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J&J Snack Foods’ Fiscal 2023 First Quarter Revenue Increases 10.3% to $351.3M
Source: Nasdaq GlobeNewswire / 30 Jan 2023 16:15:57 America/New_York
PENNSAUKEN, N.J., Jan. 30, 2023 (GLOBE NEWSWIRE) -- J&J Snack Foods Corp. (NASDAQ: JJSF) (the “Company”) today reported financial results for the first quarter ended December 24, 2022.
First Quarter Actuals $ v. LY % v. LY Net Sales $351.3M $32.9M 10.3% Operating Income $9.3M -$5.5M -37.2% Net Earnings $6.6M -$4.5M -40.2% Earnings per Diluted Share $0.34 -$0.24 -41.4% Adjusted EBITDA $25.3M -$2.3M -8.3% Adjusted Earnings per Diluted Share $0.42 -$0.15 -26.3% This press release contains non-GAAP financial measures. Please refer to the Non-GAAP Financial Measures section below for reconciliations to the most comparable GAAP measures.
Dan Fachner, J&J Snack Foods President and CEO, commented, “We are pleased to report the seventh consecutive quarter of double-digit top-line growth and remain confident in our plans to continue growing sales. We are investing in our brands, accelerating cross selling opportunities with our customers and across our channels, expanding our production capacity and building a strong pipeline of product innovation. We have hit the ground running with our Dippin’ Dots business, having already gained placement at Regal Theaters, the second largest movie theater chain in the United States. In fact, we increased unit sales in our Dippin’ Dots business over 14% in the first quarter. Also, we recently launched the Hola! Churros brand and are seeing strong momentum, including over 30% sales growth in the first quarter. This positions us well to grow our churros business, including the introduction of new products and entry into new channels. While our industry experienced some declines in traffic and volume in the first quarter, we are well positioned to manage through these economic challenges, and expect to continue growing our top line.”
“As we make meaningful progress on our strategic priorities and initiatives to improve operating efficiency and effectiveness, ongoing inflationary pressures and the softening consumer environment impacted our year over year bottom-line results. Our actions to improve gross margins helped us deliver 25.9% this quarter versus 24.9% in the prior year period. However, we continue to manage through cost pressures on the expense side, most notably distribution expenses. We expect to see improvement in expenses as we cycle through these high inflationary periods later in the year. Also, Dippin Dots is a very seasonal business and, as expected, negatively impacts our results in the first quarter. This business will drive the majority of its profitability in the second half of the year.”
“More than ever, our teams are focused on effectively managing through these dynamic market conditions while serving our customers and partners. We have taken aggressive measures to offset these various challenges and to position the company for long-term success. In addition to the sales strategies mentioned above, we are focused on improving operational efficiencies and capacity through initiatives like adding seven new, more automated production lines. To date we have opened two new frozen novelty lines and one additional churros line. Over the next six months, we will activate three additional lines focused on expanded pretzel production capacity. Also, we’ve implemented a new ERP system, outsourced our shipping logistics, and are building a more geographically optimized distribution network. In addition, we have now fully implemented various price increases across our portfolio, which we expect will continue to drive improved gross margins.”
“In closing, our momentum remains strong as our core brands and new products continue to resonate with consumers, and we are confident that our strategy is working and that we will see the benefit of our various initiatives through out the balance of fiscal 2023.”
Total Company First Quarter Highlights
Net sales increased 10.3% to $351.3 million in Q1 of fiscal 2023, compared to Q1 of fiscal 2022.
Key highlights include:
- Sales included approximately $13.4 million in revenue from Dippin’ Dots which we report in our frozen novelty category.
- Organic sales growth was driven by growth across all three business segments, led by our core products including pretzels, churros, frozen novelties and frozen beverages.
- Food Service sales exceeded Q1 ’22 by 12.5%.
- Retail segment sales exceeded Q1 ’22 by 0.9%.
- Frozen Beverage segment sales exceeded Q1 ’22 sales by 9.2%.
