c
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 30, September 28, 2023
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 0-19681
JOHN B. SANFILIPPO & SON, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 36-2419677 |
( State or other jurisdiction of incorporation or organization) | (I.R.S. Employer |
1703 North Randall Road Elgin, Illinois | 60123-7820 |
(Address of principal executive offices) | (Zip Code) |
(847) 289-1800
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Common Stock, $.01 par value per share |
| JBSS |
| The NASDAQ Stock Market LLC (NASDAQ Global Select Market) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company |
| ☐ |
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 28,October 26, 2023, 8,958,4268,973,031 shares of the Registrant’s Common Stock, $0.01 par value per share and 2,597,426 shares of the Registrant’s Class A Common Stock, $0.01 par value per share, were outstanding.
JOHN B. SANFILIPPO & SON, INC.
FORM 10-Q
For the Quarter Ended March 30,September 28, 2023
INDEX
| Page |
| |
3 | |
3 | |
4 | |
6 | |
7 | |
8 | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
|
| |
| |
| |
| |
25 | |
| |
|
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands, except share and per share amounts)
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
|
| For the Quarter Ended |
| ||||||||||||||||
| March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
|
| September 28, |
|
| September 29, |
| |||||||
Net sales |
| $ | 238,535 |
|
| $ | 218,584 |
|
| $ | 765,464 |
|
| $ | 698,120 |
|
| $ | 234,105 |
|
| $ | 252,601 |
|
Cost of sales |
|
| 188,767 |
|
|
| 179,175 |
|
|
| 608,551 |
|
|
| 554,678 |
|
|
| 177,083 |
|
|
| 201,958 |
|
Gross profit |
|
| 49,768 |
|
|
| 39,409 |
|
|
| 156,913 |
|
|
| 143,442 |
|
|
| 57,022 |
|
|
| 50,643 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Selling expenses |
|
| 18,109 |
|
|
| 15,584 |
|
|
| 57,921 |
|
|
| 56,896 |
|
|
| 21,992 |
|
|
| 17,982 |
|
Administrative expenses |
|
| 9,841 |
|
|
| 6,401 |
|
|
| 30,296 |
|
|
| 25,871 |
|
|
| 10,453 |
|
|
| 10,247 |
|
Gain on sale of facility, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,349 | ) | ||||||||
Total operating expenses |
|
| 27,950 |
|
|
| 21,985 |
|
|
| 88,217 |
|
|
| 80,418 |
|
|
| 32,445 |
|
|
| 28,229 |
|
Income from operations |
|
| 21,818 |
|
|
| 17,424 |
|
|
| 68,696 |
|
|
| 63,024 |
|
|
| 24,577 |
|
|
| 22,414 |
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest expense including $186, $199, $568 and |
|
| 552 |
|
|
| 531 |
|
|
| 1,828 |
|
|
| 1,322 |
| ||||||||
Interest expense including $178 and $193 to related parties |
|
| 227 |
|
|
| 661 |
| ||||||||||||||||
Rental and miscellaneous expense, net |
|
| 371 |
|
|
| 403 |
|
|
| 1,084 |
|
|
| 1,074 |
|
|
| 356 |
|
|
| 402 |
|
Pension expense (excluding service costs) |
|
| 349 |
|
|
| 618 |
|
|
| 1,046 |
|
|
| 1,855 |
|
|
| 350 |
|
|
| 349 |
|
Total other expense, net |
|
| 1,272 |
|
|
| 1,552 |
|
|
| 3,958 |
|
|
| 4,251 |
|
|
| 933 |
|
|
| 1,412 |
|
Income before income taxes |
|
| 20,546 |
|
|
| 15,872 |
|
|
| 64,738 |
|
|
| 58,773 |
|
|
| 23,644 |
|
|
| 21,002 |
|
Income tax expense |
|
| 4,814 |
|
|
| 3,995 |
|
|
| 16,554 |
|
|
| 14,400 |
|
|
| 6,056 |
|
|
| 5,457 |
|
Net income |
| $ | 15,732 |
|
| $ | 11,877 |
|
| $ | 48,184 |
|
| $ | 44,373 |
|
| $ | 17,588 |
|
| $ | 15,545 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Amortization of actuarial loss included in net |
|
| 7 |
|
|
| 363 |
|
|
| 21 |
|
|
| 1,091 |
|
|
| — |
|
|
| 7 |
|
Income tax expense related to pension adjustments |
|
| (2 | ) |
|
| (94 | ) |
|
| (5 | ) |
|
| (284 | ) |
|
| — |
|
|
| (1 | ) |
Other comprehensive income, net of tax |
|
| 5 |
|
|
| 269 |
|
|
| 16 |
|
|
| 807 |
|
|
| — |
|
|
| 6 |
|
Comprehensive income |
| $ | 15,737 |
|
| $ | 12,146 |
|
| $ | 48,200 |
|
| $ | 45,180 |
|
| $ | 17,588 |
|
| $ | 15,551 |
|
Net income per common share-basic |
| $ | 1.36 |
|
| $ | 1.03 |
|
| $ | 4.16 |
|
| $ | 3.85 |
|
| $ | 1.52 |
|
| $ | 1.35 |
|
Net income per common share-diluted |
| $ | 1.35 |
|
| $ | 1.02 |
|
| $ | 4.14 |
|
| $ | 3.83 |
|
| $ | 1.51 |
|
| $ | 1.34 |
|
The accompanying unaudited notes are an integral part of these consolidated financial statements.
3
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share amounts)
| March 30, |
|
| June 30, |
|
| March 24, |
|
| September 28, |
|
| June 29, |
|
| September 29, |
| |||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash |
| $ | 365 |
|
| $ | 415 |
|
| $ | 667 |
| ||||||||||||
Accounts receivable, less allowance for doubtful accounts of $305, $267 |
|
| 74,534 |
|
|
| 69,611 |
|
|
| 68,704 |
| ||||||||||||
Cash and cash equivalents |
| $ | 838 |
|
| $ | 1,948 |
|
| $ | 298 |
| ||||||||||||
Accounts receivable, less allowance for doubtful accounts of $281, $283 |
|
| 68,363 |
|
|
| 72,734 |
|
|
| 76,401 |
| ||||||||||||
Inventories |
|
| 190,351 |
|
|
| 204,855 |
|
|
| 211,127 |
|
|
| 174,789 |
|
|
| 172,936 |
|
|
| 192,098 |
|
Prepaid expenses and other current assets |
|
| 9,325 |
|
|
| 8,283 |
|
|
| 7,653 |
|
|
| 7,603 |
|
|
| 6,812 |
|
|
| 6,746 |
|
TOTAL CURRENT ASSETS |
|
| 274,575 |
|
|
| 283,164 |
|
|
| 288,151 |
|
|
| 251,593 |
|
|
| 254,430 |
|
|
| 275,543 |
|
PROPERTY, PLANT AND EQUIPMENT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Land |
|
| 9,150 |
|
|
| 9,150 |
|
|
| 9,150 |
|
|
| 9,150 |
|
|
| 9,150 |
|
|
| 9,150 |
|
Buildings |
|
| 102,840 |
|
|
| 102,810 |
|
|
| 102,810 |
|
|
| 104,982 |
|
|
| 104,150 |
|
|
| 102,837 |
|
Machinery and equipment |
|
| 259,289 |
|
|
| 245,111 |
|
|
| 230,842 |
|
|
| 267,313 |
|
|
| 261,706 |
|
|
| 251,998 |
|
Furniture and leasehold improvements |
|
| 5,275 |
|
|
| 5,296 |
|
|
| 5,296 |
|
|
| 5,275 |
|
|
| 5,275 |
|
|
| 5,296 |
|
Vehicles |
|
| 719 |
|
|
| 614 |
|
|
| 614 |
|
|
| 729 |
|
|
| 729 |
|
|
| 614 |
|
Construction in progress |
|
| 8,210 |
|
|
| 6,471 |
|
|
| 18,077 |
|
|
| 7,480 |
|
|
| 7,123 |
|
|
| 6,926 |
|
|
| 385,483 |
|
|
| 369,452 |
|
|
| 366,789 |
|
|
| 394,929 |
|
|
| 388,133 |
|
|
| 376,821 |
| |
Less: Accumulated depreciation |
|
| 263,718 |
|
|
| 252,371 |
|
|
| 249,358 |
|
|
| 271,418 |
|
|
| 267,336 |
|
|
| 255,948 |
|
|
| 121,765 |
|
|
| 117,081 |
|
|
| 117,431 |
|
|
| 123,511 |
|
|
| 120,797 |
|
|
| 120,873 |
| |
Rental investment property, less accumulated depreciation of $14,238, |
|
| 14,885 |
|
|
| 15,491 |
|
|
| 15,692 |
| ||||||||||||
Rental investment property, less accumulated depreciation of $14,641, |
|
| 14,482 |
|
|
| 14,684 |
|
|
| 15,289 |
| ||||||||||||
TOTAL PROPERTY, PLANT AND EQUIPMENT |
|
| 136,650 |
|
|
| 132,572 |
|
|
| 133,123 |
|
|
| 137,993 |
|
|
| 135,481 |
|
|
| 136,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Intangible assets, net |
|
| 7,100 |
|
|
| 8,065 |
|
|
| 8,509 |
|
|
| 6,216 |
|
|
| 6,658 |
|
|
| 7,621 |
|
Life insurance and other assets |
|
| 6,029 |
|
|
| 8,272 |
|
|
| 6,472 |
| ||||||||||||
Deferred income taxes |
|
| 2,374 |
|
|
| 3,236 |
|
|
| 5,104 |
|
|
| 3,461 |
|
|
| 3,592 |
|
|
| 3,231 |
|
Goodwill |
|
| 11,750 |
|
|
| 9,650 |
|
|
| 9,650 |
|
|
| 11,750 |
|
|
| 11,750 |
|
|
| 9,650 |
|
Operating lease right-of-use assets |
|
| 6,582 |
|
|
| 2,303 |
|
|
| 2,570 |
|
|
| 6,845 |
|
|
| 6,427 |
|
|
| 2,430 |
|
Other assets |
|
| 6,995 |
|
|
| 6,949 |
|
|
| 6,134 |
| ||||||||||||
TOTAL ASSETS |
| $ | 445,060 |
|
| $ | 447,262 |
|
| $ | 453,579 |
|
| $ | 424,853 |
|
| $ | 425,287 |
|
| $ | 440,771 |
|
The accompanying unaudited notes are an integral part of these consolidated financial statements.
