 per diluted share) for the year.

Operating income increased 23% to $30.3 million this year from $24.6 million in the year ago period for the fourth quarter.  For the year, operating income increased 11% to $85.0 million from $76.6 million last year.

The Company also said that it purchased and retired 187,649 shares of its common stock at a cost of $10,777,553 over the period July 25, 2012 to October 31, 2012 and that on November 8, 2012 its Board of Directors authorized the purchase for retirement of an additional 500,000 shares.

Gerald B. Shreiber, J & J’s President and Chief Executive Officer, commented, “We are pleased with our revenue and profit growth during the quarter and the year. We grew several of our core products including soft pretzels and churros organically as we expanded with both new customers and new venues.  New manufacturing lines were added in Texas, Missouri and New Jersey to handle projected growth for fiscal 2013 and beyond.”


J & J Snack Foods Corp.’s principal products include SUPERPRETZEL, PRETZEL FILLERS and other soft pretzels, ICEE and  SLUSH PUPPIE frozen beverages, LUIGI’S, MAMA TISH’S, SHAPE UPS, and 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, TIO PEPE’S and CALIFORNIA CHURROS churros, THE FUNNEL CAKE FACTORY funnel cakes,  MRS. GOODCOOKIE, CAMDEN CREEK, COUNTRY HOME and READI-BAKE cookies, PATIO burritos and HAND FULLS and HOLLY RIDGE BAKERY filled handheld  products.  J & J has manufacturing facilities in Pennsauken, Bridgeport and Bellmawr, New Jersey; Scranton, Hatfield and Chambersburg, Pennsylvania; Carrollton, Texas; Atlanta, Georgia; Moscow Mills, Missouri; Pensacola, Florida; Colton, Vernon  and Norwalk, California; Holly Ridge, North Carolina; and Weston, Oregon.
.
*MINUTE MAID is a registered trademark of The Coca-Cola Company.

 
 

 
 
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except  share amounts)
 
   
Quarter Ended
   
Fiscal Year Ended
 
   
September 29,
   
September 24,
   
September 29,
   
September 24,
 
   
2012
   
2011
   
2012
   
2011
 
   
(14 weeks)
   
(13 weeks)
   
(53 weeks)
   
(52 weeks)
 
   
Unaudited
   
Unaudited
   
Unaudited
       
                         
Net Sales
  $ 242,221     $ 219,380     $ 830,796     $ 744,071  
Cost of goods sold
    164,936       152,270       580,611       514,297  
Gross Profit
    77,285       67,110       250,185       229,774  
Operating expenses
                               
Marketing
    21,363       19,233       76,318       70,637  
Distribution
    17,785       16,657       62,250       57,462  
Administrative
    7,034       6,678       26,192       24,568  
Other general expense
    763       (53 )     458       524  
      46,945       42,515       165,218       153,191  
                                 
Operating Income
    30,340       24,595       84,967       76,583  
                                 
Other income (expense)
                               
Gain on bargain purchase of a business
    -       -       -       6,580  
Investment income
    260       347       1,392       1,041  
Interest expense & other
    (41 )     (32 )     (73 )     (138 )
      219       315       1,319       7,483  
Earnings before income taxes
    30,559       24,910       86,286       84,066  
Income taxes
    11,021       8,926       32,168       29,003  
NET EARNINGS
  $ 19,538     $ 15,984     $ 54,118     $ 55,063  
                                 
Earnings per diluted share
  $ 1.03     $ 0.85     $ 2.86     $ 2.93  
Earnings per basic share
  $ 1.04     $ 0.85     $ 2.87     $ 2.95  
Weighted average number of diluted shares
    18,919       18,857       18,917       18,789  
Weighted average number of basic shares
    18,867       18,774       18,854       18,672  

 
-2-

 
 
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
 
   
September 29,
2012
   
September 24,
2011
 
Assets
           
Current assets
           
Cash and cash equivalents
  $ 154,198     $ 87,479  
Marketable securities held to maturity
    1,214       25,506  
Accounts receivable, net
    76,414       75,000  
Inventories, net
    69,761       63,461  
Prepaid expenses and other
    2,220       4,196  
Deferred income taxes
    4,261       4,208  
Total current assets
    308,068       259,850  
                 
Property, plant and equipment, at cost
    483,873       446,856  
Less accumulated depreciation and amortization
    342,329       322,206  
      141,544       124,650  
                 