Gross profit as a percentage of sales was 25.9% in Q1 ’23, comparing favorably to 24.9% in Q1 ‘22. Key ingredients including flour, oils, eggs, meats, sugar and dairy continue to experience inflationary pressures compared to the same quarter last year, up approximately 20%. Inflation trends are gradually improving for some raw materials since our 2022 fourth quarter, which we expect will benefit margins in future months. Three pricing actions implemented in fiscal 2022 along with improved mix helped to partially offset these headwinds and are expected to provide additional benefits through out the balance of fiscal 2023.
Total operating expenses of $81.5 million represented 23.2% of sales for the quarter, compared to 20.3% in Q1 ’22, reflecting ongoing inflationary pressures across distribution and administrative costs. Distribution costs represented 12.0% of sales in the quarter, versus 10.5% in the prior year period, but improved sequentially compared to Q4 2022. We expect our various strategic and operational initiatives to improve logistics management and increase efficiency across our distribution network and supply chain allowing us to reduce costs and drive significant savings over the coming quarters and years.
Marketing and selling expenses represented 6.7% of sales, versus 6.6% in the prior year period, and 6.4% in Q4’ 22. Administrative expenses were 4.7% of sales in Q1 ’23, compared to 3.3% in Q1 ’22 and 4.3% in Q4’ 22 driven mostly by the expected seasonal impact of Dippin’ Dots.
Adjusted operating income was $11.2 million in the first quarter of fiscal 2023, compared to $14.6 million in the prior year period, with the decrease driven by the ongoing inflationary pressures, somewhat offset by revenue growth across all three of our business segments. This led to net earnings in Q1 ’23 of $6.6 million, compared to $11.1 million in Q1 ’22. Our effective tax rate was 26% in Q1 ’23.
Food Services Segment First Quarter Highlights
- Q1 ’23 food service sales exceeded Q1 ’22 by $26.6 million, or an increase of 12.5%, including approximately $13.4 million in sales from Dippin’ Dots.
- Outdoor venues, including stadiums and amusement parks, restaurants and strategic accounts continued to experience revenue growth, including 157.4% increase in frozen novelties largely due to the acquisition of Dippin’ Dots, a 32.2% increase in churros, a 27.5% increase in handheld sales, and a 3.6% and 1.0% increase in soft pretzels and bakery sales, respectively, compared to Q1 ‘22.
- Sales of new products and expanded customer placement were approximately $3.6 million driven primarily by new bakery products and the Bavarian pretzel stick.
- Q1 ’23 operating income decreased 29.0% to $6.4 million reflecting the significant increase in input, production and distribution costs.
Retail Segment First Quarter Highlights
- Q1 ’23 retail sales increased 0.9% to $43.1 million, compared to Q1 ’22.
- Handhelds sales grew by 126.6%, compared to Q1 ’22, frozen novelty sales grew by 0.9%. Soft pretzel sales decreased 10.6% and biscuit sales decreased 4.3%, versus the prior year period.
- New product innovation contributed approximately $1.3 million in the quarter driven by the new Luigi’s gelato product and additional placement of Dogsters items at major grocery retailers.
- Operating income decreased 77.7% to $1.1 million, versus the prior year period driven by higher cost of goods sold and distribution related expenses.
Frozen Beverages Segment First Quarter Highlights
- Frozen beverage segment sales were $70.0 million and beat Q1 ’22 sales by 9.2%.
- Beverage sales grew 14.5%, or $4.9 million compared to Q1 ’22 led by consumption trends in travel, sporting events, concerts, and amusement venues. Sales were strong even as volume at Theaters declined in the quarter due to lower performing releases and weather impacts during the Christmas holiday season.
- Machine repair and maintenance service revenues increased 8.3%, versus the prior year period reflecting healthy maintenance call volumes, while equipment sales decreased 10.7% due to the timing of customer installations between years.
- Q1 ’23 operating income improved to $1.8 million, compared to a Q1 ’22 operating income of $0.9 million, as strong sales drove leverage across the business.