4
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share amounts)
| March 30, |
|
| June 30, |
|
| March 24, |
|
| September 28, |
|
| June 29, |
|
| September 29, |
| |||||||
LIABILITIES & STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revolving credit facility borrowings |
| $ | 27,825 |
|
| $ | 40,439 |
|
| $ | 65,863 |
|
| $ | 6,008 |
|
| $ | — |
|
| $ | 42,624 |
|
Current maturities of long-term debt, net, including |
|
| 657 |
|
|
| 3,149 |
|
|
| 3,961 |
| ||||||||||||
Current maturities of long-term debt, net, including |
|
| 688 |
|
|
| 672 |
|
|
| 2,046 |
| ||||||||||||
Accounts payable |
|
| 42,264 |
|
|
| 47,720 |
|
|
| 48,918 |
|
|
| 51,922 |
|
|
| 42,680 |
|
|
| 51,222 |
|
Bank overdraft |
|
| 458 |
|
|
| 214 |
|
|
| 1,314 |
|
|
| 669 |
|
|
| 285 |
|
|
| 488 |
|
Accrued payroll and related benefits |
|
| 17,061 |
|
|
| 18,888 |
|
|
| 12,646 |
|
|
| 12,034 |
|
|
| 27,572 |
|
|
| 12,166 |
|
Other accrued expenses |
|
| 14,493 |
|
|
| 12,352 |
|
|
| 13,113 |
|
|
| 17,980 |
|
|
| 14,479 |
|
|
| 17,624 |
|
TOTAL CURRENT LIABILITIES |
|
| 102,758 |
|
|
| 122,762 |
|
|
| 145,815 |
|
|
| 89,301 |
|
|
| 85,688 |
|
|
| 126,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
LONG-TERM LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Long-term debt, less current maturities, net, including |
|
| 7,276 |
|
|
| 7,774 |
|
|
| 7,933 |
| ||||||||||||
Long-term debt, less current maturities, net, including |
|
| 6,924 |
|
|
| 7,102 |
|
|
| 7,612 |
| ||||||||||||
Retirement plan |
|
| 29,471 |
|
|
| 28,886 |
|
|
| 35,935 |
|
|
| 26,788 |
|
|
| 26,653 |
|
|
| 28,753 |
|
Long-term operating lease liabilities, net of current portion |
|
| 4,905 |
|
|
| 1,076 |
|
|
| 1,241 |
|
|
| 5,136 |
|
|
| 4,771 |
|
|
| 1,242 |
|
Long-term workers' compensation liabilities |
|
| 7,304 |
|
|
| 7,321 |
|
|
| 7,422 |
| ||||||||||||
Other |
|
| 8,332 |
|
|
| 7,943 |
|
|
| 7,876 |
|
|
| 2,033 |
|
|
| 1,545 |
|
|
| 409 |
|
TOTAL LONG-TERM LIABILITIES |
|
| 49,984 |
|
|
| 45,679 |
|
|
| 52,985 |
|
|
| 48,185 |
|
|
| 47,392 |
|
|
| 45,438 |
|
TOTAL LIABILITIES |
|
| 152,742 |
|
|
| 168,441 |
|
|
| 198,800 |
|
|
| 137,486 |
|
|
| 133,080 |
|
|
| 171,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
STOCKHOLDERS' EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Class A Common Stock, convertible to Common Stock on |
|
| 26 |
|
|
| 26 |
|
|
| 26 |
|
|
| 26 |
|
|
| 26 |
|
|
| 26 |
|
Common Stock, non-cumulative voting rights of one vote |
|
| 91 |
|
|
| 90 |
|
|
| 90 |
| ||||||||||||
Common Stock, non-cumulative voting rights of one vote |
|
| 91 |
|
|
| 91 |
|
|
| 90 |
| ||||||||||||
Capital in excess of par value |
|
| 131,649 |
|
|
| 128,800 |
|
|
| 127,910 |
|
|
| 132,733 |
|
|
| 131,986 |
|
|
| 129,572 |
|
Retained earnings |
|
| 164,220 |
|
|
| 153,589 |
|
|
| 136,175 |
|
|
| 155,925 |
|
|
| 161,512 |
|
|
| 143,153 |
|
Accumulated other comprehensive loss |
|
| (2,464 | ) |
|
| (2,480 | ) |
|
| (8,218 | ) |
|
| (204 | ) |
|
| (204 | ) |
|
| (2,474 | ) |
Treasury stock, at cost; 117,900 shares of Common Stock |
|
| (1,204 | ) |
|
| (1,204 | ) |
|
| (1,204 | ) |
|
| (1,204 | ) |
|
| (1,204 | ) |
|
| (1,204 | ) |
TOTAL STOCKHOLDERS’ EQUITY |
|
| 292,318 |
|
|
| 278,821 |
|
|
| 254,779 |
|
|
| 287,367 |
|
|
| 292,207 |
|
|
| 269,163 |
|
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY |
| $ | 445,060 |
|
| $ | 447,262 |
|
| $ | 453,579 |
|
| $ | 424,853 |
|
| $ | 425,287 |
|
| $ | 440,771 |
|
The accompanying unaudited notes are an integral part of these consolidated financial statements.
5
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(Dollars in thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| ||||||||||
| Class A |
|
|
|
|
|
|
|
| Capital in |
|
|
|
|
| Other |
|
|
|
|
|
|
| ||||||||||||
| Common Stock |
|
| Common Stock |
|
| Excess of |
|
| Retained |
|
| Comprehensive |
|
| Treasury |
|
|
|
| |||||||||||||||
Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Par Value |
|
| Earnings |
|
| Loss |
|
| Stock |
|
| Total |
| ||||||||||
Balance, June 30, 2022 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,047,359 |
|
| $ | 90 |
|
| $ | 128,800 |
|
| $ | 153,589 |
|
| $ | (2,480 | ) |
| $ | (1,204 | ) |
| $ | 278,821 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15,545 |
|
|
|
|
|
|
|
|
| 15,545 |
| |||||||
Cash dividends ($2.25 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (25,981 | ) |
|
|
|
|
|
|
|
| (25,981 | ) | |||||||
Pension liability amortization, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6 |
|
|
|
|
|
| 6 |
| |||||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
| 772 |
|
|
|
|
|
|
|
|
|
|
|
| 772 |
| |||||||
Balance, September 29, 2022 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,047,359 |
|
| $ | 90 |
|
| $ | 129,572 |
|
| $ | 143,153 |
|
| $ | (2,474 | ) |
| $ | (1,204 | ) |
| $ | 269,163 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 16,907 |
|
|
|
|
|
|
|
|
| 16,907 |
| |||||||
Cash dividends ($1.00 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (11,572 | ) |
|
|
|
|
|
|
|
| (11,572 | ) | |||||||
Pension liability amortization, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5 |
|
|
|
|
|
| 5 |
| |||||||
Equity award exercises, net |
|
|
|
|
|
|
| 24,709 |
|
|
| 1 |
|
|
| (356 | ) |
|
|
|
|
|
|
|
|
|
|
| (355 | ) | |||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
| 1,515 |
|
|
|
|
|
|
|
|
|
|
|
| 1,515 |
| |||||||
Balance, December 29, 2022 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,072,068 |
|
| $ | 91 |
|
| $ | 130,731 |
|
| $ | 148,488 |
|
| $ | (2,469 | ) |
| $ | (1,204 | ) |
| $ | 275,663 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15,732 |
|
|
|
|
|
|
|
|
| 15,732 |
| |||||||
Pension liability amortization, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5 |
|
|
|
|
|
| 5 |
| |||||||
Equity award exercises, net |
|
|
|
|
|
|
| 4,258 |
|
|
| — |
|
|
| (23 | ) |
|
|
|
|
|
|
|
|
|
|
| (23 | ) | |||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
| 941 |
|
|
|
|
|
|
|
|
|
|
|
| 941 |
| |||||||
Balance, March 30, 2023 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,076,326 |
|
| $ | 91 |
|
| $ | 131,649 |
|
| $ | 164,220 |
|
| $ | (2,464 | ) |
| $ | (1,204 | ) |
| $ | 292,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| ||||||||||
| Class A |
|
|
|
|
|
|
|
| Capital in |
|
|
|
|
| Other |
|
|
|
|
|
|
| ||||||||||||
| Common Stock |
|
| Common Stock |
|
| Excess of |
|
| Retained |
|
| Comprehensive |
|
| Treasury |
|
|
|
| |||||||||||||||
Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Par Value |
|
| Earnings |
|
| Loss |
|
| Stock |
|
| Total |
| ||||||||||
Balance, June 29, 2023 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,076,326 |
|
| $ | 91 |
|
| $ | 131,986 |
|
| $ | 161,512 |
|
| $ | (204 | ) |
| $ | (1,204 | ) |
| $ | 292,207 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 17,588 |
|
|
|
|
|
|
|
|
| 17,588 |
| |||||||
Cash dividends ($2.00 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (23,175 | ) |
|
|
|
|
|
|
|
| (23,175 | ) | |||||||
Equity award exercises |
|
|
|
|
|
|
| 14,605 |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| — |
| |||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
| 747 |
|
|
|
|
|
|
|
|
|
|
|
| 747 |
| |||||||
Balance, September 28, 2023 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,090,931 |
|
| $ | 91 |
|
| $ | 132,733 |
|
| $ | 155,925 |
|
| $ | (204 | ) |
| $ | (1,204 | ) |
| $ | 287,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| ||||||||||
| Class A |
|
|
|
|
|
|
|
| Capital in |
|
|
|
|
| Other |
|
|
|
|
|
|
| ||||||||||||
| Common Stock |
|
| Common Stock |
|
| Excess of |
|
| Retained |
|
| Comprehensive |
|
| Treasury |
|
|
|
| |||||||||||||||
Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Par Value |
|
| Earnings |
|
| Loss |
|
| Stock |
|
| Total |
| ||||||||||
Balance, June 24, 2021 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 8,988,812 |
|
| $ | 90 |
|
| $ | 126,271 |
|
| $ | 126,336 |
|
| $ | (9,025 | ) |
| $ | (1,204 | ) |
| $ | 242,494 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19,249 |
|
|
|
|
|
|
|
|
| 19,249 |
| |||||||
Cash dividends ($3.00 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (34,534 | ) |
|
|
|
|
|
|
|
| (34,534 | ) | |||||||
Pension liability amortization, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 269 |
|
|
|
|
|
| 269 |
| |||||||
Equity award exercises, net |
|
|
|
|
|
|
| 1,168 |
|
|
| — |
|
|
| (16 | ) |
|
|
|
|
|
|
|
|
|
|
| (16 | ) | |||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
| 703 |
|
|
|
|
|
|
|
|
|
|
|
| 703 |
| |||||||
Balance, September 23, 2021 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 8,989,980 |
|
| $ | 90 |
|
| $ | 126,958 |
|
| $ | 111,051 |
|
| $ | (8,756 | ) |
| $ | (1,204 | ) |
| $ | 228,165 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 13,247 |
|
|
|
|
|
|
|
|
| 13,247 |
| |||||||
Pension liability amortization, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 269 |
|
|
|
|
|
| 269 |
| |||||||
Equity award exercises, net |
|
|
|
|
|
|
| 54,980 |
|
|
| — |
|
|
| (946 | ) |
|
|
|
|
|
|
|
|
|
|
| (946 | ) | |||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
| 1,068 |
|
|
|
|
|
|
|
|
|
|
|
| 1,068 |
| |||||||
Balance, December 23, 2021 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,044,960 |
|
| $ | 90 |
|
| $ | 127,080 |
|
| $ | 124,298 |
|
| $ | (8,487 | ) |
| $ | (1,204 | ) |
| $ | 241,803 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,877 |
|
|
|
|
|
|
|
|
| 11,877 |
| |||||||
Pension liability amortization, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 269 |
|
|
|
|
|
| 269 |
| |||||||
Equity award exercises, net |
|
|
|
|
|
|
| 1,460 |
|
|
| — |
|
|
| (48 | ) |
|
|
|
|
|
|
|
|
|
|
| (48 | ) | |||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
| 878 |
|
|
|
|
|
|
|
|
|
|
|
| 878 |
| |||||||
Balance, March 24, 2022 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,046,420 |
|
| $ | 90 |
|
| $ | 127,910 |
|
| $ | 136,175 |
|
| $ | (8,218 | ) |
| $ | (1,204 | ) |
| $ | 254,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| ||||||||||
| Class A |
|
|
|
|
|
|
|
| Capital in |
|
|
|
|
| Other |
|
|
|
|
|
|
| ||||||||||||
| Common Stock |
|
| Common Stock |
|
| Excess of |
|
| Retained |
|
| Comprehensive |
|
| Treasury |
|
|
|
| |||||||||||||||
Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Par Value |
|
| Earnings |
|
| Loss |
|
| Stock |
|
| Total |
| ||||||||||
Balance, June 30, 2022 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,047,359 |
|
| $ | 90 |
|
| $ | 128,800 |
|
| $ | 153,589 |
|
| $ | (2,480 | ) |
| $ | (1,204 | ) |
| $ | 278,821 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15,545 |
|
|
|
|
|
|
|
|
| 15,545 |
| |||||||
Cash dividends ($2.25 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (25,981 | ) |
|
|
|
|
|
|
|
| (25,981 | ) | |||||||
Pension liability amortization, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6 |
|
|
|
|
|
| 6 |
| |||||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
| 772 |
|
|
|
|
|
|
|
|
|
|
|
| 772 |
| |||||||
Balance, September 29, 2022 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,047,359 |
|
| $ | 90 |
|
| $ | 129,572 |
|
| $ | 143,153 |
|
| $ | (2,474 | ) |
| $ | (1,204 | ) |
| $ | 269,163 |
|
The accompanying unaudited notes are an integral part of these consolidated financial statements.