Other assets
               
Goodwill
    76,899       70,070  
Other intangible assets, net
    48,464       52,005  
Marketable securities held to maturity
    24,998       42,000  
Other
    3,071       2,241  
      153,432       166,316  
    $ 603,044     $ 550,816  
                 
Liability and Stockholder's Equity
               
Current Liabilities
               
Current obligations under capital leases
  $ 340     $ 278  
Accounts payable
    59,649       55,918  
Accrued liabilities
    5,919       4,593  
Accrued compensation expense
    13,151       12,859  
Dividends payable
    2,446       2,200  
Total current liabilities
    81,505       75,848  
                 
Long-term obligations under capital leases
    347       523  
Deferred income taxes
    44,874       41,050  
Other long-term liabilities
    831       1,007  
                 
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 18,780,000 and 18,727,000 respectively
    43,011       45,017  
Accumulated other comprehensive loss
    (3,132 )     (3,914 )
Retained Earnings
    435,608       391,285  
      475,487       432,388  
    $ 603,044     $ 550,816  

 
-3-

 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
   
(53 weeks)
 
(52 weeks)
 
(52 weeks)
 
                   
Operating activities:
                 
Net earnings
  $ 54,118     $ 55,063     $ 48,409  
Adjustments to reconcile net earnings to net cash provided by operating activities:
                       
Depreciation of fixed assets
    26,175       25,046       24,498  
Amortization of intangibles and deferred costs
    4,762       5,188       5,354  
Losses(gains) from disposals and impairment of property & equipment
    (146 )     52       (14 )
Share-based compensation
    1,246       918       1,248  
Gain on bargain purchase of a business
    -       (6,580 )     -  
Deferred income taxes
    3,108       6,108       3,219  
Changes in assets and liabilities, net of effects from purchase of companies:
                       
(Increase)decrease in accounts receivable
    (605 )     (5,231 )     (8,629 )
(Increase)decrease in inventories
    (6,463 )     (6,262 )     (4,422 )
Decrease(increase) in prepaid expenses and other
    1,982       1,870       (4,101 )
Increase in accounts payable and accrued liabilities
    5,248       4,284       2,446  
Net cash provided by operating activities
    89,425       80,456       68,008  
Investing activities:
                       
Payments for purchases of companies, net of cash acquired
    (7,900 )     (8,806 )     (25,185 )
Purchases of property, plant and equipment
    (42,800 )     (29,124 )     (33,531 )
Purchases of marketable securities
    (68,450 )     (63,293 )     (50,496 )
Proceeds from redemption and sales of marketable securities
    109,744       37,568       67,362  
Proceeds from disposal of property and equipment
    1,038       394       407  
Other
    (950 )     (644 )     (12 )
Net cash used in investing activities
    (9,318 )     (63,905 )     (41,455 )
Financing activities:
                       
Payments to repurchase common stock
    (8,167 )     -       (7,768 )
Proceeds from issuance of common stock
    4,227       5,377       3,051  
Payments on capitalized lease obligations
    (311 )     (244 )     (143 )
Payment of cash dividend
    (9,549 )     (8,540 )     (7,749 )
Net cash used in financing activities
    (13,800 )     (3,407 )     (12,609 )
Effect of exchange rates on cash and cash equivalents
    412       (330 )     378  
Net increase in cash and cash equivalents
    66,719       12,814       14,322  
Cash and cash equivalents at beginning of year
    87,479       74,665       60,343  
Cash and cash equivalents at end of year
  $ 154,198     $ 87,479     $ 74,665  

 
-4-

 
 
SEGMENT REPORTING
 
    Fiscal year ended  
   
September 29,
   
September 24,
   
September 25,
 
   
2012
   
2011
   
2010
 
    (in thousands)  
                   
Sales to External Customers:
             
Food Service
                 
Soft pretzels
  $ 118,014     $ 103,943     $ 100,694  
Frozen juices and ices
    53,813       49,740       47,273  
Churros
    45,974       41,583       31,732  
Handhelds
    27,818       8,865       -  
Bakery
    266,192       241,288       234,032  
Other
    9,451       18,143       24,075  
    $ 521,262     $ 463,562     $ 437,806  
                         
Retail Supermarket
                       
Soft pretzels
  $ 33,842     $ 32,044     $ 30,463  
Frozen juices and ices
    53,673       51,940       48,288  
Handhelds
    24,358       9,424       -  
Coupon redemption
    (3,222 )     (3,857 )     (3,399 )
Other
    1,217       1,548       767  
    $ 109,868     $ 91,099     $ 76,119  
                         