Conference Call
J&J Snack Foods Corp. will host a conference call to discuss results and business outlook on January 31, 2023, at 10:00 a.m. Eastern Time. Conference call participants should register by clicking on this Registration Link to receive the dial-in number and a personal PIN, which are required to access the conference call. A transcript of the conference call will also be available on the Investors homepage at www.jjsnack.com.About J & J Snack Foods Corp.
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, DIPPIN’ DOTS ice cream, LUIGI’S Real Italian Ice, MINUTE MAID* frozen ices, WHOLE FRUIT sorbet and frozen fruit bars, SOUR PATCH KIDS** Flavored Ice Pops, HOLA! CHURROS, and THE FUNNEL CAKE FACTORY funnel cakes and several bakery brands within DADDY RAY’S, COUNTRY HOME BAKERS and HILL & VALLEY. 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.Cautionary Statement Regarding Forward-Looking Information
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding the Company’s expected future financial position, results of operations, revenue growth and profit levels, cash flows, business strategy, budgets, projected costs, capital expenditures, products, competitive positions, growth opportunities, plans and objectives of management for future operations, as well as statements that include words such as “anticipate,” “if,” “believe,” “plan,” “goals,” “estimate,” “expect,” “intend,” “may,” “could,” “should,” “will,” and other similar expressions are forward-looking statements. This includes, without limitation, our statements and expectations regarding any current or future recovery in our industry and our profitability-related continuous improvement initiatives in our operations. Such forward-looking statements are inherently uncertain, and readers must recognize that actual results may differ materially from the expectations of management. We do not undertake a duty to update such forward-looking statements. Factors that may cause actual results to differ materially from those in the forward-looking statements include consumer spending, price competition, acceptance of new products, the pricing and availability of raw materials, transportation costs, changes in the competitive marketplace the uncertainty and ultimate economic impact of the COVID-19 pandemic, and other risks identified in our annual report on Form 10-K, and our other filings with the Securities and Exchange Commission. Many of these factors are outside of the Company’s control.Non-GAAP Financial Measures
Adjusted EBITDA consists of net earnings adjusted to exclude: income taxes (benefit); investment income; interest expense; depreciation and amortization; share-based compensation expense; COVID-19 related expenses (recoveries); net (gain) loss on sale or disposal of assets; impairment charges, restructuring costs, merger and acquisition costs, acquisition related inventory adjustments, and integration costs.
Adjusted Operating Income consists of operating income adjusted to exclude: COVID-19 related expenses (recoveries); impairment charges, restructuring costs, merger and acquisition costs, acquisition related amortization expenses and inventory adjustments, and integration costs.
Adjusted Earnings per Diluted Share consists of net earnings adjusted to exclude: COVID-19 related expenses (recoveries); impairment charges, restructuring costs, merger and acquisition costs, acquisition related amortization expenses and inventory adjustment, and integration costs. For purposes of comparability, the income tax effect of pre-tax adjustments is determined using statutory tax rates.
This press release contains certain non-GAAP financial measures; Adjusted EBITDA, Adjusted Operating Income, and Adjusted Earnings per Diluted Share. A “non-GAAP financial measure” is a numerical measure of a company’s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”) in the statements of income, balance sheets, or statements of cash flow of the company. Pursuant to applicable reporting requirements, the company has provided reconciliations below of non-GAAP financial measures to the most directly comparable GAAP measure.
The non-GAAP financial measures presented within the Company’s earnings release are not indicators of our financial performance under GAAP and should not be considered as an alternative to the applicable GAAP measure. These non-GAAP measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. In addition, in evaluating these non-GAAP measures, you should be aware that in the future we may incur income, expenses, gains and losses, similar to the adjustments in this press release. Our presentation of these non-GAAP measures should not be construed as an inference that our future results will be unaffected by unusual or infrequent items. We compensate for these limitations by providing equal prominence to our GAAP results and using non-GAAP measures only as supplemental presentations.