6
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
| For the Thirty-Nine Weeks Ended |
|
| For the Quarter Ended |
| |||||||||||
| March 30, |
|
| March 24, |
|
| September 28, |
|
| September 29, |
| |||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 48,184 |
|
| $ | 44,373 |
|
| $ | 17,588 |
|
| $ | 15,545 |
|
Depreciation and amortization |
|
| 15,323 |
|
|
| 13,619 |
|
|
| 5,236 |
|
|
| 4,961 |
|
Loss (gain) on disposition of assets, net |
|
| 47 |
|
|
| (1,754 | ) | ||||||||
Loss on disposition of assets, net |
|
| 126 |
|
|
| 5 |
| ||||||||
Deferred income tax expense |
|
| 862 |
|
|
| 983 |
|
|
| 131 |
|
|
| 5 |
|
Stock-based compensation expense |
|
| 3,228 |
|
|
| 2,649 |
|
|
| 747 |
|
|
| 772 |
|
Change in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts receivable, net |
|
| (4,923 | ) |
|
| (2,370 | ) |
|
| 4,511 |
|
|
| (6,790 | ) |
Inventories |
|
| 14,744 |
|
|
| (63,129 | ) |
|
| (1,853 | ) |
|
| 12,757 |
|
Prepaid expenses and other current assets |
|
| 535 |
|
|
| 915 |
|
|
| (791 | ) |
|
| 1,537 |
|
Accounts payable |
|
| (5,285 | ) |
|
| 1,767 |
|
|
| 8,796 |
|
|
| 3,216 |
|
Accrued expenses |
|
| 1,312 |
|
|
| (10,046 | ) |
|
| (15,881 | ) |
|
| (5,265 | ) |
Income taxes payable |
|
| (2,575 | ) |
|
| (1,917 | ) |
|
| 3,844 |
|
|
| 3,815 |
|
Other long-term assets and liabilities |
|
| 335 |
|
|
| 532 |
|
|
| (348 | ) |
|
| 215 |
|
Other, net |
|
| 602 |
|
|
| 1,823 |
|
|
| (225 | ) |
|
| (127 | ) |
Net cash provided by (used in) operating activities |
|
| 72,389 |
|
|
| (12,555 | ) | ||||||||
Net cash provided by operating activities |
|
| 21,881 |
|
|
| 30,646 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Purchases of property, plant and equipment |
|
| (15,586 | ) |
|
| (12,836 | ) |
|
| (5,993 | ) |
|
| (5,918 | ) |
Acquisition of Just the Cheese brand |
|
| (3,500 | ) |
|
| — |
| ||||||||
Proceeds from disposition of assets, net |
|
| — |
|
|
| 3,950 |
| ||||||||
Proceeds from the sale of life insurance policies |
|
| — |
|
|
| 3,225 |
| ||||||||
Other, net |
|
| (56 | ) |
|
| (827 | ) |
|
| (53 | ) |
|
| (56 | ) |
Net cash used in investing activities |
|
| (19,142 | ) |
|
| (6,488 | ) |
|
| (6,046 | ) |
|
| (5,974 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net short-term (repayments) borrowings |
|
| (12,614 | ) |
|
| 57,210 |
| ||||||||
Net short-term borrowings |
|
| 6,008 |
|
|
| 2,185 |
| ||||||||
Principal payments on long-term debt |
|
| (2,995 | ) |
|
| (2,849 | ) |
|
| (162 | ) |
|
| (1,267 | ) |
Increase in bank overdraft |
|
| 244 |
|
|
| 221 |
|
|
| 384 |
|
|
| 274 |
|
Dividends paid |
|
| (37,553 | ) |
|
| (34,534 | ) |
|
| (23,175 | ) |
|
| (25,981 | ) |
Taxes paid related to net share settlement of equity awards |
|
| (379 | ) |
|
| (1,010 | ) | ||||||||
Net cash (used in) provided by financing activities |
|
| (53,297 | ) |
|
| 19,038 |
| ||||||||
Net cash used in financing activities |
|
| (16,945 | ) |
|
| (24,789 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
NET DECREASE IN CASH |
|
| (50 | ) |
|
| (5 | ) | ||||||||
Cash, beginning of period |
|
| 415 |
|
|
| 672 |
| ||||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
| (1,110 | ) |
|
| (117 | ) | ||||||||
Cash and cash equivalents, beginning of period |
|
| 1,948 |
|
|
| 415 |
| ||||||||
Cash, end of period |
| $ | 365 |
|
| $ | 667 |
|
| $ | 838 |
|
| $ | 298 |
|
The accompanying unaudited notes are an integral part of these consolidated financial statements.
7
JOHN B. SANFILIPPO & SON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except where noted and per share data)
Note 1 – Basis of Presentation and Description of Business
As used herein, unless the context otherwise indicates, the terms “we”, “us”, “our” or “Company” collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiary, JBSS Ventures, LLC. Our fiscal year ends on the final Thursday of June each year, and typically consists of fifty-two weeks (four thirteen-week quarters). Additional information on the comparability of the periods presented is as follows:
We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States. These nuts are sold under our Fisher,, Orchard Valley Harvest,, Squirrel Brand and Southern Style Nutsbrand names and under a variety of private brands. We also market and distribute, and in most cases, manufacture or process, a diverse product line of food and snack products, including peanut butter, almond butter, cashew butter, candy and confections, snack and trail mixes, nutrition bars, snack bites, sunflower kernels, dried fruit, corn snacks, chickpea snacks, sesame sticks, and other sesame snack products and baked cheese snack products under our brand names, and under private brands.In addition, with our acquisition of theincluding Just the Cheese brand, we have expanded our product offerings to include baked cheese snack products on a branded, and under private label basis.brands. Our products are sold through three primary distribution channels, including food retailers in the consumer channel, commercial ingredient users and contract packaging customers.
The accompanying unaudited financial statements fairly present the consolidated statements of comprehensive income, consolidated balance sheets, consolidated statements of stockholders’ equity and consolidated statements of cash flows, and reflect all adjustments, consisting only of normal recurring adjustments which are necessary for the fair statement of the results of the interim periods. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
The interim results of operations are not necessarily indicative of the results to be expected for a full year. The balance sheet data as of June 30, 202229, 2023 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). Accordingly, these unaudited financial statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 20222023 Annual Report on Form 10-K for the fiscal year ended June 30, 2022.29, 2023.
Note 2 – Acquisition of Just the Cheese Brand
On December 16, 2022, we completed the acquisition of certain assets (the “Acquisition”) of Specialty Cheese Company, Inc. The acquired assets are primarily related to the manufacturing and sale of baked cheese snack products, including those products sold under the Just the Cheese brand, all finished goods inventory and intangible assets. At the time of the closing of the Acquisition, the full purchase price of $3,500 was paid in cash and funded from our Credit Facility (as defined below). Just the Cheese is one of the nation’s leading baked cheese snacking brands and offers 100% real cheese snack bars and cheese crisps. The Acquisition will provide us with a product that expands our portfolio into new snacking categories and is anticipated to accelerate growth with our private brand and food service customers. The Acquisition has been accounted for as a business combination in accordance with ASC Topic 805, “Business Combinations”.
8
The final purchase price allocation was completed during the third quarter of fiscal 2023 which resulted in immaterial changes to fixed assets and customer relationships. The total purchase price of $3,500 has been allocated to the fair values of the assets acquired as follows:
Inventories |
| $ | 240 |
|
Fixed assets |
|
| 800 |
|
Identifiable intangible assets: |
|
|
| |
Customer relationships |
|
| 250 |
|
Brand names |
|
| 80 |
|
Non-compete agreement |
|
| 30 |
|
Goodwill |
|
| 2,100 |
|
Total purchase price |
| $ | 3,500 |
|
The customer relationship assets represent the value of the long-term strategic relationship with significant customers who purchase Just the Cheese brand products. The brand name asset represents the value of the established Just the Cheese brand name.
Goodwill, which is expected to be deductible for tax purposes, arises from intangible assets that do not qualify for separate recognition and expected synergies from combining the operations related to the Just the Cheese brand with those of the Company. There were no material contingencies recognized or unrecognized associated with the Acquisition.
Due to the immaterial financial nature of the Acquisition, unaudited pro forma results of operations of the Company (as if the Acquisition had taken place at the beginning of fiscal 2023) will not be presented.
Since the Acquisition, we continue to operate in a single reportable operating segment that consists of selling various nut and nut-related products through three sales distribution channels.
Note 32 – Revenue Recognition
We recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. For each customer contract, a five-step process is followed in which we identify the contract, identify performance obligations, determine the transaction price, allocate the contract transaction price to the performance obligations, and recognize the revenue when (or as) the performance obligation is transferred to the customer.
When Performance Obligations Are Satisfied
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations are primarily for the delivery of raw and processed recipe and snack nuts, nut butters and trail mixes.
Our customer contracts do not include more than one performance obligation. If a contract were to contain more than one performance obligation, we are required to allocate the contract’s transaction price to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by directly observable data.
8
Revenue recognition is generally completed at a point in time when product control is transferred to the customer. For virtually all of our revenues, control transfers to the customer when the product is shipped or delivered to the customer based upon applicable shipping terms. This allows the customer to then direct the use and obtain substantially all of the remaining benefits from the asset at that point in time. Therefore, the timing of our revenue recognition requires little judgment.
9
Variable Consideration
Some of our products are sold through specific incentive programs including, but not limited to, promotional allowances, volume and customer rebates, in-store display incentives and marketing allowances to consumer and some commercial ingredient customers. The ultimate cost of these programs is dependent on certain factors such as actual purchase volumes or customer activities and is dependent on significant management judgment when determining estimates. The Company accounts for these programs as variable consideration and recognizes a reduction in revenue (and a corresponding reduction in the transaction price) in the same period as the underlying program based upon the terms of the specific arrangements.
Trade promotions, consisting primarily of customer pricing allowances, merchandising funds and consumer coupons, are also offered through various programs to customers and consumers. A provision for estimated trade promotions is recorded as a reduction of revenue (and a reduction in the transaction price) in the same period when the sale is recognized. Revenues are also recorded net of expected customer deductions which are provided for based upon past experiences. Evaluating these estimates requires management judgment.
We generally use the most likely amount method to determine the variable consideration. We believe there will not be significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. The Company reviews and updates its estimates and related accruals of variable consideration and trade promotions at least quarterly based on the terms of the agreements and historical experience. Any uncertainties in the ultimate resolution of variable consideration due to factors outside of the Company’s influence are typically resolved within a short timeframe. Therefore, no additional constraint on the variable consideration is required.
Contract Balances
Contract assets or liabilities result from transactions with revenue recorded over time. If the measure of remaining rights exceeds the measure of the remaining performance obligations, the Company records a contract asset. Conversely, if the measure of the remaining performance obligations exceeds the measure of the remaining rights, the Company records a contract liability. The contract asset balance at September 29, 2022 was $562 and was recorded in the caption “Prepaid expenses and other current assets” on the Consolidated Balance Sheets. There was no contract asset balance for anythe other periods presented. The Company generally does not have material deferred revenue or contract liability balances arising from transactions with customers.
