J & J Snack Foods : JJSnackFoods FirstQuarterEarningsCall 01 26 2021

50073263-J & J Snack

Foods - First Quarter

Earnings Call - 01-26-

2021

50073263-J & J Snack Foods - First Quarter Earnings Call - 01-26-2021

Operator: Welcome to the J&J Snack Foods First Quarter Earnings Call. My name is Richard, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. During the question-and- answer session, ff you have a question, please press star then one on your touch tone phone. Please note that this conference is being recorded. I will now turn the call over to Jerry Shreiber. Mr. Schreiber, you may begin.

Jerry: Thank you Richard. Good morning everybody. And welcome to our first quarter conference call with J&J Snack Foods. I am Jerry Schreiber. You should be familiar with my name and whatnot as I've been in this same position now close to 50 years much to my pleasure and privilege. We have two new attendees here Dan Fachner, who has been running our IC business, and I say it very, very well, has not been in the formal shareholders meeting, he recently located from the West Coast and is now living in Tennessee. And as you may know, Dennis Moore, who was our CFO for 30 some odd years has retired. And Ken Plunk who is certainly well-qualified, he had a stellar career with Kmart - I'm sorry with Walmart - and Ken has been with us now again four months?

Ken: Roughly yeah.

Jerry: Okay, yeah. All right. Let me begin with some commentary for the first quarter. And I'll begin with our forward-looking statements. Forward-Looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. You are cautioned not to place undue reliance on these statements which reflect management's analysis only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof.

Results of operations. Net sales were $241 million for the quarter, a decrease of 15%. Sales continued to be challenged by the impacts of COVID-19, especially in our food service and frozen beverage business segments. Despite this environment, we are seeing gradual improvements in sales trends since quarter four of 2020, where sales were 19% worse than last year.

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50073263-J & J Snack Foods - First Quarter Earnings Call - 01-26-2021

Our retail business responded well, driving 33% growth. Operating income was $578,000 for the quarter, a decrease of $21.1 million as declining sales, pressured production efficiency, and expense leverage.

Now I'd like to review the results of each of our business segments. And let me add just one comment. Our food service business, which represents about 70% of our total sales, was significantly impacted during the past year because of the sports and leisure cancellations and sales reductions, movie theaters, and to a lesser extent school.

Food service. Sales to food service customers decreased 13% for the quarter, an improving trend when compared to quarter four 2020 that declined 21% versus the prior year. Key customer and venues and channels like theme parks, schools, restaurants, sports, and leisure, and theaters continue to operate at limited capacity impacting food service sales.

Soft pretzel sales decreased 35% and frozen juices and ices decreased 11%. Truro[?] and funnel cake sales were down 30% and 49% respectively. Sales of bakery products declined 8% as the virus impacted traffic, purchase choices and frequency in this part of our business.

Our handheld business had a strong sales quarter exceeding last year by $10.4 million or 145% and was driven by a new product developed by one of our wholesale club customers. Operating income in our food service segment decreased $11.9 billion in the quarter due to the sales shortfall and lower growth [inaudible].

Retail supermarkets. Our retail gross business continues to perform well as sales increased 33% for the quarter. Sales were led by our super pretzel brands with an increase of 41% in the quarter. Frozen juice and ices and sales were up 52% and sales of biscuits increased 10%. Handheld sales were up 1% for the quarter. Operating income increased $2.5 million or 113% in the quarter driven by higher sales and operating income margins of 12%. Over 400 points better than last year.

Sales for the frozen beverage business segment were down 41% in the quarter. Beverage- related sales were down 55% driven entirely by a 56% decline in gallons as traffic and theaters, amusement park and retailers faced continued impacts from COVID-19. These

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50073263-J & J Snack Foods - First Quarter Earnings Call - 01-26-2021

venues rely on incremental seasonal sales in December, which was significantly affected by reduced operating capacity and consumers staying home. Service revenue declined 16% almost entirely from cancellation of our key customers maintenance program. Machine revenue decreased 46% due mainly from lapping a $5 million non-reoccurring sales from last year. Our frozen beverage segment incurred an operating loss for the quarter of $10.3 million as the COVID-19 restrictions continued to pressure sales. These sales challenges impacting gross margin mix and efficiency.

Consolidated. Gross profit as a percentage of sales was 20.8% this quarter down from 27.5% last year. Gross profit percentages decreased because of the previously mentioned COVID 19 sales pressure on our food service and frozen beverage customer. Total operating expense as a percentage of sales was 20.6% in the quarter, up from last year's 19.9%. Total expenses were $6.6 million below last year, but still deleveraged against these significant drops in sales. Net earnings quarter was $1.8 million down from $17.1 million last year. Our cash and investment securities balance were $285 million as of 26th December 2020, an increase of $7 million from our September year end. We continue to drive positive cashflow and our balance sheet and liquidity remains strong in this challenging environment.

We continue to look for acquisition opportunities and remain focused on the long-term growth opportunities of our business. Our capital spending was $9.7 million in a quarter. As we continue to invest in plant efficiencies growing our business. We estimate our spending for the year to be about consistent with prior years. A cash dividend of 57.5 - 57 point - 57.5 cents per share was declared by our board of directors and paid on 12th January 2021. We did not fight any shares of our stocks in the quarter. Our investment income this year was $116,000 less than last year due to decreases in the amount of investments and a lower interest rate.

I want to thank you again for your continued interest. I will now turn the meeting over to Dan Fachner who was named President of the J&J Snack Foods total group about six months ago. And Dan will have a few additional comments before we open up the meeting for Q&A.

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