Frozen Beverages
                       
Beverages
  $ 135,436     $ 133,372     $ 128,125  
Repair and maintenance service
    49,115       42,608       40,410  
Machines sales
    13,136       11,362       11,964  
Other
    1,979       2,068       2,279  
    $ 199,666     $ 189,410     $ 182,778  
                         
Consolidated Sales
  $ 830,796     $ 744,071     $ 696,703  
                         
Depreciation and Amortization:
                 
Food Service
  $ 17,287     $ 16,986     $ 17,252  
Retail Supermarket
    23       8       -  
Frozen Beverages
    13,627       13,240       12,600  
    $ 30,937     $ 30,234     $ 29,852  
                         
Operating Income:
                       
Food Service
  $ 49,770     $ 46,171     $ 50,220  
Retail Supermarket
    13,316       11,830       11,281  
Frozen Beverages
    21,881       18,582       15,661  
    $ 84,967     $ 76,583     $ 77,162  
                         
Capital Expenditures:
                       
Food Service
  $ 28,504     $ 14,905     $ 18,392  
Retail Supermarket
    -       -       -  
Frozen Beverages
    14,296       14,219       15,139  
    $ 42,800     $ 29,124     $ 33,531  
                         
Assets:
                       
Food Service
  $ 453,509     $ 405,927     $ 341,285  
Retail Supermarket
    6,098       3,579       2,731  
Frozen Beverages
    143,437       141,310       139,978  
    $ 603,044     $ 550,816     $ 483,994  

 
-5-

 

RESULTS OF OPERATIONS

Fiscal 2012 (53 weeks) Compared to Fiscal 2011 (52 weeks)

Net sales increased $86,725,000, or 12%, to $830,796,000 in fiscal 2012 from $744,071,000 in fiscal 2011. Excluding sales from the extra week in 2012, sales increased approximately 10% from 2011 to 2012.

Excluding sales from the acquisitions of the frozen handheld business of ConAgra Foods in May 2011 and Kim & Scott’s Gourmet Pretzels in June 2012 in the twelve months post acquisitions and the extra week in 2012, sales increased approximately 5% for the year.

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 is considered to be the one and only key variable 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.

 
-6-

 

FOOD SERVICE

Sales to food service customers increased $57,700,000 or 12%, to $521,262,000 in fiscal 2012. Excluding sales from the extra week in 2012, sales increased approximately 10% from 2011 to 2012.  Excluding handhelds and Kim & Scott’s sales in the twelve months post acquisitions and the extra week in 2012, sales increased approximately 6% for the year. Soft pretzel sales to the food service market increased 14% to $118,014,000 for the year aided by increased sales to restaurant chains, warehouse club stores and throughout our customer base. Increased sales to one customer accounted for approximately 25% of the pretzel sales increase.  Excluding Kim & Scott’s sales, food service soft pretzel sales increased 12% for the year. Frozen juice bar and ices sales increased $4,073,000 or 8%, to $53,813,000 for the year primarily as the result of higher sales to warehouse club stores and throughout our customer base.  Increased sales to one customer accounted for about 85% of the frozen juices and ices sales increase.  Churro sales to food service customers increased 11% to $45,974,000 in 2012 with sales increasing generally throughout our customer base, with sales to international customers accounting for about 1/3 of the sales increase. Sales of bakery products increased $24,904,000, or 10%, for the year as sales were spread throughout our customer base.  Handheld sales to food service customers were $27,818,000 in 2012. Funnel cake and related funnel cake product sales decreased by $8,564,000 to $8,033,000 with lower sales to three customers accounting for all of the decrease. Sales of new products in the first twelve months since their introduction were approximately $15.2 million for the year. Price increases accounted for approximately $16.1 million of sales for the year and net volume increases, including new product sales as defined above and sales resulting from the acquisitions of Kim & Scott’s and the handheld business, accounted for approximately $41.6 million of sales for the year. Operating income in our Food Service segment increased from $46,171,000 in 2011 to $49,770,000 in 2012 primarily as a result of increased sales volume and price increases which offset higher ingredient and packaging cost increases of about $9 million and the negative impact of the sharp decline in funnel cake sales.