Disaggregation of Revenue
Revenue disaggregated by sales channel is as follows:
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
|
| For the Quarter Ended |
| ||||||||||||||||
Distribution Channel |
| March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
|
| September 28, |
|
| September 29, |
| ||||||
Consumer |
| $ | 185,128 |
|
| $ | 173,648 |
|
| $ | 606,188 |
|
| $ | 556,888 |
|
| $ | 184,334 |
|
| $ | 196,547 |
|
Commercial Ingredients |
|
| 30,901 |
|
|
| 25,514 |
|
|
| 90,827 |
|
|
| 81,426 |
|
|
| 28,135 |
|
|
| 31,507 |
|
Contract Packaging |
|
| 22,506 |
|
|
| 19,422 |
|
|
| 68,449 |
|
|
| 59,806 |
|
|
| 21,636 |
|
|
| 24,547 |
|
Total |
| $ | 238,535 |
|
| $ | 218,584 |
|
| $ | 765,464 |
|
| $ | 698,120 |
|
| $ | 234,105 |
|
| $ | 252,601 |
|
Note 43 – Leases
Description of Leases
We lease equipment used in the transportation of goods in our warehouses, as well as a limited number of automobiles and a small warehouse near our Bainbridge, Georgia facility. Our leases generally do not contain non-lease components and do not contain any explicit guarantees of residual value. Our leases for warehouse transportation equipment generally require the equipment to be returned to the lessor in good working order.
109
Through a review of our contracts, we determine if an arrangement is a lease at inception and analyze the lease to determine if it is operating or finance. Operating lease right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental collateralized borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Implicit rates are used when readily determinable. None of our leases currently contain options to extend the term. In the event of an option to extend the term of a lease, the lease term used in measuring the liability would include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the respective lease term. Our leases have remaining terms of up to 5.55.8 years.
It is our accounting policy not to not apply lease recognition requirements to short term leases, which are defined as leases with an initial term of 12 months or less. As such, leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheets. We have also made the policy election to not separate lease and non-lease components for all leases.
The following table provides supplemental information related to operating lease right-of-use assets and liabilities:
March 30, |
|
| June 30, |
|
| March 24, |
|
| Affected Line Item in Consolidated Balance Sheet | September 28, |
|
| June 29, |
|
| September 29, |
|
| Affected Line Item in Consolidated Balance Sheets | |||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating lease right-of-use assets | $ | 6,582 |
|
| $ | 2,303 |
|
| $ | 2,570 |
|
| Operating lease right-of-use assets | $ | 6,845 |
|
| $ | 6,427 |
|
| $ | 2,430 |
|
| Operating lease right-of-use assets |
Total lease right-of-use assets | $ | 6,582 |
|
| $ | 2,303 |
|
| $ | 2,570 |
|
| $ | 6,845 |
|
| $ | 6,427 |
|
| $ | 2,430 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Operating leases | $ | 1,752 |
|
| $ | 1,258 |
|
| $ | 1,355 |
|
| Other accrued expenses | $ | 1,775 |
|
| $ | 1,729 |
|
| $ | 1,215 |
|
| Other accrued expenses |
Noncurrent: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Operating leases |
| 4,905 |
|
|
| 1,076 |
|
|
| 1,241 |
|
| Long-term operating lease liabilities |
| 5,136 |
|
|
| 4,771 |
|
|
| 1,242 |
|
| Long-term operating lease liabilities |
Total lease liabilities | $ | 6,657 |
|
| $ | 2,334 |
|
| $ | 2,596 |
|
| $ | 6,911 |
|
| $ | 6,500 |
|
| $ | 2,457 |
|
|
The following tables summarize the Company’s total lease costs and other information arising from operating lease transactions:
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
|
| For the Quarter Ended |
| ||||||||||||||||
| March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
|
| September 28, |
|
| September 29, |
| |||||||
Operating lease costs (a) |
| $ | 529 |
|
| $ | 470 |
|
| $ | 1,544 |
|
| $ | 1,384 |
|
| $ | 670 |
|
| $ | 474 |
|
Variable lease costs (b) |
|
| 74 |
|
|
| 15 |
|
|
| 189 |
|
|
| 51 |
|
|
| (174 | ) |
|
| 57 |
|
Total lease cost |
| $ | 603 |
|
| $ | 485 |
|
| $ | 1,733 |
|
| $ | 1,435 |
|
| $ | 496 |
|
| $ | 531 |
|
Supplemental cash flow and other information related to leases was as follows:
| For the Thirty-Nine Weeks Ended |
|
| For the Quarter Ended |
| |||||||||||
| March 30, |
|
| March 24, |
|
| September 28, |
|
| September 29, |
| |||||
Operating cash flows information: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash paid for amounts included in measurements for lease liabilities |
| $ | 1,249 |
|
| $ | 1,199 |
|
| $ | 578 |
|
| $ | 402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Non-cash activity: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Right-of-use assets obtained in exchange for new operating lease obligations |
| $ | 5,458 |
|
| $ | 167 |
|
| $ | 860 |
|
| $ | 496 |
|
| March 30, |
|
| June 30, |
|
| March 24, |
|
| September 28, |
|
| June 29, |
|
| September 29, |
| |||||||
Weighted average remaining lease term (in years) |
|
| 4.6 |
|
|
| 2.3 |
|
|
| 2.4 |
|
|
| 4.4 |
|
|
| 4.4 |
|
|
| 2.5 |
|
Weighted average discount rate |
|
| 6.6 | % |
|
| 4.3 | % |
|
| 4.2 | % |
|
| 6.8 | % |
|
| 6.7 | % |
|
| 4.6 | % |
1110
Maturities of operating lease liabilities as of March 30,September 28, 2023 are as follows:
Fiscal year ending |
|
|
| |||||
June 29, 2023 (excluding the thirty-nine weeks ended March 30, 2023) |
| $ | 636 |
| ||||
June 27, 2024 |
|
| 1,918 |
| ||||
Fiscal Year Ending |
|
|
| |||||
June 27, 2024 (excluding the quarter ended September 28, 2023) |
| $ | 1,709 |
| ||||
June 26, 2025 |
|
| 1,541 |
|
|
| 1,827 |
|
June 25, 2026 |
|
| 1,347 |
|
|
| 1,622 |
|
June 24, 2027 |
|
| 1,158 |
|
|
| 1,372 |
|
June 29, 2028 |
|
| 1,000 |
|
|
| 1,210 |
|
June 28, 2029 |
|
| 252 |
| ||||
Thereafter |
|
| 139 |
|
|
| — |
|
Total lease payment |
|
| 7,739 |
|
|
| 7,992 |
|
Less imputed interest |
|
| (1,082 | ) |
|
| (1,081 | ) |
Present value of operating lease liabilities |
| $ | 6,657 |
|
| $ | 6,911 |
|
At March 30,September 28, 2023, the Company had an immaterial amounthas additional operating leases of leasesapproximately $351 that hadhave not yet commenced.commenced and therefore are not reflected in the Consolidated Balance Sheets and tables above. The leases are scheduled to commence in the second quarter of fiscal 2024 with an initial lease term ranging from 2 to 6 years.
Lessor Accounting
We lease office space in our four-story office building located in Elgin, Illinois. As a lessor, we retain substantially all of the risks and benefits of ownership of the investment property and under Topic 842: Leases we continue to account for all of our leases as operating leases. Lease agreements may include options to renew. We accrue fixed lease income on a straight‑line basis over the terms of the leases. There is generally no variable lease consideration and an immaterial amount of non-lease components such as recurring utility and storage fees. Leases between related parties are immaterial.
Leasing revenue is as follows:
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
| |||||||||||
| March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
| |||||
Lease income related to lease payments |
| $ | 419 |
|
| $ | 402 |
|
| $ | 1,224 |
|
| $ | 1,220 |
|
| For the Quarter Ended |
| ||||||
| September 28, |
|
| September 29, |
| |||
Lease income related to lease payments |
| $ | 444 |
|
| $ | 402 |
|
The future minimum, undiscounted fixed cash flows under non-cancelable tenant operating leases for each of the next five years and thereafter are as follows:
Fiscal Year Ending |
|
|
|
|
|
| ||
June 29, 2023 (excluding the thirty-nine weeks ended March 30, 2023) |
| $ | 465 |
| ||||
June 27, 2024 |
|
| 1,869 |
| ||||
June 27, 2024 (excluding the quarter ended September 28, 2023) |
| $ | 1,543 |
| ||||
June 26, 2025 |
|
| 1,282 |
|
|
| 1,477 |
|
June 25, 2026 |
|
| 697 |
|
|
| 972 |
|
June 24, 2027 |
|
| 614 |
|
|
| 930 |
|
June 29, 2028 |
|
| — |
|
|
| 328 |
|
June 28, 2029 |
|
| 336 |
| ||||
Thereafter |
|
| 1,478 |
| ||||
| $ | 4,927 |
|
| $ | 7,064 |
|
Note 54 – Inventories
Inventories consist of the following:
| March 30, |
|
| June 30, |
|
| March 24, |
|
| September 28, |
|
| June 29, |
|
| September 29, |
| |||||||
Raw material and supplies |
| $ | 90,110 |
|
| $ | 77,558 |
|
| $ | 104,810 |
|
| $ | 49,565 |
|
| $ | 65,430 |
|
| $ | 60,657 |
|
Work-in-process and finished goods |
|
| 100,241 |
|
|
| 127,297 |
|
|
| 106,317 |
|
|
| 125,224 |
|
|
| 107,506 |
|
|
| 131,441 |
|
Total |
| $ | 190,351 |
|
| $ | 204,855 |
|
| $ | 211,127 |
|
| $ | 174,789 |
|
| $ | 172,936 |
|
| $ | 192,098 |
|
1211
Note 65 – Goodwill and Intangible Assets
Identifiable intangible assets that are subject to amortization consist of the following:
| March 30, |
|
| June 30, |
|
| March 24, |
|
| September 28, |
|
| June 29, |
|
| September 29, |
| |||||||
Customer relationships |
| $ | 21,350 |
|
| $ | 21,100 |
|
| $ | 21,100 |
|
| $ | 21,350 |
|
| $ | 21,350 |
|
| $ | 21,100 |
|
Brand names |
|
| 17,070 |
|
|
| 16,990 |
|
|
| 16,990 |
|
|
| 17,070 |
|
|
| 17,070 |
|
|
| 16,990 |
|
Non-compete agreement |
|
| 300 |
|
|
| 270 |
|
|
| 270 |
|
|
| 300 |
|
|
| 300 |
|
|
| 270 |
|
|
| 38,720 |
|
|
| 38,360 |
|
|
| 38,360 |
|
|
| 38,720 |
|
|
| 38,720 |
|
|
| 38,360 |
| |
Less accumulated amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Customer relationships |
|
| (19,572 | ) |
|
| (18,795 | ) |
|
| (18,537 | ) |
|
| (20,095 | ) |
|
| (19,834 | ) |
|
| (19,053 | ) |
Brand names |
|
| (11,776 | ) |
|
| (11,252 | ) |
|
| (11,080 | ) |
|
| (12,134 | ) |
|
| (11,955 | ) |
|
| (11,425 | ) |
Non-compete agreement |
|
| (272 | ) |
|
| (248 | ) |
|
| (234 | ) |
|
| (275 | ) |
|
| (273 | ) |
|
| (261 | ) |
|
| (31,620 | ) |
|
| (30,295 | ) |
|
| (29,851 | ) |
|
| (32,504 | ) |
|
| (32,062 | ) |
|
| (30,739 | ) | |
Net intangible assets |
| $ | 7,100 |
|
| $ | 8,065 |
|
| $ | 8,509 |
|
| $ | 6,216 |
|
| $ | 6,658 |
|
| $ | 7,621 |
|
Customer relationships are being amortized on an accelerated basis. The brand names remaining to be amortized consist of the Squirrel Brand, Southern Style Nuts and Just the Cheese brand names.