The non-GAAP measures presented are utilized by management to evaluate the Company’s business performance and profitability by excluding certain items that may not be indicative of our recurring core business operating results. The Company believes that these measures provide additional clarity for investors by excluding specific income, expenses, gains and losses, in an effort to show comparable business operating results for the periods presented. Similarly, Management believes these adjusted measures are useful performance measures because certain items included in the calculations may either mask or exaggerate trends in the Company’s ongoing operating performance. See the reconciliation of Non-GAAP Financial Measures below.Investor Contact:
Joseph Jaffoni, Norberto Aja or Jennifer Neuman
JCIR
(212) 835-8500
jjsf@jcir.comJ & J SNACK FOODS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) (in thousands, except per share amounts) Three months ended December 24, December 25, 2022 2021 Net Sales $ 351,343 $ 318,490 Cost of goods sold 260,488 239,115 Gross Profit 90,855 79,375 Operating expenses Marketing 23,699 20,907 Distribution 42,049 33,315 Administrative 16,391 10,369 Other general expense (income) (612 ) (61 ) Total Operating Expenses 81,527 64,530 Operating Income 9,328 14,845 Other income (expense) Investment income 685 271 Interest expense (1,049 ) (18 ) Earnings before income taxes 8,964 15,098 Income tax expense 2,331 4,007 NET EARNINGS $ 6,633 $ 11,091 Earnings per diluted share $ 0.34 $ 0.58 Weighted average number of diluted shares 19,274 19,153 Earnings per basic share $ 0.35 $ 0.58 Weighted average number of basic shares 19,222 19,085 J & J SNACK FOODS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) December 24, 2022 September 24, (unaudited) 2022 Assets Current assets Cash and cash equivalents $ 54,866 $ 35,181 Marketable securities held to maturity 2,008 4,011 Accounts receivable, net 187,321 208,178 Inventories 182,642 180,473 Prepaid expenses and other 14,473 16,794 Total current assets 441,310 444,637 Property, plant and equipment, at cost 891,243 860,050 Less accumulated depreciation and amortization 537,873 524,683 Property, plant and equipment, net 353,370 335,367 Other assets Goodwill 184,420 184,420 Other intangible assets, net 190,027 191,732 Marketable securities available for sale 4,371 5,708 Operating lease right-of-use assets 50,063 51,137 Other 3,987 3,965 Total other assets 432,868 436,962 Total Assets $ 1,227,548 $ 1,216,966 Liabilities and Stockholders’ Equity Current Liabilities Current finance lease liabilities $ 128 $ 124 Accounts payable 91,610 108,146 Accrued insurance liability 16,014 15,678 Accrued liabilities 9,642 9,214 Current operating lease liabilities 13,219 13,524 Accrued compensation expense 16,104 21,700 Dividends payable 13,461 13,453 Total current liabilities 160,178 181,839 Long-term debt 92,000 55,000 Noncurrent finance lease liabilities 303 254 Noncurrent operating lease liabilities 41,883 42,660 Deferred income taxes 69,873 70,407 Other long-term liabilities 3,575 3,637 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 19,229,000 and 19,219,000 respectively 96,550 94,026 Accumulated other comprehensive loss (12,842 ) (13,713 ) Retained Earnings 776,028 782,856 Total stockholders’ equity 859,736 863,169 Total Liabilities and Stockholders’ Equity $ 1,227,548 $ 1,216,966 J & J SNACK FOODS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three months ended December 24, December 25, 2022 2021 Operating activities: Net earnings $ 6,633 $ 11,091 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation of fixed assets 13,476 11,923 Amortization of intangibles and deferred costs 1,705 588 Gains from disposals of property & equipment (711 ) (27 ) Share-based compensation 1,239 1,083 Deferred income taxes (526 ) (529 ) Loss on marketable securities 