J & J Snack Foods(JJSF) - 2019 Q2 - Quarterly Report

Part I. Financial Information This section presents the company's financial statements and management's analysis of its financial condition and results of operations Consolidated Financial Statements This section presents the unaudited consolidated financial statements for J & J Snack Foods Corp. as of March 30, 2019, and for the three and six-month periods then ended, with comparative data for the prior year Consolidated Balance Sheets The company's total assets increased to $952.7 million as of March 30, 2019, from $932.0 million at September 29, 2018 Consolidated Balance Sheet Highlights (in thousands) | Account | March 30, 2019 | September 29, 2018 | | :--- | :--- | :--- | | Total Current Assets | $407,095 | $382,797 | | Total Assets | $952,712 | $932,013 | | Total Current Liabilities | $112,203 | $117,899 | | Total Liabilities | $167,800 | $172,922 | | Total Stockholders' Equity | $785,115 | $759,091 | Consolidated Statements of Earnings For the three months ended March 30, 2019, net sales grew 4% year-over-year to $276.3 million, and net earnings increased 14% to $20.4 million Quarterly Performance (Three Months Ended, in thousands, except per share) | Metric | March 30, 2019 | March 31, 2018 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $276,302 | $266,101 | +3.8% | | Gross Profit | $79,248 | $77,278 | +2.5% | | Operating Income | $24,771 | $23,541 | +5.2% | | Net Earnings | $20,354 | $17,833 | +14.1% | | Diluted EPS | $1.08 | $0.95 | +13.7% | Semi-Annual Performance (Six Months Ended, in thousands, except per share) | Metric | March 30, 2019 | March 31, 2018 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $547,914 | $531,311 | +3.1% | | Gross Profit | $156,111 | $150,557 | +3.7% | | Operating Income | $46,853 | $44,769 | +4.7% | | Net Earnings | $37,880 | $54,082 | -30.0% | | Diluted EPS | $2.00 | $2.88 | -30.6% | - The significant decrease in net earnings for the six-month period is primarily due to a $20.9 million gain on the remeasurement of deferred tax liabilities in the prior year following the 2017 Tax Cuts and Jobs Act[54][105] Consolidated Statements of Cash Flows For the six months ended March 30, 2019, net cash provided by operating activities increased to $50.3 million from $41.9 million in the prior year Cash Flow Summary (Six Months Ended, in thousands) | Activity | March 30, 2019 | March 31, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $50,259 | $41,897 | | Net cash used in investing activities | ($22,074) | ($42,422) | | Net cash used in financing activities | ($12,066) | ($13,467) | | Net increase (decrease) in cash | $15,176 | ($15,757) | | Cash at end of period | $126,655 | $75,205 | Notes to the Consolidated Financial Statements The notes detail key accounting policies, including the adoption of new revenue recognition guidance in fiscal 2019, which did not have a material impact - The company adopted new revenue recognition guidance (ASC 606) in fiscal 2019 using a modified retrospective approach, which did not materially impact the financial statements[26][56] - The company's three reportable segments are Food Service, Retail Supermarkets, and Frozen Beverages. The Chief Operating Decision Makers review performance based on sales and operating income for each segment[60][65] - Goodwill remained unchanged at $102.5 million as of March 30, 2019, allocated across Food Service ($61.7 million), Frozen Beverages ($37.2 million), and Retail Supermarket ($3.7 million) segments[71] - The company expects the adoption of new lease accounting guidance in fiscal 2020 to have a material impact, requiring the recognition of right-of-use assets and lease liabilities on the balance sheet[57] Management's Discussion and Analysis of Financial Condition and Results of Operations Net sales increased 4% in Q2 and 3% in the first six months of fiscal 2019, driven by a 15% sales increase in the Frozen Beverages segment in Q2 Consolidated Sales Performance (YoY) | Period | Net Sales (in thousands) | Growth | | :--- | :--- | :--- | | Q2 2019 | $276,302 | +4% | | H1 2019 | $547,914 | +3% | - The company maintains a $50 million revolving credit facility, which was unused as of March 30, 2019, and believes its liquidity is sufficient for future growth[79][83] - The Board of Directors declared a quarterly cash dividend of $0.50 per share[80] Food Service Segment Analysis Food Service sales grew 1% in Q2 and 2% in the first half, with operating income increasing due to lower marketing expenses and improved operations Food Service Sales Performance (YoY) | Period | Sales (in thousands) | Growth | | :--- | :--- | :--- | | Q2 2019 | $181,425 | +1% | | H1 2019 | $369,315 | +2% | - Bakery sales growth of 4% for the six months was primarily driven by one co-pack customer and increased sales to warehouse club stores and schools[88] - Handheld sales decreased 14% in the quarter and 19% in the six months due to lower sales to co-pack customers after unsuccessful product launches[89] - Segment operating income increased to $19.6 million in Q2 (from $18.5 million) and to $38.0 million in H1 (from $34.4 million), benefiting from price increases and improved facility operations[91] Retail Supermarkets Segment Analysis The Retail Supermarkets segment saw sales decrease by 1% in Q2 and remain flat for the first half, with operating income declining over six months due to higher costs Retail Supermarkets Sales Performance (YoY) | Period | Sales (in thousands) | Growth | | :--- | :--- | :--- | | Q2 2019 | $27,809 | -1% | | H1 2019 | $51,224 | 0% | - Soft pretzel sales grew 7% in Q2, driven by the AUNTIE ANNE'S brand[93] - Operating income decreased in the six-month period to $4.1 million from $5.1 million in the prior year, attributed to increased product and distribution costs[95] Frozen Beverages Segment Analysis The Frozen Beverages segment experienced strong sales growth of 15% in Q2 and 8% in the first half, primarily driven by a significant increase in machine revenue Frozen Beverages Sales Performance (YoY) | Period | Sales (in thousands) | Growth | | :--- | :--- | :--- | | Q2 2019 | $67,068 | +15% | | H1 2019 | $127,375 | +8% | - Machine revenue was the primary growth driver, increasing by $7.3 million in Q2 and $8.7 million in H1, with increases concentrated among three customers[97] - Core beverage sales were up 1% in Q2 but down 2% in H1. Service revenue increased 4% in both periods[96] Quantitative and Qualitative Disclosures About Market Risk The company states that there has been no material change in its assessment of sensitivity to market risk since the disclosure in its 2017 annual report on Form 10-K - There have been no material changes to the company's market risk disclosures[107] Controls and Procedures The company's CEO and CFO concluded that as of March 30, 2019, the disclosure controls and procedures were effective - Management has concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period[108] - No material changes to internal control over financial reporting occurred during the quarter ended March 30, 2019[109] Part II. Other Information This section includes exhibits and certifications required for regulatory filings Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications as required by the Sarbanes-Oxley Act and the financial statements formatted in XBRL - Exhibits filed include certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[111] - Financial information is also provided in XBRL format[111]