Total amortization expense related to intangible assets, which is classified in administrative expense in the Consolidated Statement of Comprehensive Income, was $441 and $1,325442 for the quarter and thirty-nine weeks ended March 30, 2023, respectively.September 28, 2023. Amortization expense for the remainder of fiscal 20232024 is expected to be approximately $4421,123 and expected amortization expense the next five fiscal years is as follows:
Fiscal Year Ending |
|
|
|
|
|
| ||
June 27, 2024 |
| $ | 1,565 |
| ||||
June 26, 2025 |
|
| 1,213 |
|
| $ | 1,213 |
|
June 25, 2026 |
|
| 880 |
|
|
| 880 |
|
June 24, 2027 |
|
| 706 |
|
|
| 706 |
|
June 29, 2028 |
|
| 528 |
|
|
| 528 |
|
June 28, 2029 |
|
| 400 |
|
The intangibles related to the Just the Cheese brand acquisition, which are reflected in the above table, and the expected amortization expense are based on the final valuation report with respect to such intangible assets.
Our net goodwill at March 30,September 28, 2023 was comprised of $9,650 from the Squirrel Brand acquisition completed in the second quarter of fiscal 2018 and $2,100 from the Just the Cheese brand acquisition completed in the second quarter of fiscal 2023. The changes in the carrying amount of goodwill since June 25, 202130, 2022 are as follows:
Gross goodwill balance at June 25, 2021 |
| $ | 18,416 |
|
Accumulated impairment losses |
|
| (8,766 | ) |
Net balance at June 25, 2021 |
|
| 9,650 |
|
Goodwill acquired during the period |
|
| 2,100 |
|
Net balance at March 30, 2023 |
| $ | 11,750 |
|
Gross goodwill balance at June 30, 2022 |
| $ | 18,416 |
|
Accumulated impairment losses |
|
| (8,766 | ) |
Net goodwill balance at June 30, 2022 |
|
| 9,650 |
|
Goodwill acquired during fiscal 2023 |
|
| 2,100 |
|
Net balance at June 29, 2023 |
|
| 11,750 |
|
Goodwill acquired during fiscal 2024 |
|
| — |
|
Net balance at September 28, 2023 |
| $ | 11,750 |
|
Note 76 – Credit Facility
Our Amended and Restated Credit Agreement dated March 5, 2020 provides for a $117,500 senior secured revolving credit facility (the “Credit Facility”). The Credit Facility is secured by substantially all our assets other than machinery and equipment, real property and fixtures.
At March 30,September 28, 2023, we had $85,485107,302 of available credit under the Credit Facility which reflects borrowings of $27,8256,008 and reduced availability as a result of $4,190 in outstanding letters of credit. As of March 30,September 28, 2023, we were in compliance with all financial covenants under the Credit Facility.
For information about the most recent amendment to our Amended and Restated Credit Agreement (as defined below) see Note 14‒Subsequent Events.
1312
Note 87 – Earnings Per Common Share
The following table presents the reconciliation of the weighted average shares outstanding used in computing basic and diluted earnings per share:
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
|
| For the Quarter Ended |
| ||||||||||||||||
| March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
|
| September 28, |
|
| September 29, |
| |||||||
Weighted average number of shares |
|
| 11,592,362 |
|
|
| 11,548,554 |
|
|
| 11,570,954 |
|
|
| 11,533,338 |
|
|
| 11,594,960 |
|
|
| 11,553,432 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Restricted stock units |
|
| 63,832 |
|
|
| 53,412 |
|
|
| 61,702 |
|
|
| 55,745 |
|
|
| 79,782 |
|
|
| 63,681 |
|
Weighted average number of shares |
|
| 11,656,194 |
|
|
| 11,601,966 |
|
|
| 11,632,656 |
|
|
| 11,589,083 |
|
|
| 11,674,742 |
|
|
| 11,617,113 |
|
There were no anti-dilutive awards excluded from the computation of diluted earnings per share for any periods presented.
Note 98 – Stock-Based Compensation Plans
The following is a summary ofDuring the quarter ended September 28, 2023 there was no significant restricted stock unit ("RSU") activity foractivity. Compensation expense attributable to stock-based compensation during the first thirty-nine weeksquarter of fiscal 2023:
Restricted Stock Units |
| Shares |
|
| Weighted Average Grant Date Fair Value |
| ||
Outstanding at June 30, 2022 |
|
| 142,239 |
|
| $ | 70.42 |
|
Granted |
|
| 64,351 |
|
| $ | 74.11 |
|
Vested (a) |
|
| (33,607 | ) |
| $ | 88.62 |
|
Forfeited |
|
| (3,024 | ) |
| $ | 72.19 |
|
Outstanding at March 30, 2023 |
|
| 169,959 |
|
| $ | 68.19 |
|
At March 30,2024 and fiscal 2023 there were was $38,490747 RSUs outstanding that were vested but deferred.
The following table summarizes compensation expense charged to earnings for all equity compensation plans for the periods presented:and $772
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
| |||||||||||
| March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
| |||||
Stock-based compensation expense |
| $ | 941 |
|
| $ | 878 |
|
| $ | 3,228 |
|
| $ | 2,649 |
|
, respectively. As of March 30,September 28, 2023, there was $5,5393,341 of total unrecognized compensation expense related to non-vested RSUs granted under our stock-based compensation plans. We expect to recognize that cost over a weighted average period of 1.61.1 years.
14
Note 109 – Retirement Plan
The Supplemental Employee Retirement Plan (“Retirement Plan”) is an unfunded, non-qualified deferred compensation plan that will provide eligible participants with monthly benefits upon retirement, disability or death, subject to certain conditions. The monthly benefit is based upon each participant’s earnings and his or her number of years of service. The components of net periodic benefit cost are as follows:
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
|
| For the Quarter Ended |
| ||||||||||||||||
|
| March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
|
| September 28, |
|
| September 29, |
| ||||||
Service cost |
| $ | 200 |
|
| $ | 248 |
|
| $ | 601 |
|
| $ | 743 |
|
| $ | 63 |
|
| $ | 200 |
|
Interest cost |
|
| 342 |
|
|
| 255 |
|
|
| 1,025 |
|
|
| 764 |
|
|
| 350 |
|
|
| 342 |
|
Amortization of loss |
|
| 7 |
|
|
| 363 |
|
|
| 21 |
|
|
| 1,091 |
|
|
| — |
|
|
| 7 |
|
Net periodic benefit cost |
| $ | 549 |
|
| $ | 866 |
|
| $ | 1,647 |
|
| $ | 2,598 |
|
| $ | 413 |
|
| $ | 549 |
|
The components of net periodic benefit cost other than the service cost component are included in the line item “Pension expense (excluding service costs)” in the Consolidated Statements of Comprehensive Income.
Note 1110 – Accumulated Other Comprehensive Loss
The table below sets forth the changes to accumulated other comprehensive loss (“AOCL”) for the thirty-nine weeksquarter ended March 30,September 28, 2023 and March 24,September 29, 2022. These changes are all related to our defined benefit pension plan.
| For the Thirty-Nine Weeks Ended |
|
| For the Quarter Ended |
| |||||||||||
Changes to AOCL (a) |
| March 30, |
|
| March 24, |
|
| September 28, |
|
| September 29, |
| ||||
Balance at beginning of period |
| $ | (2,480 | ) |
| $ | (9,025 | ) |
| $ | (204 | ) |
| $ | (2,480 | ) |
Other comprehensive income before reclassifications |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Amounts reclassified from accumulated other comprehensive loss |
|
| 21 |
|
|
| 1,091 |
|
|
| — |
|
|
| 7 |
|
Tax effect |
|
| (5 | ) |
|
| (284 | ) |
|
| — |
|
|
| (1 | ) |
Net current-period other comprehensive income |
|
| 16 |
|
|
| 807 |
|
|
| — |
|
|
| 6 |
|
Balance at end of period |
| $ | (2,464 | ) |
| $ | (8,218 | ) |
| $ | (204 | ) |
| $ | (2,474 | ) |
13
The reclassifications out of AOCL for the quarter and thirty-nine weeks ended March 30,September 28, 2023 and March 24,September 29, 2022 were as follows:
For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
|
| Affected Line Item | |||||||||||
Reclassifications from AOCL to | March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
|
| Statements of | ||||
Amortization of defined benefit |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrecognized net loss | $ | (7 | ) |
| $ | (363 | ) |
| $ | (21 | ) |
| $ | (1,091 | ) |
| Pension expense (excluding service costs) |
Tax effect |
| 2 |
|
|
| 94 |
|
|
| 5 |
|
|
| 284 |
|
| Income tax expense |
Amortization of defined pension items, | $ | (5 | ) |
| $ | (269 | ) |
| $ | (16 | ) |
| $ | (807 | ) |
|
|
For the Quarter Ended | Affected Line Item | ||||||||
Reclassifications from AOCL to Earnings (b) | September 28, | September 29, | Consolidated Statements of | ||||||
Amortization of defined benefit pension items: | |||||||||
Unrecognized net loss | $ | — | $ | (7 | ) | Pension expense (excluding service costs) | |||
Tax effect | — | 1 | Income tax expense | ||||||
Amortization of defined pension items, net of tax | $ | — | $ | (6 | ) |
15
Note 1211 – Commitments and Contingent Liabilities
We are currently a party to various legal proceedings in the ordinary course of business. While management presently believes that the ultimate outcomes of these proceedings, individually and in the aggregate, will not materially affect our Company’s financial position, results of operations or cash flows, legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur. Unfavorable outcomes could include substantial monetary damages in excess of any appropriate accruals, which management has established. Were such unfavorable final outcomes to occur, there exists the possibility of a material adverse effect on our financial position, results of operations and cash flows.
Note 1312 – Fair Value of Financial Instruments
The Financial Accounting Standards Board defines fair value as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels:
|
|
|
|
|
|
|
Level 1 |
|
| – |
|
| Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities. |
|
|
| ||||
Level 2 |
|
| – |
|
| Observable inputs other than quoted prices in active markets. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. |
|
|
| ||||
Level 3 |
|
| – |
|
| Unobservable inputs for which there is little or no market data available. |
The carrying values of cash, trade accounts receivable and accounts payable approximate their fair values at each balance sheet date because of the short-term maturities and nature of these balances.
The carrying value of our revolving credit facility borrowings approximates fair value at each balance sheet date because interest rates on this instrument approximate current market rates (Level 2 criteria) and because of the short-term maturity and nature of this balance. In addition, there has been no significant change in our inherent credit risk.
The following table summarizes the carrying value and fair value estimate of our current and long-term debt, excluding unamortized debt issuance costs:
| March 30, |
|
| June 30, |
|
| March 24, |
|
| September 28, |
|
| June 29, |
|
| September 29, |
| |||||||
Carrying value of current and long-term debt: |
| $ | 7,933 |
|
| $ | 10,927 |
|
| $ | 11,901 |
|
| $ | 7,612 |
|
| $ | 7,774 |
|
| $ | 9,660 |
|
Fair value of current and long-term debt: |
|
| 6,865 |
|
|
| 11,179 |
|
|
| 12,669 |
|
|
| 7,033 |
|
|
| 7,421 |
|
|
| 9,583 |
|
The estimated fair value of our long-term debt was determined using a market approach based upon Level 2 observable inputs, which estimates fair value based on interest rates currently offered on loans with similar terms to borrowers of similar credit quality or broker quotes. In addition, there have been no significant changes in the underlying assets securing our long-term debt.
Note 14 – Garysburg, North Carolina Facility
During the first quarter of fiscal 2022 we sold the Garysburg property and remaining equipment located at the property to a third party for $4,000, subject to customary adjustments to reflect closing costs, which resulted in a $2,349 gain.
Note 1513 – Recent Accounting Pronouncements
There were no recent accounting pronouncements adopted in the current fiscal year.
