Thursday, 29. October 2020
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J+J Snack Foods: reports Q2-2017 results

Pennsauken / NJ. (jj) J+J Snack Foods Corporation, a leading niche snack food and beverage company, announced sales and earnings for the second quarter ended March 25, 2017.

Sales increased 7 percent to 246.5 million USD from 229.7 million USD in last year’s second quarter. Net earnings increased 3 percent to 16.0 million USD in the current quarter from 15.6 million USD last year. Earnings per diluted share increased 2 percent to 0.85 USD for the second quarter from 0.83 USD last year. Operating income increased 4 percent to 24.1 million USD in the current quarter from 23.3 million USD in the year ago quarter.

For the six months ended March 25, 2017, sales increased 4 percent to 472.1 million USD from 452.6 million USD in last year’s first half. Net earnings increased 3 percent to 29.5 million USD in the six months from 28.6 million USD last year. Earnings per diluted share increased 3 percent to 1.57 USD from 1.52 USD last year. Operating income increased 4 percent to 43.4 million USD this year from 41.6 million USD last year.

Gerald B. Shreiber, J+J’s President and Chief Executive Officer, commented, «Our food service group had a strong quarter led by improved sales and operating efficiencies. The acquisition of Hill and Valley cookie brands contributed significantly to sales for the period, but had only a marginal benefit to operating income».

Results of operations

Net sales increased 16’803’000 USD or 7 percent to 246’513’000 USD for the three months and 19’523’000 USD or 4 percent to 472’083’000 USD for the six months ended March 25, 2017 compared to the three and six months ended March 26, 2016. Excluding sales of Hill + Valley, acquired December 30, 2016, sales for the three months increased 7’320’000 USD, or 3 percent and sales for the six months increased 10’040’000 USD, or 2 percent from last year.

Food service

Sales to food service customers increased 15’355’000 USD or 10 percent in the second quarter to 164’078’000 USD and increased 18’900’000 USD or 6 percent for the six months. Excluding sales of Hill + Valley, sales increased 5’872’000 USD, or 4 percent, for the second quarter and 9’417’000 USD, or 3 percent for the six months. Soft pretzel sales to the food service market increased 4 percent to 84’487’000 USD in the six months with sales increases to schools, convenience stores and restaurant chains.

Frozen juices and ices sales decreased 12 percent to 9’693’000 USD in the three months and decreased 11 percent to 17’172’000 USD in the six months resulting from lower sales to warehouse club stores. Churro sales to food service customers increased 7 percent to 14’719’000 USD in the second quarter and 6 percent to 29’157’000 USD in the six months with increased sales to restaurant chains and warehouse club stores.

Sales of bakery products increased 13’380’000 USD or 18 percent in the second quarter to 83’804’000 USD and increased 12’058’000 USD or 8 percent for the six months. Excluding sales of Hill + Valley, sales increased 3’897’000 USD, or 6 percent, for the second quarter and 2’575’000 USD, or 2 percent for the six months with sales increases and decreases spread across our customer base.

Sales of handhelds increased 924’000 USD or 13 percent in the quarter and 2’257’000 USD or 17 percent for the six months with all of the increase coming from sales to three customers in the quarter and five customers in the six months. Sales of funnel cake increased 1’066’000 USD or 32 percent in the quarter and 2’213’000 USD or 36 percent for the six months primarily due to increased sales to school food service and restaurant chains.

Sales of new products in the first twelve months since their introduction were approximately 9 million USD in this quarter and 16 million USD in the six months. Price increases had a marginal impact on sales in the quarter and for the six months and net volume increases, including new product sales as defined above and Hill + Valley sales , accounted for approximately 15 million USD of sales in the quarter and 19 million USD of sales in the six months.

Operating income in our Food Service segment increased from 18’520’000 USD to 19’636’000 USD in the quarter and increased from 34’422’000 USD to 36’690’000 USD in the six months. Operating income for both periods benefitted from sales increases, improved operations and lower ingredient costs. Hill + Valley contributed 144’000 USD to operating income in the second quarter.

Retail supermarkets

Sales of products to retail supermarkets decreased 1’088’000 USD or 4 percent to 25’612’000 USD in the second quarter and decreased 729’000 USD or 2 percent to 47’231’000 USD in the six months. Soft pretzel sales for the second quarter were down 6 percent to 9’186’000 USD and were down 2 percent to 18’130’000 USD for the six months with sales decreases across customers and products. Sales of frozen juices and ices increased 284’000 USD or 2 percent to 13’191’000 USD in the second quarter and were up 1’071’000 USD to 23’042’000 USD for the six months led by increased sales of our WHOLEFRUIT products. Handheld sales to retail supermarket customers decreased 2 percent to 3’376’000 USD in the quarter and decreased 7 percent to 6’826’000 USD for the six months, even though trade spending for the introduction of new products, which is a reduction of sales , was less this year by approximately 600’000 USD for the quarter and 800’000 USD for the six months.

