Pennsauken / NJ. (jj) J+J Snack Foods Corporation reported sales and earnings for its 2011 fiscal year. Sales for the fiscal year ended September 24, 2011 increased seven percent to 744,1 million USD from 696,7 million USD in the fiscal year ended September 25, 2010. Net earnings increased 14 percent to 55,1 million USD in fiscal 2011 from 48,4 million USD in fiscal 2010. On a per diluted share basis, earnings increased 13 percent to 2,93 USD from 2,59 USD. Operating income decreased one percent to 76,6 million USD this year from 77,2 million USD in the year ago period.
For the fourth quarter ended September 24, 2011, sales increased nine percent to 219,4 million USD from 200,5 million USD in the fourth quarter ended September 25, 2010. Net earnings decreased three percent to 16,0 million USD in the current year quarter from 16,5 million USD. Earnings per diluted share were 0,85 USD this year compared to 0,88 USD last year. Operating income decreased one percent to 24,6 million USD from 24,8 million USD in the year ago period.
Net earnings for the fiscal year included a 6,6 million USD gain on bargain purchase of a business. Without this gain, net earnings were 48,5 million USD or 2,58 USD per diluted share, for the fiscal year.
Gerald B. Shreiber, J+J´s President and Chief Executive Officer, commented, «Our ICEE beverage group had a strong fourth quarter and year. The balance of our business was impacted by higher input costs and added costs of distribution».
Results of Operations (Unaudited)
Net sales increased 47’368’000 USD or seven percent, to 744’071’000 USD in fiscal 2011 (52 weeks) from 696’703’000 USD in fiscal 2010 (52 weeks).
Excluding sales from the acquisition of Parrot Ice in February 2010, California Churros in June 2010 and the frozen hand-held business of ConAgra Foods in May 2011, sales increased three percent 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.
Food Service
Sales to food service customers increased 25’756’000 USD or six percent, to 463’562’000 USD in fiscal 2011. Excluding sales from the acquisition of California Churros and hand-held sales, food service sales increased two percent for the year. Soft pretzel sales to the food service market increased three percent to 103’943’000 USD for the year aided by increased sales to restaurant chains in the fourth quarter. Frozen juice bar and ices sales increased 2’467’000 USD or five percent, to 49’740’000 USD for the year primarily as the result of higher sales to school food service accounts. Churro sales to food service customers increased 31 percent to 41’583’000 USD in 2011. Without sales from California Churros, churro sales for the year would have been up about two percent. Sales of bakery products, excluding biscuit and dumpling sales and fruit and fig bar sales, increased 9’190’000 USD or five percent, for the year due primarily to increased sales to private label customers and to school food service. Biscuit and dumpling sales increased four percent to 34’774’000 USD. Sales of fig and fruit bars decreased eleven percent to 28’363’000 USD due primarily to lower sales across our customer base resulting from decreased demand. Handheld sales to food service customers was 8’865’000 USD in 2011. Funnel cake and related funnel cake product sales decreased by 6’207’000 USD to 16’597’000 USD with sales to one customer down 9’570’000 USD or 75 percent. Sales of new products in the first twelve months since their introduction were approximately 12,5 million USD for the year. Price increases accounted for approximately 10,5 million USD of sales for the year and net volume increases, including new product sales as defined above and sales resulting from the acquisitions of California Churros and hand-held sales, accounted for approximately 15,3 million USD of sales for the year. Operating income in our Food Service segment decreased from 50’220’000 USD in 2010 to 46’171’000 USD in 2011 primarily as a result of higher ingredients and packaging costs of about 16 million USD and increased freight and distribution costs caused by higher freight rates and the integration of the hand-held business, which were partially offset by the benefit of higher pricing.