There are no recent accounting pronouncements that have been issued and not yet adopted that are expected to have a material impact on our Consolidated Financial Statements.
16
Note 1614 – Subsequent EventEvents
On May 2,September 29, 2023, our Boardwe completed the acquisition of Directors declaredcertain assets from TreeHouse Foods, Inc. (the “Seller”) relating to its snack bars business. The acquired assets include inventory, a special cash dividend of $1.50 per share on all issuedmanufacturing facility and outstanding shares of Common Stockrelated equipment located in Lakeville, Minnesota, and Class A Stock of the Companycustomer relationships, among others (the “May 2023 Dividends”"Lakeville Acquisition"). The Mayinitial purchase price was approximately $61,252 in cash, which included approximately $37,346 of inventory, and is subject to certain post-closing adjustments. In November 2023, Dividends willwe expect to receive $2,435 from the Seller for a purchase price adjustment to the final inventory acquired, for a revised net purchase price of approximately $58,817. The initial accounting for this business combination is incomplete as we are awaiting the fair value analysis and therefore the required ASC 805 disclosures are not available to be paid on made. The purchase price for the Lakeville Acquisition was funded from borrowings under the Credit Facility as amended by the Second Amendment.
On September 29, 2023, we entered into the Second Amendment to our Amended and Restated Credit Agreement (the "Second Amendment"), which (among other things) increased the borrowing capacity under the Credit Facility to $June 22, 2023 150,000 from $117,500to stockholders of record asprovide extra available capacity for the short-term working capital requirements of the closebusiness acquired pursuant to the Lakeville Acquisition. The Second Amendment also extends the maturity date of business onthe Credit Facility to September 29, 2028. June 1, 2023.
1715
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
The following discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and the Notes to Consolidated Financial Statements.
Our fiscal year ends on the final Thursday of June each year, and typically consists of fifty-two weeks (four thirteen-week quarters). Additional information on the comparability of the periods presented is as follows:
As used herein, unless the context otherwise indicates, the terms “we”, “us”, “our” or “Company” collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiary, JBSS Ventures, LLC.
We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States. These nuts are sold under our Fisher,, Orchard Valley Harvest,, Squirrel BrandandSouthern Style Nutsbrand names and under a variety of private brands. We also market and distribute, and in most cases, manufacture or process, a diverse product line of food and snack products, including peanut butter, almond butter, cashew butter, candy and confections, snack and trail mixes, nutrition bars, snack bites, sunflower kernels, dried fruit, corn snacks, chickpea snacks, sesame sticks, and other sesame snack products and baked cheese snack products under our brand names, including Just the Cheese, and under private brands. In addition, with our acquisition of the Just the Cheese brand, we have expanded our product offerings to include baked cheese snack products on a branded and private label basis. We distribute our products in the consumer, commercial ingredients and contract packaging distribution channels.
During fiscal 2022, we created a Long-Range Plan to define our future growth priorities. Our Long-Range Plan focuses on growing our non-branded business across key customers, as well as transforming Fisher, Orchard Valley Harvest and Squirrel Brand into leading brands while increasing distribution and diversifying our portfolio into high growth snacking segments. We plan towill execute on our Long-Range Plan by providing our non-branded customers withcustomer value-added solutions based on our extensive industry and consumer expertise with innovative products such as our newly developed product line of private brand nutrition bars which were introduced during the current third quarter.fiscal 2023. We will grow our branded business by reaching new consumers via product expansion and packaging innovation, expanding distribution across current and alternative channels, diversifying our product offerings and focusing on new ways for consumers to buy our products, including sales via e-commerce platforms. This Long-Range Plan also contemplates increasing our sales through product innovation and targeted, opportunistic acquisitions, such as the acquisition of the Just the Cheese brand completed during fiscal 2023 and the recent Lakeville Acquisition completed in the second quarter of fiscal 2023.2024, which will expand our ability to produce private brand snack bars.
We will continue to focus our promotional and advertising activity to invest in our brands to achieve growth. We intend to execute an omnichannel approach to win in key categories including recipe nuts, snack nuts, trail mix and other snacking categories. We continue to see e-commerce growth across our branded portfolio and anticipate taking various actions with the goal of accelerating that growth across a variety of established and emerging platforms. We will continue to face the ongoing challenges specific to our business, such as food safety and regulatory issues and the maintenance and growth of our customer base for branded and private label products. See the information referenced in Part II, Item 1A — “Risk Factors” of this report for additional information about our risks, challenges and uncertainties.
We face a number of challenges in the future, which include the impacts of ongoing inflation in food and other input prices, rising interest rates that reduce economic growth, consumers reducing their purchases in the nut category, including branded nut products, potential for economic downturn in the markets in which we operate and continued supply chain challenges. We have also experiencedcontinue to experience a tightening in thetight labor market for those employed at our production facilities, which has led to increased labor costs.
18
Inflation and Consumer Trends
We face changing industry trends as consumers' purchasing preferences evolve. Due to significant inflation, including higher commodity acquisition costs in fiscal 2022,the ongoing inflationary environment, we have seen higher selling prices at retail. With higher prices across our categories and the broader food market, and also due to any actual or potential economic downturn or tightening of consumer finances due to inflation or other causes, consumers may purchaseare purchasing fewer snack products. We have seen this through the decline in the recipe and snack nut categories during the currentsince fiscal year,2023 and into fiscal 2024, as consumers shift their preferences to private brands or lower priced nuts or purchase snack products outside the nut and trail mix
16
category. With the inflationary environment, we are also seeing signs of consumers shifting to more value-focused retailers, such as mass merchandising retailers, club stores and dollar stores, not all of which we distribute or sell to.
Supply Chain and Transportation
In recent quarters,the first quarter of fiscal 2024, we faced supply chain challenges related to certain raw material shortages, extended lead-times, supplier capacity constraints and inflationary pressures. While we do not have faced challenges with shortages and cost increases for shipping pallets, packaging, imported ingredients, transportation and shipping availability. The conflictdirect exposure to suppliers in Russia, Ukraine has further exacerbatedor Israel, the conflicts in these regions could continue to result in volatile commodity markets, supply chain disruptions especiallyand increased costs. Global supply chain pressures have eased, but we continue to see negative impacts related to sunflower oil used in roasting nut productsmacro-economics, geo-political unrest, growing political instability and sunflower lecithin used in many confectionery ingredients. Global supply is improving but is reliant on continued Ukraine shipments. We have been able to temporarily mitigate our risk for these ingredients by working with customers and suppliers to secure additional sourcing or reformulate products.climate-related events. Overall packaging costs appearand ingredient inflation appears to be leveling off but is expected to remain well above historical levels. In addition, we are seeing someWe anticipate pricing relief in select ingredient categories with reformulationssome areas in the current fiscal year, if and substitutions, but lead-timesas shortages decrease and supply chains improve. However, we expect that some costs may remain long compared toabove historical lead-times.levels or unpredictable for a longer period.
We have also experienced supply chain issues related to a shortage in capacity in the transportation industry. This tightening in transportation capacity began to ease during the third quarter of fiscal 2022 and has continued to ease into fiscal 2023 due to inflationary costs decreasing demand in the freight market. AlthoughWhile we have seen stabilization in truckload capacity and volume at U.S. ports and improvements with driver hiring, there are still warehouse and dock staff shortages and fuel and energy concerns due to continued unrest abroad coupled with persistent inflation. Instability and prices in the transportation industry may increase further into fiscal 2024 due to the bankruptcy of a major U.S.-based trucking company. Fuel prices that were at record highs during spring and summer 2022 have beguncontinued to decrease, yet still remain volatile.volatile and unpredictable. While there are indicators of transportation cost improvement, and despite our mitigation of some of the transportation shortages, and maintaining high service levels, we may continue to face an unpredictable transportation environment. There is no guarantee that our mitigation strategies will continue to be effective, that any transportation capacity easing will continue or that transportation prices will return to more normalized levels.
TheseWe have remained agile by proactively identifying risks, modifying inventory plans and diversifying our supplier base to mitigate risk of customer order shortages and related challenges have impactedmaintain our operations and resulted in increased expenses and manufacturing inefficiencies that have negatively impacted (and may continue to impact) our net income.supply chain. We anticipate pricing relief in some of these areas in the coming quarters, if and as shortages decrease and supply chains normalize; however, we expect that some costs may remain elevated or unpredictable for a longer period of time, particularly as the conflict in Ukraine continues.
We are working, and will continue to work, withproactively manage our vendors, customersbusiness in response to the evolving global economic environment and suppliersrelated uncertainty. We continue to source additional raw materialsprioritize and packaging supplies andtake steps to remain flexible in obtaining the transportation and labor services we need.mitigate impacts to our supply chain. If these shortages and other supply chain issuespressures continue, to create a challenge in securing adequate supplies to fulfill customer orders, or we cannot obtain the transportation and labor services needed to fulfill customer orders, such shortages and supply chain issues could have an unfavorable impact on net sales and our operations during the remainder of fiscal year 2023 and into fiscal 2024. Additionally, as costs increase due to these issues or due to overall inflationary pressures, there is an additional risk of not being able to pass (in part or in full) such potential cost increases onto our customers or in a timely manner. If we cannot align costs with prices for our products, our operating performance could be adversely impacted.
1917
QUARTERLY HIGHLIGHTS
Our net sales of $238.5$234.1 million for the thirdfirst quarter of fiscal 2023 increased 9.1%2024 decreased 7.3% from our net sales of $218.6$252.6 million for the thirdfirst quarter of fiscal 2022. Net sales for the first thirty-nine weeks of fiscal 2023 increased by $67.3 million, or 9.6%, to $765.5 million compared to the first thirty-nine weeks of fiscal 2022.2023.
Sales volume, measured as pounds sold to customers, increased 5.0% for the third quarter of fiscal 2023 compared to the third quarter of fiscal 2022. Sales volume for the first thirty-nine weeks of fiscal 2023 increased 0.8%decreased 7.3% compared to the first thirty-nine weeksquarter of fiscal 2022.2023.
Gross profit increased by $10.4$6.4 million, and our gross profit margin, as a percentage of net sales, increased to 20.9%24.4% for the thirdfirst quarter of fiscal 20232024 compared to 18.0%20.0% for the thirdfirst quarter of fiscal 2022. Gross profit increased $13.5 million, and our gross profit margin was unchanged at 20.5% for both the first thirty-nine weeks of fiscal 2023 and fiscal 2022.2023.
Total operating expenses for the thirdfirst quarter of fiscal 20232024 increased by $6.0$4.2 million, or 27.1%14.9%, compared to the thirdfirst quarter of fiscal 2022.2023. As a percentage of net sales, total operating expenses in the thirdfirst quarter of fiscal 20232024 increased to 11.7%13.9% from 10.1%11.2% for the thirdfirst quarter of fiscal 2022. For the first thirty-nine weeks of fiscal 2023, total operating expenses increased $7.8 million, and total operating expenses as a percentage of net sales was unchanged at 11.5% compared to the first thirty-nine weeks of fiscal 2022.2023.
The total value of inventories on hand at the end of the thirdfirst quarter of fiscal 20232024 decreased $20.8$17.3 million, or 9.8%9.0%, in comparison to the total value of inventories on hand at the end of the thirdfirst quarter of fiscal 2022.2023.
We have seenexpect acquisition costs for allmost major tree nuts, other than walnuts, to be flat or decrease, and we expect acquisition costs for peanuts to increase modestly in the 20222023 crop year (which falls into our current 20232024 fiscal year). We completed procurement ofWhile we began to procure inshell walnuts during the first halfquarter of fiscal 2022, and2024, the final total payments due to our walnut growers werewill not be determined inuntil the current quarter. Thesecond and/or third quarters of fiscal 2024. We will determine the final prices paid, and remaining to be paid to the walnut growers were based upon current market prices and other factors such as crop size and export demand. A large majority of paymentsWe have estimated the liability to our walnut growers were completed inand our walnut inventory costs using currently available information. Any difference between our estimated liability and the actual payments will be determined during the second and/or third quarterquarters of fiscal 2023. Remaining amounts to2024 and will be paid to walnut growers as of March 30, 2023 are final and are not subject to revision. We increasedrecognized in our walnut grower liability by approximately $1.2 million during the third quarter of fiscal 2023, as the final payments due to walnut growers are slightly more than the amounts estimatedfinancial results at the end of the second quarter. This increase is insignificant compared to our total inshell walnut procurement costs for the year, and the portion of the adjustment to cost of sales was immaterial to our results of operations.that time.
