JJSF J and J Snack Foods Corporation

J & J Snack Foods Corp. (NASDAQ:JJSF) today reported record sales and earnings for its 2009 fiscal year.

Sales for the fiscal year ended September 26, 2009 increased 4% to $653.0 million from $629.4 million in the fiscal year ended September 27, 2008. Net earnings increased 48% to $41.3 million in fiscal 2009 from $27.9 million in fiscal 2008. On a per diluted share basis, earnings increased 50% to $2.21 from $1.47. Operating income increased 54% to $66.9 million this year from $43.3 million in the year ago period.

For the fourth quarter ended September 26, 2009, sales increased 3% to $182.8 million from $177.4 million in the fourth quarter ended September 27, 2008. Net earnings increased 32% to $14.8 million in the current year quarter from $11.2 million. Earnings per diluted share were $.79 this year compared to $.59 last year. Operating income increased 33% to $23.8 million from $17.9 million in the year ago period.

Gerald B. Shreiber, J & J’s President and Chief Executive Officer, commented, “Continued strong and improving performance from all our business groups contributed to our results for the quarter and the year. Country Home Bakers, our cookie, biscuit and specialty bread business, had an outstanding year. Overall, we benefitted from cost containment while driving sales value.”

J & J Snack Foods Corp.’s principal products include SUPERPRETZEL, PRETZEL FILLERS and other soft pretzels, ICEE, SLUSH PUPPIE and ARCTIC BLAST frozen beverages, LUIGI’S, MAMA TISH’S, SHAPE UPS, MINUTE MAID* and BARQ’S** frozen juice bars and ices, WHOLE FRUIT sorbet, FRUIT-A-FREEZE frozen fruit bars, MARY B’S biscuits and dumplings, DADDY RAY’S fig and fruit bars, TIO PEPE’S churros, THE FUNNEL CAKE FACTORY funnel cakes, and MRS. GOODCOOKIE, CAMDEN CREEK, COUNTRY HOME and READI-BAKE cookies. 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 and Vernon and Newport, California.

*MINUTE MAID is a registered trademark of The Coca-Cola Company.

**BARQ’S is a registered trademark of Barq’s Inc.

 

Consolidated Statements of Operations

Three Months Ended

 

Fiscal Year Ended

Sept. 26,   Sept. 27, Sept. 26,   Sept. 27,

2009

2008

2009

2008

Unaudited Unaudited Unaudited (in thousands)   Net sales $ 182,792 $ 177,393 $ 653,047 $ 629,359 Cost of goods sold   121,041   122,025   444,203   442,452 Gross profit 61,751 55,368 208,844 186,907 Operating expenses   37,904   37,502   141,906   143,571 Operating income 23,847 17,866 66,938 43,336 Other income   306   580   1,271   2,549

Earnings before income taxes

24,153 18,446 68,209 45,885 Income taxes   9,333   7,253   26,897   17,977 Net earnings $ 14,820 $ 11,193 $ 41,312 $ 27,908   Earnings per diluted share $ .79 $ .59 $ 2.21 $ 1.47 Earnings per basic share $ .80 $ .60 $ 2.23 $ 1.49 Weighted average number of diluted shares 18,764 18,993 18,713 19,008 Weighted average number of basic shares 18,541 18,765 18,516 18,770      

Consolidated Balance Sheets

September 26, 2009

 

September 27, 2008

Unaudited (in thousands)   Cash & cash equivalents $ 60,343 $ 44,265 Current marketable securities held to maturity 38,653 2,470 Current auction market preferred stock - 14,000 Other current assets 112,115 116,465 Property, plant & equipment, net 97,173 93,064 Goodwill 60,314 60,314 Marketable securities held to maturity 19,994 - Other intangible assets, net 49,125 53,633 Auction market preferred stock - 21,200 Other   2,110     2,997   Total $ 439,827   $ 408,408     Current liabilities $ 67,679 $ 66,194 Long-term obligations under capital leases 285 381 Deferred income taxes 27,033 23,056 Other long-term liabilities 1,986 1,999 Stockholders’ equity   342,844     316,778   Total $ 439,827   $ 408,408        

Consolidated Statements of Cash Flows

Fiscal Year Ended

September 26, 2009

September 27, 2008

Unaudited (in thousands) Operating activities: Net earnings $ 41,312 $ 27,908

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization of fixed assets

22,663 22,181

Amortization of intangibles and deferred costs

5,090 5,289

Gains from disposals and write- downs of property & equipment

(31 ) (174 ) Share-based compensation 1,716 1,851 Deferred income taxes 3,839 3,446

Changes in assets and liabilities, net of effects from purchase of companies:

Decrease (increase) in accounts receivable 1,144 (4,701 ) Decrease (increase) in inventories 2,993 (2,448 )

Decrease (increase) in prepaid expenses and other

37 (537 )

Increase in accounts payable and accrued liabilities

  1,870     2,082   Net cash provided by operating activities   80,633     54,897     Investing activities: Purchases of property, plant and equipment (27,190 ) (22,781 ) Purchase of marketable securities (66,380 ) (2,470 )

Proceeds from redemption and sales of marketable securities

10,204 - Purchase of auction market preferred stock - (10,500 )

Proceeds from redemption and sales of auction market preferred stock

35,200 16,500 Proceeds from disposal of property & equipment 326 932 Other   15     (535 ) Net cash used in investing activities   (47,825 )   (18,854 )   Financing activities: Payments to repurchase common stock (12,510 ) (3,539 ) Proceeds from issuance of common stock 3,971 2,811 Payments of cash dividend (7,108 ) (6,781 ) Payments on capitalized lease obligations   (93 )   (91 )   Net cash used in financing activities (15,740 ) (7,600 )  

