J & J Snack Foods(US:JJSF)2019-05-03 15:13Financial Data and Key Metrics Changes - Net sales increased by 4% for the quarter and 3% for the six months [5] - Net earnings rose by 14% to $20.4 million or $1.08 per share from $17.8 million or $0.95 per share a year ago [5] - Operating income increased by 5% for both the quarter and the six months [6] - EBITDA for the past 12 months was $168 million [6] - Gross profit as a percentage of sales decreased to 28.7% from 29.04% last year [11] - Total operating expense as a percentage of sales decreased to 19.7% from 20.2% last year [11] Business Line Data and Key Metrics Changes - Food Service sales increased by 1% for the quarter and 2% for the six months, driven by soft pretzels, churros, and funnel cakes [7][8] - Retail Supermarkets sales decreased by 1% for the quarter but remained unchanged for the six months, with soft pretzel sales up 7% for the quarter [9] - ICEE and Frozen Beverages sales increased by 15% for the quarter and 8% for the six months, with beverage machine sales up significantly [10] Market Data and Key Metrics Changes - Sales of frozen juice bars and ices were down 5% for the quarter and up 3% for the six months [9] - Sales of handhelds were down 14% for the quarter [7] - Operating income in the Food Service segment increased from $18.5 million to $19.6 million due to lower marketing and distribution expenses [14] Company Strategy and Development Direction - The company is focused on acquisitions as a use of cash, with $287 million in cash and investment securities [12] - Management is optimistic about the Food Service segment, particularly soft pretzels, and is exploring ways to grow sales in this area [19][21] - The company is continuously developing new products and has several projects in the pipeline [54] Management's Comments on Operating Environment and Future Outlook - Management expects a good performance in the third and fourth quarters, benefiting from warmer weather and increased outdoor activities [67] - The company has not experienced a down earnings quarter historically and does not expect one in the near future [68] Other Important Information - Capital spending was $15 million in the quarter, with an estimated total of about $50 million for the year [12] - A cash dividend of $0.50 per share was declared and paid [12] Q&A Session Summary Question: Insights on Food Service business growth - Management noted that while soft pretzel sales have stabilized, they remain bullish on growth opportunities in the restaurant sector [19][21] Question: Bakery business performance - The bakery business was flat due to tough comparisons and co-packing opportunities shifting [22][23] Question: Frozen Beverages machine sales - Management acknowledged the unpredictability of machine sales but emphasized the importance of influencing customers to use their brands [29][30] Question: Pricing impact - Management expects pricing changes to have a more significant impact in the second half of the fiscal year [31] Question: Distribution costs - Management reported a decrease in distribution costs, attributing it to a plateauing effect [38] Question: Cash and securities management - Management confirmed that cash reserves are primarily intended for acquisitions rather than special dividends [45] Question: Supply chain improvements - Management provided an update on ongoing projects aimed at improving margins through better logistics and production capacity [62][64]