2018
RESULTS OF OPERATIONS
Net Sales
Our net sales increased 9.1%decreased 7.3% to $238.5$234.1 million in the thirdfirst quarter of fiscal 20232024 compared to net sales of $218.6$252.6 million for the thirdfirst quarter of fiscal 2022.2023. The increasedecrease in net sales was attributable to a 5.0% increase7.3% decrease in sales volume, which is defined as pounds sold to customers, and a 3.9% increase in the weighted average sales price per pound.customers. The increase in the weighted average selling price per pound was mainly due to the normalization of selling prices with tree nut acquisition costs, as well as higher commodity acquisition costs for peanuts and dried fruit. The increasedecrease in sales volume was primarily driven by increaseddecreased sales of peanut butter.
For the first thirty-nine weeks of fiscal 2023 our net sales were $765.5 million, an increase of $67.3 million, or 9.6%, compared to the same period of fiscal 2022. The increase in net sales was primarily attributable to a 8.8% increase in the weighted average selling price per pound, and a 0.8% increase in sales volume. The increase in the weighted average selling price resulted from higher commodity acquisition costsvolume for pecans, cashews, peanuts and dried fruit.all product types.
The following table summarizes sales by product type as a percentage of total gross sales. The information is based upon gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product type.
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
|
| For the Quarter Ended |
| ||||||||||||||||
Product Type |
| March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
|
| September 28, |
|
| September 29, |
| ||||||
Peanuts & Peanut Butter |
|
| 20.1 | % |
|
| 18.8 | % |
|
| 18.5 | % |
|
| 17.6 | % |
|
| 20.1 | % |
|
| 19.3 | % |
Pecans |
|
| 8.0 |
|
|
| 6.9 |
|
|
| 12.2 |
|
|
| 10.7 |
|
|
| 9.2 |
|
|
| 10.3 |
|
Cashews & Mixed Nuts |
|
| 22.0 |
|
|
| 23.8 |
|
|
| 20.9 |
|
|
| 22.7 |
|
|
| 21.0 |
|
|
| 20.1 |
|
Walnuts |
|
| 4.8 |
|
|
| 4.6 |
|
|
| 5.8 |
|
|
| 5.9 |
|
|
| 4.9 |
|
|
| 5.7 |
|
Almonds |
|
| 9.3 |
|
|
| 10.7 |
|
|
| 8.9 |
|
|
| 10.1 |
|
|
| 9.1 |
|
|
| 9.0 |
|
Trail & Snack Mixes |
|
| 28.2 |
|
|
| 28.4 |
|
|
| 27.0 |
|
|
| 26.7 |
|
|
| 28.0 |
|
|
| 28.9 |
|
Other |
|
| 7.6 |
|
|
| 6.8 |
|
|
| 6.7 |
|
|
| 6.3 |
|
|
| 7.7 |
|
|
| 6.7 |
|
Total |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
The following table shows a comparison of net sales by distribution channel (dollars in thousands):
| For the Quarter Ended |
|
| For the Quarter Ended |
| |||||||||||||||||||||||||||||||||||||||||||
Distribution Channel |
| March 30, |
|
| Percentage |
|
| March 24, |
|
| Percentage |
|
| $ |
|
| % |
|
| September 28, |
|
| Percentage |
|
| September 29, |
|
| Percentage |
|
| $ |
|
| % |
| ||||||||||||
Consumer (1) |
| $ | 185,128 |
|
|
| 77.6 | % |
| $ | 173,648 |
|
|
| 79.4 | % |
| $ | 11,480 |
|
|
| 6.6 | % |
| $ | 184,334 |
|
|
| 78.8 | % |
| $ | 196,547 |
|
|
| 77.8 | % |
| $ | (12,213 | ) |
|
| (6.2 | )% |
Commercial Ingredients |
|
| 30,901 |
|
|
| 13.0 |
|
|
| 25,514 |
|
|
| 11.7 |
|
| $ | 5,387 |
|
|
| 21.1 |
|
|
| 28,135 |
|
|
| 12.0 |
|
|
| 31,507 |
|
|
| 12.5 |
|
|
| (3,372 | ) |
|
| (10.7 | ) |
Contract Packaging |
|
| 22,506 |
|
|
| 9.4 |
|
|
| 19,422 |
|
|
| 8.9 |
|
| $ | 3,084 |
|
|
| 15.9 |
|
|
| 21,636 |
|
|
| 9.2 |
|
|
| 24,547 |
|
|
| 9.7 |
|
|
| (2,911 | ) |
|
| (11.9 | ) |
Total |
| $ | 238,535 |
|
|
| 100.0 | % |
| $ | 218,584 |
|
|
| 100.0 | % |
| $ | 19,951 |
|
|
| 9.1 | % |
| $ | 234,105 |
|
|
| 100.0 | % |
| $ | 252,601 |
|
|
| 100.0 | % |
| $ | (18,496 | ) |
|
| (7.3 | )% |
21
The following table shows a comparison of net sales by distribution channel (dollars in thousands):
|
| For the Thirty-Nine Weeks Ended |
| |||||||||||||||||||||
Distribution Channel |
| March 30, |
|
| Percentage |
|
| March 24, |
|
| Percentage |
|
| $ |
|
| % |
| ||||||
Consumer (1) |
| $ | 606,188 |
|
|
| 79.2 | % |
| $ | 556,888 |
|
|
| 79.8 | % |
| $ | 49,300 |
|
|
| 8.9 | % |
Commercial Ingredients |
|
| 90,827 |
|
|
| 11.9 |
|
|
| 81,426 |
|
|
| 11.6 |
|
| $ | 9,401 |
|
|
| 11.5 |
|
Contract Packaging |
|
| 68,449 |
|
|
| 8.9 |
|
|
| 59,806 |
|
|
| 8.6 |
|
| $ | 8,643 |
|
|
| 14.5 |
|
Total |
| $ | 765,464 |
|
|
| 100.0 | % |
| $ | 698,120 |
|
|
| 100.0 | % |
| $ | 67,344 |
|
|
| 9.6 | % |
Net sales in the consumer distribution channel increased $11.5decreased $12.2 million, or 6.6%6.2%, and sales volume increased 2.1%decreased 5.8% in the thirdfirst quarter of fiscal 20232024 compared to the thirdfirst quarter of fiscal 2022.2023. The sales volume increasedecrease was mostly driven by an increasea decrease in private brand sales volume due to new private brand peanut butter businessfewer promotional programs and lower seasonal sales volume for snack and trail mixes at atwo current mass merchandising retailerretailers and increaseda decrease in peanut butter distributionsales volume at a grocery store retailer.the same two mass merchandisers. Also contributing to the increasedecrease was a 20.8% increase30.9% decrease in sales volume of Orchard Valley HarvestFisher productssnack nuts due to theincreased competitive pricing pressures, discontinuance of a product line at a mass merchandising retailer and timing of holiday sales toorders for a major customer in the non-food sector who delayed their orders from the previous quarter and increased promotional support at the same customer. These increases were substantially offset by lost private brand distribution at a grocery store retailer that occurred in the fourth quarter of fiscal 2022. Sales volume of Fisher snack nuts decreased 16.7% due to decreased merchandising activity at a major customer and a seasonal rotation at a club store that did not repeat in the current quarter.sector. Sales volume of Fisher recipe nuts increased 6.4% asdecreased 10.8% mainly due to a resultone-time order at an existing grocery customer in the same quarter of increasedour prior fiscal year that did not recur in the current quarter and timing of holiday sales orders for another grocery customer. Sales volume for Southern Style Nuts decreased 36.6% mainly from reduced distribution and promotional programs at a mass merchandising retailer.
In the first thirty-nine weeks of fiscal 2023, net sales in the consumer distribution channel increased $49.3 million, or 8.9%, and sales volume decreased 0.3% compared to the same period of fiscal 2022. The sales volume decrease was driven by lost private brand distribution at the groceryclub store retailer cited in the quarterly comparison, which was largely offset by increased distribution at a mass merchandising retailer and at a grocery store retailer.customer.
Net sales in the commercial ingredients distribution channel increased 21.1%decreased 10.7% in dollars and 18.9%5.5% in sales volume in the thirdfirst quarter of fiscal 20232024 compared to the thirdfirst quarter of fiscal 2022.2023. The increasedecrease in sales volume was due to a 30.5% increase50.3% decrease in sales volume of peanut crushing stock to foodservice customerspeanut oil processors due to increasedreduced peanut butter distribution at existing customers.
In the first thirty-nine weeks of fiscal 2023, net sales in the commercial ingredients distribution channel increased 11.5% in dollars and 3.9% in sales volume compared to the same period of fiscal 2022. The increase in sales volume was due to a 15.3% increase in sales volume to foodservice customers for the reason cited in the quarterly comparison and also due to the continued recovery in the restaurant industry from the impacts of COVID-19 restrictions. This increase was partially offset by lower sales of bulk products to other food manufacturers as a result of reduced consumption from softened consumer spending.shelling.
Net sales in the contract packaging distribution channel increased 15.9%decreased 11.9% in dollars and 7.5%19.4% in sales volume in the thirdfirst quarter of fiscal 20232024 compared to the thirdfirst quarter of fiscal 2022.2023. The increasedecrease in sales volume was primarily due to increaseddecreased peanut distribution and cashew distribution by an existingtiming of holiday sales orders for a major customer.
In the first thirty-nine weeks19
Gross Profit
Gross profit increased by $10.4$6.4 million, or 26.3%12.6%, to $49.8$57.0 million for the thirdfirst quarter of fiscal 2024 compared to the first quarter of fiscal 2023 compareddue to the third quarter of fiscal 2022.lower acquisition costs for all major tree nuts which was partially offset by decreased sales volume. Our gross profit margin, as a percentage of net sales, increased to 20.9%24.4% for the thirdfirst quarter of fiscal 2024 compared to 20.0% for the first quarter of fiscal 2023 compareddue to 18.0%lower acquisition costs for the third quarter of fiscal 2022, as gross profit margins returned to more normalized levels. The prior comparable quarter gross profit marginall major tree nuts, which was negatively impactedpartially offset by higher than anticipated commodity acquisition costs and other inflationary cost increases.for peanuts. The increase in gross profit was mainlyalso due to the reasons noted abovemanufacturing efficiencies and increaseddecreased peanut sales volume.
22
Gross profit was $156.9 million for the first thirty-nine weeks of fiscal 2023 compared to $143.4 million for the first thirty-nine weeks of fiscal 2022 primarily due to a higher net sales base. Our gross profit margin, as a percentage of sales, was unchanged at 20.5% for both the first thirty-nine weeks of fiscal 2023 and fiscal 2022.
Operating Expenses
Total operating expenses for the thirdfirst quarter of fiscal 20232024 increased by $6.0$4.2 million, or 27.1%14.9%, to $28.0$32.4 million. Operating expenses increased to 11.7%13.9% of net sales for the thirdfirst quarter of fiscal 20232024 compared to 10.1%11.2% of net sales for the thirdfirst quarter of fiscal 2022.2023 due to an increase in total expense and a lower net sales base.