Effect of exchange rate on cash and cash equivalents

  (990 )   3     Net increase in cash & cash equivalents 16,078 28,446   Cash and cash equivalents at beginning of year   44,265     15,819     Cash and cash equivalents at end of year $ 60,343   $ 44,265        

Segment Reporting

Fiscal Year End

September 26, 2009

September 27, 2008

Unaudited (in thousands)   Sales to external customers: Food Service $ 417,753 $ 400,194 Retail Supermarket 65,158 57,112 The Restaurant Group 1,257 1,635 Frozen Beverages   168,879     170,418   $ 653,047   $ 629,359     Depreciation and Amortization: Food Service $ 16,530 $ 16,655 Retail Supermarket - - The Restaurant Group 33 54 Frozen Beverages   11,190     10,761   $ 27,753   $ 27,470     Operating Income (Loss): Food Service $ 45,024 $ 24,784 Retail Supermarket 7,442 4,665 The Restaurant Group (64 ) (140 ) Frozen Beverages   14,536     14,027   $ 66,938   $ 43,336     Capital Expenditures: Food Service $ 14,979 $ 11,898 Retail Supermarket - - The Restaurant Group - - Frozen Beverages   12,211     10,883   $ 27,190   $ 22,781     Assets: Food Service $ 309,988 $ 277,481 Retail Supermarket - - The Restaurant Group 557 629 Frozen Beverages   129,282     130,298   $ 439,827   $ 408,408    

RESULTS OF OPERATIONS (Unaudited)

Fiscal 2009 (52 weeks) Compared to Fiscal 2008 (52 weeks)

Net sales increased $23,688,000, or 4%, to $653,047,000 in fiscal 2009 from $629,359,000 in fiscal 2008.

We have four reportable segments: Food Service, Retail Supermarkets, The Restaurant Group and Frozen Beverages.

The Chief Operating Decision Maker for Food Service, Retail Supermarkets and The Restaurant Group and the Chief Operating Decision Maker for Frozen Beverages monthly review and evaluate operating income and sales in order to assess performance and allocate resources to each individual segment. 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 $17,559,000, or 4%, to $417,753,000 in fiscal 2009. Soft pretzel sales to the food service market decreased $313,000, or about 1/3 of one percent, to $99,471,000 for the year. Unit sales of soft pretzels were down 3% for the year. Sales of bakery products excluding biscuit and dumpling sales and fruit and fig bar sales, increased $6,607,000, or 4%, for the year. Biscuit and dumpling sales were up 8% to $32,845,000 due to increased distribution and new product offerings. Sales of fig and fruit bars increased 11% to $29,497,000 due to strong volume growth spread across our customer base. Churro sales were up 16% for the year with $29,404,000 of sales in 2009 with over 80% of the sales increase coming from sales to one customer. Frozen juice bar and ices sales decreased $934,000 or 2% to $50,272,000 for the year. Sales of our funnel cake products were up $2,872,000, or 49%, with sales to one customer accounting for about one-half of the increase. The changes in sales throughout the Food Service segment were from a combination of volume changes and price increases.

Retail Supermarkets

Sales of products to retail supermarkets increased $8,046,000 or 14% to $65,158,000 in fiscal 2009. Total soft pretzel sales to retail supermarkets were $30,506,000, an increase of 11% from fiscal 2008, on a unit volume decrease of 2%. Sales of frozen juice bars and ices increased 19% to $37,819,000 in 2009 on a case volume increase of 25%. Increased trade spending of $1.3 million for the introduction of new frozen novelty items and a shift in product mix reduced sales dollars in relation to the unit volume increases. Coupon costs, a reduction of sales, increased 38% or about $1,029,000 for the year.

The Restaurant Group

Sales of our Restaurant Group, which operates BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET retail stores in the Mid-Atlantic region, declined by 23% primarily due to closings or licensings of stores in the past year. At September 26, 2009, we had 4 stores open. Sales of stores open for both years were down 7% for the year.

Frozen Beverages

Frozen beverage and related product sales decreased $1,539,000 or 1% to $168,879,000 in fiscal 2009. Beverage sales alone were down 1% for the year. Gallon sales were down 2% for the year in our base ICEE business. Service revenue increased $3,210,000, or 8%, to $42,013,000 for the year as we continue to grow this part of our business. Frozen carbonated machine sales decreased $2,834,000 to $10,004,000 for the year.

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 percent of sales increased 2.28 percentage points in 2009 from 2008 to 32%.

Lower commodity costs in excess of $11,000,000, higher pricing and increased efficiencies due to volume in some of our product lines partially offset by higher workers’ compensation and group health insurance expense were the primary drivers causing the gross profit percentage increase.

Total operating expenses decreased $1,665,000 to $141,906,000 in fiscal 2009 and as a percentage of sales decreased 1.08 percentage points to 22% of sales in 2009. Other general income was $5,000 this year. Other general income of $375,000 last year primarily consisted of gains on the disposition of assets and insurance gains in our Food Service and Frozen Beverages segments offset by store closing costs in our Restaurant Group segment of $102,000. Marketing expenses decreased .45 percentage points and remained at 11% of sales. Controlled spending in our Food Service and Frozen Beverages segments accounted for the overall decline. Distribution expenses decreased .75 of a percentage point and remained at 8% of sales due to lower freight and fuel costs. Administrative expenses were about 3-1/2% of sales in both years.

Operating income increased $23,602,000, or 54%, to $66,938,000 in fiscal 2009 as a result of the aforementioned items.

Investment income decreased by $1,279,000 to $1,386,000 due to the general decline in the level of interest rates.

The effective income tax rate was 39% in both fiscal years.

Net earnings increased $13,404,000, or 48%, in fiscal 2009 to $41,312,000, or $2.21 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.

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 management’s 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.