Retail Supermarkets
Sales of products to retail supermarkets increased 14’980’000 USD or 20 percent to 91’099’000 USD in fiscal year 2011. Excluding hand-held sales, sales increased seven percent for the year. Soft pretzel sales to retail supermarkets were 32’044’000 USD compared to 30’463’000 USD in 2010 on a unit volume increase of two percent. Sales of frozen juices and ices increased 3’652’000 USD or eight percent to 51’940’000 USD on a unit volume increase of nine percent. Coupon redemption costs, a reduction of sales, increased 13 percent or about 458’000 USD for the year. Handheld sales to retail supermarket customers were 9’424’000 USD in 2011. Sales of products in the first twelve months since their introduction were approximately 4,5 million USD in fiscal year 2011. Price increases accounted for approximately 3,1 million USD of sales for the year and net volume increases, including new product sales as defined above and hand-held sales and net of decreased coupon costs, accounted for approximately 12,0 million USD of sales for the year. Operating income in our Retail Supermarkets segment increased from 11’281’000 USD in 2010 to 11’830’000 USD in 2011. Operating income benefited by lower advertising expense of approximately 800’000 USD and higher volume and pricing, which was partially offset by higher product costs related to ingredient and packaging cost increases.
Frozen Beverages
Frozen beverage and related product sales increased four percent to 189’410’000 USD in fiscal 2011. Beverage sales alone increased four percent to 133’372’000 USD for the year with a 31 percent increase in sales in Mexico accounting for over 50 percent of the increase. Domestic gallon sales were flat in our base ICEE business. Service revenue increased five percent to 42’608’000 USD 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, decreased from 11’964’000 USD in 2010 to 11’362’000 USD in 2011. The estimated number of Company owned frozen beverage dispensers was 40’800 and 38’600 at September 24, 2011 and September 25, 2010, respectively. Operating income in our Frozen Beverage segment increased from 15’661’000 USD in 2010 to 18’582’000 USD in 2011 as a result of increased volume as discussed above and controlled expenses. Higher gasoline costs of approximately 1,4 million USD 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 30,88 percent in 2011 from 32,69 percent in 2010. Higher ingredient and packaging costs compared to last year of approximately 18 million USD and the mid single digit gross profit margin of hand-held sales were primarily responsible for the decreased gross profit percentage. 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 ingredient and packaging costs over the past eighteen months which we anticipate will result in higher costs over some portions of our fiscal year 2012. The impact of these higher costs and increased costs in operational areas may result in lower net earnings in 2012 than in 2011.
Total operating expenses increased 2’543’000 USD to 153’191’000 USD in fiscal 2011 but as a percentage of sales decreased a full percentage point to 21 percent of sales. Marketing expenses decreased ,86 percentage points to nine percent of sales because of reduced advertising of 800’000 USD in our retail supermarket segment and controlled spending elsewhere. Distribution expenses increased ,24 percentage points to eight percent of sales due to higher fuel costs and freight rates. Administrative expenses decreased ,18 percentage points and were three percent of sales in both years. Other general expense of 524’000 USD this year compared to other general expense of 2’087’000 USD in 2010. Included in other general expense in 2010 is 1,6 million USD for an unclaimed property assessment and 577’000 USD of acquisition costs. Included in other general expense in 2011 is 546’000 USD of acquisition costs.
Operating income decreased 579’000 USD or one percent to 76’583’000 USD in fiscal year 2011 as a result of the aforementioned items.
Gain on the bargain purchase of a business of 6’580’000 USD in the third quarter resulted from the fair value of the identifiable assets acquired in the handhelds acquisition exceeding the purchase price.
Investment income decreased by 73’000 USD to 1’041’000 USD due to the general decline in the level of interest rates.
The effective income tax rate decreased 3,51 percentage points to 35 percent from 38 percent last year. Adjusting out the effect of the gain on bargain purchase of a business, the effective tax rate in 2011 is 37 percent.
Net earnings increased 6’654’000 USD or 14 percent, in fiscal 2011 to 55’063’000 USD or 2,93 USD per diluted share as a result of the aforementioned items. Without the benefit of the gain on bargain purchase of a business, net earnings were 48’483’000 USD compared to 48’409’000 USD last 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.