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $18,769,000 or 21% to $109,868,000 in fiscal year 2012.  Excluding sales from the extra week in 2012, sales increased approximately 18% from 2011 to 2012.  Excluding handheld sales and Kim & Scott’s sales in the twelve months post acquisitions and the extra week in 2012, sales increased approximately 2% for the year.  Soft pretzel sales to retail supermarkets were $33,842,000 compared to $32,044,000 in 2011 on a unit volume increase of 2%.  Sales of frozen juices and ices increased $1,733,000 or 3% to $53,673,000 on flat volume.  Coupon redemption costs, a reduction of sales, decreased 16% or about $635,000 for the year.  Handheld sales to retail supermarket customers were $24,358,000 in 2012.  Sales of products in the first twelve months since their introduction were approximately $7.0 million in fiscal year 2012. Price increases accounted for approximately $3.7 million of sales for the year and net volume increases, including new product sales as defined above and handheld sales and Kim & Scott’s sales and net of decreased coupon costs, accounted for approximately $15.0 million of sales for the year. Operating income in our Retail Supermarkets segment increased from $11,830,000 in 2011 to $13,316,000 in 2012 primarily due to operating income generated by handheld sales and lower coupon expense.

 
-7-

 
 
FROZEN BEVERAGES

Frozen beverage and related product sales increased 5% to $199,666,000 in fiscal 2012. Excluding sales from the extra week in 2012, sales increased approximately 4% from 2011 to 2012.  Beverage sales alone increased 2% to $135,436,000 for the year with increases and decreases throughout our customer base.  Domestic gallon sales were flat in our base ICEE business. Service revenue increased 15% to $49,115,000 for the year with increases and decreases spread across our customer base.  Sales of beverage machines, which tend to fluctuate from year to year while following no specific trend, increased from $11,362,000 in 2011 to $13,136,000 in 2012.  The estimated number of Company owned frozen beverage dispensers was 42,500 and 40,800 at September 29, 2012 and September 24, 2011, respectively.  Operating income in our Frozen Beverage segment increased from $18,582,000 in 2011 to $21,881,000 in 2012 as a result of increased sales as discussed above and controlled expenses.  Higher gasoline costs of approximately $900,000 impacted the year’s operating income.

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 30.11% in 2012 from 30.88% in 2011.  Higher ingredient and packaging costs compared to last year of approximately $10 million and the lower gross profit margin of handheld sales were primarily responsible for the decreased gross profit percentage.  Without this handhelds impact, gross profit as a percentage of sales would have been roughly the same for 2011 and 2012.  Ingredient and packaging costs can be extremely volatile and may be significantly different from what we are presently expecting and therefore we cannot project the impact of ingredient and packaging costs on our business going forward; however, there has been a very significant increase in the market cost of flour and packaging as well as other lesser used ingredients over the past six months which we anticipate will result in higher costs over some portions of our fiscal year 2013.

 
-8-

 
 
Total operating expenses increased $12,027,000 to $165,218,000 in fiscal 2012 but as a percentage of sales decreased .70 percentage points to 20% of sales.  Marketing expenses decreased .30 percentage points and remained at 9% of sales. Distribution expenses decreased .23 percentage points to 7% of sales. Administrative expenses decreased .15 percentage points and were 3% of sales in both years. The drops in percentages were generally because of increased sales.  Other general expense of $458,000 this year compared to other general expense of $524,000 in 2011.  Included in other general expense in 2012 is $404,000 of acquisition costs and costs of relocating Kim & Scott’s operations. Included in other general expense in 2011 is $546,000 of acquisition costs.

Operating income for the year was impacted by approximately $800,000 of costs of a management and sales meeting held in October 2011, which has historically been held every five years.

Operating income increased $8,384,000 or 11% to $84,967,000 in fiscal year 2012 as a result of the aforementioned items.

Gain on the bargain purchase of a business of $6,580,000 in 2011 resulted from the fair value of the identifiable assets acquired in the handhelds acquisition exceeding the purchase price.
 
Investment income increased by $351,000 to $1,392,000 due to increased investments in marketable securities.

The effective income tax rate increased 2.78 percentage points to 37% from 35% last year.  Adjusting out the effect of the gain on bargain purchase of a business, the effective tax rate in 2011 was 37%.

Net earnings decreased $945,000 or 2%, in fiscal 2012 to $54,118,000, or $2.86 per diluted share as a result of the aforementioned items.  Without the benefit of the gain on bargain purchase of a business in 2011, net earnings were $48,483,000 in 2011 compared to $54,118,000 this year.

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.

-9-