37 44 Other (18 ) (4 ) Changes in assets and liabilities, net of effects from purchase of companies Decrease in accounts receivable 21,171 231 (Increase) in inventories (2,284 ) (9,958 ) Decrease in prepaid expenses 2,343 719 (Decrease) in accounts payable and accrued liabilities (21,655 ) (9,707 ) Net cash provided by operating activities 21,410 5,454 Investing activities: Purchases of property, plant and equipment (30,910 ) (16,100 ) Proceeds from redemption and sales of marketable securities 3,300 7,200 Proceeds from disposal of property and equipment 729 231 Net cash used in investing activities (26,881 ) (8,669 ) Financing activities: Proceeds from issuance of stock 1,285 706 Borrowings under credit facility 72,000 - Repayment of borrowings under credit facility (35,000 ) - Payments on finance lease obligations (39 ) (74 ) Payment of cash dividends (13,453 ) (12,080 ) Net cash provided by (used in) financing activities 24,793 (11,448 ) Effect of exchange rates on cash and cash equivalents 363 (69 ) Net increase (decrease) in cash and cash equivalents 19,685 (14,732 ) Cash and cash equivalents at beginning of period 35,181 283,192 Cash and cash equivalents at end of period $ 54,866 $ 268,460 J & J SNACK FOODS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands) Three months ended December 24, December 25, 2022 2021 Sales to External Customers: Food Service Soft pretzels $ 52,223 $ 50,421 Frozen novelties 21,765 8,457 Churros 25,757 19,489 Handhelds 23,572 18,495 Bakery 108,948 107,831 Other 6,032 7,039 Total Food Service $ 238,297 $ 211,732 Retail Supermarket Soft pretzels $ 14,485 $ 16,194 Frozen novelties 17,969 17,802 Biscuits 7,913 8,271 Handhelds 2,892 1,276 Coupon redemption (176 ) (896 ) Other (10 ) 48 Total Retail Supermarket $ 43,073 $ 42,695 Frozen Beverages Beverages $ 38,659 $ 33,763 Repair and maintenance service 23,827 22,011 Machines revenue 7,011 7,847 Other 476 442 Total Frozen Beverages $ 69,973 $ 64,063 Consolidated Sales $ 351,343 $ 318,490 Depreciation and Amortization: Food Service $ 9,458 $ 6,669 Retail Supermarket 391 366 Frozen Beverages 5,332 5,476 Total Depreciation and Amortization $ 15,181 $ 12,511 Operating Income: Food Service $ 6,387 $ 9,001 Retail Supermarket 1,111 4,984 Frozen Beverages 1,830 860 Total Operating Income $ 9,328 $ 14,845 Capital Expenditures: Food Service $ 24,862 $ 10,233 Retail Supermarket 1,374 2,529 Frozen Beverages 4,674 3,338 Total Capital Expenditures $ 30,910 $ 16,100 Assets: Food Service $ 907,736 $ 794,819 Retail Supermarket 16,941 29,802 Frozen Beverages 302,871 287,285 Total Assets $ 1,227,548 $ 1,111,906 J & J SNACK FOODS CORP. AND SUBSIDIARIES NON-GAAP FINANCIAL MEASURES (Unaudited) (in thousands) Three Months Ended December 24, December 25, 2022 2021 Reconciliation of GAAP Net Earnings to Adjusted EBITDA Net Earnings $ 6,633 $ 11,091 Income Taxes 2,331 4,007 Investment Income (685 ) (271 ) Interest Expense 1,049 18 Depreciation and Amortization 15,181 12,511 Share-Based Compensation 1,239 1,083 COVID-19 Expenses (Recoveries) - (874 ) Net (Gain) Loss on Sale or Disposal of Assets (711 ) (27 ) Integration Costs 229 - Adjusted EBITDA $ 25,266 $ 27,538 Reconciliation of GAAP Operating Income to Adjusted Operating Income Operating Income $ 9,328 $ 14,845 COVID-19 Expenses (Recoveries) - (874 ) Acquisition Related Amortization Expenses 1,679 592 Integration Costs 229 - Adjusted Operating Income $ 11,236 $ 14,563 Reconciliation of GAAP Earnings per Diluted Share to Adjusted Earnings per Diluted Share Earnings per Diluted Share $ 0.34 $ 0.58 COVID-19 Expenses (Recoveries) - (0.05 ) Acquisition Related Amortization Expenses 0.09 0.03 Integration Costs 0.01 - Tax Effect of Non-GAAP Adjustments (1) (0.02 ) 0.01 Adjusted Earnings per Diluted Share $ 0.42 $ 0.57 (1) Income taxes associated with pre-tax adjustments determined using statutory tax rates