Sales of new products in the second quarter were approximately 200’000 USD and were 750’000 USD for the six months. Price increases had a marginal impact on sales in the quarter and for the six months and net volume decreases, including new product sales as defined above and net of increased coupon costs, lowered sales by about 1.4 million USD in in the quarter and the six months.

Operating income in our Retail Supermarkets segment was 2’454’000 USD in this year’s quarter compared to 2’469’000 USD in last year’s quarter and was 3’500’000 USD in this year’s six months compared to 3’559’000 USD in last year’s six months. Lower trade spending for the introduction of new products compared to last year offset the negative factors of generally lower sales and higher coupon expenses in both periods.

Frozen beverages

Frozen beverage and related product sales increased 5 percent to 56’823’000 USD in the second quarter and increased 1 percent to 110’477’000 USD in the six month period. Beverage related sales alone were up 4 percent to 31’822’000 USD in the second quarter and were up 3 percent to 60’098’000 USD in the six month period. Gallon sales were up 4 percent for the three months and were up 2 percent for the six month period primarily due to higher sales to movie theaters but with higher sales to other customer groups as well. Service revenue increased 4 percent to 17’687’000 USD in the second quarter and increased 3 percent to 35’778’000 USD for the six month period 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, were 7’012’000 USD, an increase of 12 percent from last year’s second quarter and were 14’051’000 USD, or 6 percent lower than last year, in the six month period.

Operating income in our Frozen Beverage segment decreased to 2’021’000 USD in this quarter and to 3’248’000 USD for the six months compared to 2’290’000 USD and 3’658’000 USD in last years’ periods, respectively. Higher payroll costs including higher group health insurance costs of about 208’000 USD and 545’000 USD in the quarter and six months, respectively, contributed to the lower operating income in both periods.

Consolidated

Gross profit as a percentage of sales was 29.54 percent in the three month period this year and 29.93 percent last year. For the six month period, gross profit as a percentage of sales was 29.38 percent this year and 29.30 percent a year ago. More than 1/2 of the gross profit percentage decrease in the quarter resulted from the lower gross profit percentage of the Hill + Valley business. Higher costs in our frozen beverages business also impacted the gross margin percentage in the quarter. For the six months, the negative impact of the lower Hill + Valley gross profit percentage and higher costs in our frozen beverages business were offset by improved sales, lower ingredient costs and improved operating efficiencies in our food service segment as well as by lower trade spending for the introduction of new products compared to last year in our retail supermarkets segment.

Total operating expenses increased 3’236’000 USD in the second quarter and as a percentage of sales was 19.8 percent in both years. For the first half, operating expenses increased 4’329’000 USD, and as a percentage of sales increased from 20.1 percent to 20.2 percent. Marketing expenses were 8.7 percent of sales in this year’s quarter and 8.9 percent last year and were 8.9 percent in this year’s six months compared to 8.8 percent to of sales in last year’s six months. Distribution expenses were 7.5 percent of sales in this year’s quarter and were 7.6 percent of sales in last year’s quarter, and were 7.8 percent in this year’s six month period and 7.9 percent of sales last years’ six month period. Administrative expenses were 3.5 percent of sales this quarter and 3.6 percent for the six month period compared to 3.3 percent of sales last year in the second quarter and 3.4 percent for the six months.

Operating income increased 832’000 USD or 4 percent to 24’111’000 USD in the second quarter and increased 1’799’000 USD or 4 percent to 43’438’000 USD in the first half as a result of the aforementioned items.

Investment income increased by 198’000 USD and 265’000 USD in the second quarter and six months, respectively, primarily because last year’s quarter and six months included losses on the sales of marketable securities of 297’000 USD and 406’000 USD, respectively.

Other expense for the quarter and six months this year includes 514’000 USD of acquisition costs for the Hill + Valley purchase.

The effective income tax rate has been estimated at 35.4 percent and 35.7 percent for the quarter this year and last year, respectively and 34.8 percent and 34.7 percent for the six months this year and last year, respectively.

Net earnings increased 399’000 USD or 3 percent in the current three month period to 15’987’000 USD and were 29’527’000 USD for the six months this year compared to 28’566’000 USD for the six month period last year, an increase of 3 percent.

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.