Selling expenses for the thirdfirst quarter of fiscal 20232024 were $18.1$22.0 million, an increase of $2.5$4.0 million, or 16.2%22.3%, from the thirdfirst quarter of fiscal 2022.2023. The increase was driven primarily by a $2.3$4.4 million increase in compensation expense, primarily related to incentive compensation, a $0.4 million increase inadvertising, consumer insight research and related consulting expenses, a $0.2 million increase in sales broker commission expense and a $0.2$0.3 million increase in sample expense related to a new product linenutrition bars which launched in the current third quarter.quarter of fiscal 2023 and a $0.2 million increase in consulting expenses. These increases were partially offset by a $0.8 million decrease in freight expense due to a decrease in freight rates.
Administrative expenses for the thirdfirst quarter of fiscal 20232024 were $9.8$10.5 million compared to $6.4$10.2 million for the thirdfirst quarter of fiscal 2022.2023. The increase was due to a $2.8 million$0.3 increase in compensation expense, primarily related to incentive compensation, and a $0.5 million decrease in miscellaneous income as a result of a one-time gain in the comparable quarter which did not reoccur in the current quarter.
Total operating expenses for the first thirty-nine weeks of fiscal 2023 increased by $7.8 million, or 9.7%, to $88.2 million. Operating expenses as a percentage of net sales was unchanged at 11.5% for both the first thirty-nine weeks of fiscal 2023 and fiscal 2022.
Selling expenses for the first thirty-nine weeks of fiscal 2023 were $57.9 million, an increase of $1.0 million, or 1.8%, from the amount recorded for the first thirty-nine weeks of fiscal 2022. The increase was driven primarily by a $3.1 million increase in compensation expense, primarily related to incentive compensation, a $0.7 million increase in sales broker commission expense and a $0.4 million increase in sample expense for the same reason cited in the quarterly comparison. These increases were partially offset by a $2.1 million decrease in freight expense due to a decrease in freight rates and $1.7 million decrease in advertising, consumer insight research and related consulting expenses.
Administrative expenses for the first thirty-nine weeks of fiscal 2023 were $30.3 million, an increase of $4.4 million, or 17.1%, compared to the same period of fiscal 2022. The increase was primarily due to a $4.0 million increase in compensation expense, primarily related to incentive compensation, and a $0.6 million increase in audit and legal expenses primarily for Acquisition-related costs, which were partially offset by a $0.5 million decrease in the loss on asset disposals.
The $2.3 million gain on sale of facility in the first thirty-nine weeks of fiscal 2022 was the result of the sale of our Garysburg, North Carolina facility.charitable food donations.
Income from Operations
Due to the factors discussed above, income from operations was $21.8$24.6 million, or 9.1% of net sales, for the third quarter of fiscal 2023 compared to $17.4 million, or 8.0% of net sales, for the third quarter of fiscal 2022.
Due to the factors discussed above, income from operations was $68.7 million, or 9.0%10.5% of net sales, for the first thirty-nine weeksquarter of fiscal 20232024 compared to $63.0$22.4 million, or 9.0%8.9% of net sales, for the first thirty-nine weeksquarter of fiscal 2022.2023.
Interest Expense
Interest expense was $0.6 million for the third quarter of fiscal 2023 compared to $0.5 million for the third quarter of fiscal 2022. Interest expense was $1.8$0.2 million for the first thirty-nine weeksquarter of fiscal 20232024 compared to $1.3$0.7 million for the first thirty-nine weeksquarter of fiscal 2022.2023. The increasedecrease in interest expense for both the quarterly and year to date comparisons was due to higher weightedlower average interest rates.debt levels.
Rental and Miscellaneous Expense, Net
Net rental and miscellaneous expense was $0.4 million for both the thirdfirst quarter of fiscal 20232024 and fiscal 2022. Net rental and miscellaneous expense was $1.1 million for both the first thirty-nine weeks of fiscal 2023 and fiscal 2022.2023.
23
Pension Expense (Excluding Service Costs)
Pension expense (excluding service costs) was $0.4 million for the first quarter of fiscal 2024 compared to $0.3 million for the thirdfirst quarter of fiscal 2023 compared to $0.6 million for the third quarter of fiscal 2022. Pension expense (excluding service costs) was $1.0 million for the first thirty-nine weeks of fiscal 2023 compared to $1.9 million for the first thirty-nine weeks of fiscal 2022. The decrease in pension expense (excluding service costs) for both the quarterly and year to date comparisons was primarily due to a decrease in the unrecognized net loss remaining to be amortized, which was a result of a large actuarial gain in the prior fiscal year.2023.
Income Tax Expense
Income tax expense was $4.8 million, or 23.4% of income before income taxes (the “Effective Tax Rate”), for the third quarter of fiscal 2023 compared to $4.0 million, or 25.2% of income before income taxes, for the third quarter of fiscal 2022. The decrease in the Effective Tax Rate for the quarterly comparison is primarily due to a decrease in state income tax expense. For the first thirty-nine weeks of fiscal 2023, income tax expense was $16.6$6.1 million, or 25.6% of income before income taxes, for the first quarter of fiscal 2024 compared to $14.4$5.5 million, or 24.5%26.0% of income before income taxes, for the comparable period last year. The increase in the Effective Tax Rate for the current thirty-nine week period is mainly due to the favorable impact of $0.7 million of discrete tax benefits from share-based compensation recognized in the secondfirst quarter of fiscal 2022 that did not reoccur in the current fiscal year.2023.
Net Income
Net income was $15.7$17.6 million, or $1.36$1.52 per common share basic and $1.35 per common share diluted, for the third quarter of fiscal 2023, compared to $11.9 million, or $1.03 per common share basic and $1.02 per common share diluted, for the third quarter of fiscal 2022.
Net income was $48.2 million, or $4.16 per common share basic and $4.14$1.51 per common share diluted, for the first thirty-nine weeksquarter of fiscal 2023,2024, compared to net income of $44.4$15.5 million, or $3.85$1.35 per common share basic and $3.83$1.34 per common share diluted, for the first thirty-nine weeksquarter of fiscal 2022.2023.
2420
LIQUIDITY AND CAPITAL RESOURCES
General
The primary uses of cash are to fund our current operations, fulfill contractual obligations, pursue our Long-Range Plan through growing our branded and private label programs, consummate and integrate business acquisitions, return cash to our stockholders through dividends, repay indebtedness and pay amounts owed under the Retirement Plan. Also, various uncertainties, including cost uncertainties, could result in additional uses of cash. The primary sources of cash are results of operations and availability under our Credit Facility. We anticipate that expected net cash flow generated from operations and amounts available pursuant to the Credit Facility will be sufficient to fund our operations for the next twelve months. Our available credit under our Credit Facility has allowed us to devote more funds to promote our products, increase consumer insight capabilities and promotional efforts, reinvest in the Company through capital expenditures, develop new products, pay cash dividends, consummate strategic investments and business acquisitions, such as the acquisition of the Just the Cheese brand in fiscal 2023 and the Lakeville Acquisition disclosed in Note 14‒Subsequent Events, and explore other growth strategies outlined in our Long-Range Plan.
Cash flows from operating activities have historically been driven by net income but are also significantly influenced by inventory requirements, which can change based upon fluctuations in both quantities and market prices of the various nuts and nut products we buy and sell. Current market trends in nut prices and crop estimates also impact nut procurement.
The following table sets forth certain cash flow information for the first three quartersquarter of fiscal 20232024 and 2022,2023, respectively (dollars in thousands):
| March 30, |
|
| March 24, |
|
| $ |
|
| September 28, |
|
| September 29, |
|
| $ |
| |||||||
Operating activities |
| $ | 72,389 |
|
| $ | (12,555 | ) |
| $ | 84,944 |
|
| $ | 21,881 |
|
| $ | 30,646 |
|
| $ | (8,765 | ) |
Investing activities |
|
| (19,142 | ) |
|
| (6,488 | ) |
|
| (12,654 | ) |
|
| (6,046 | ) |
|
| (5,974 | ) |
|
| (72 | ) |
Financing activities |
|
| (53,297 | ) |
|
| 19,038 |
|
|
| (72,335 | ) |
|
| (16,945 | ) |
|
| (24,789 | ) |
|
| 7,844 |
|
Net decrease in cash |
| $ | (50 | ) |
| $ | (5 | ) |
| $ | (45 | ) | ||||||||||||
Total change in cash |
| $ | (1,110 | ) |
| $ | (117 | ) |
| $ | (993 | ) |
Operating Activities Net cash provided by operating activities was $72.4$21.9 million for the first thirty-nine weeksquarter of fiscal 20232024 compared to net cash used inprovided by operating activities of $12.6$30.6 million for the comparative periodfirst quarter of fiscal 2022.2023. The increasedecrease in operating cash flow was primarily due to a decreased use ofchanges in working capital, for inventory compared to the first thirty-nine weeks of fiscal 2022 as a result of decreasing commodity acquisition costs.primarily accounts receivable and inventory.
Total inventories were $190.4$174.8 million at March 30,September 28, 2023, a decreasean increase of $14.5$1.9 million, or 7.1%1.1%, from the inventory balance at June 30, 2022,29, 2023, and a decrease of $20.8$17.3 million, or 9.8%9.0%, from the inventory balance at March 24,September 29, 2022. The decrease in inventories at March 30,September 28, 2023 compared to June 30,September 29, 2022 was primarily due to the early shell out of inshell pecans, lower commodity acquisition costs for all major tree nuts and lower quantities of work-in-process and finished goods on hand,and work in process, which were partially offset by higher on hand quantities of pecans, walnuts, cashews and other raw materials. The decrease in inventories at March 30, 2023 compared to March 24, 2022 was primarily due to lower commodity acquisition costs for all major tree nuts. This decrease was partially offset by higher acquisition costs for peanuts and other raw materials and higher quantities of other raw materials and cashews on hand.pecans.
Raw nut and dried fruit input stocks, some of which are classified as work-in-process, increaseddecreased by 1.13.6 million pounds, or 1.8%11.6%, at March 30,September 28, 2023 compared to March 24,September 29, 2022 due to higherlower quantities of inshell walnutspeanuts, almonds and cashewsdried fruit on hand, partially offset by lowerhigher quantities of almonds and inshell pecans.cashews on hand. The weighted average cost per pound of raw nut input stocks on hand at the end of the thirdfirst quarter of fiscal 20232024 decreased 24.1%2.6% compared to the end of the thirdfirst quarter of fiscal 20222023 primarily due to lower commodity acquisition costs for all major tree nuts.nuts, which was partially offset by higher on hand quantities of pecans.
Investing Activities Cash used in investing activities was $19.1unchanged at $6.0 million during the first thirty-nine weeksquarter of fiscal 20232024 compared to $6.5 million for the same period last year. The increase in cash used in investing activities was partially attributable to the $3.9Capital asset purchases were $6.0 million of net proceeds received from the disposition of the Garysburg, North Carolina facility, which occurred induring the first quarter of fiscal 2022, and the $3.2 million of cash proceeds resulting from the Sanfilippo family's exercise of their contractual purchase option and our resulting sale of certain life insurance policies to the Sanfilippo family, which occurred in the third quarter of fiscal 2022. Neither event reoccurred in the current fiscal year. The $3.5 million purchase price for the acquisition of the Just the Cheese brand also contributed to the increase in cash used for investing activities. Capital asset purchases were $15.6 million during the first thirty-nine weeks of fiscal 20232024 compared to $12.8$5.9 million for the first thirty-nine weeksquarter of fiscal 2022.2023. We expect total capital expenditures for new equipment, facility upgrades, and food safety enhancements, including for fiscal 2023our newly acquired bar business in Lakeville, Minnesota, to be approximately $20.0 to $23.0 million.$28.0 million for fiscal 2024. Absent any material acquisitions or other significant investments, we believe that cash on hand, combined with cash provided by operations and borrowings available under the Credit Facility, will be sufficient to meet the cash requirements for planned capital expenditures.
25Financing Activities Cash used in financing activities was $16.9 million during the first quarter of fiscal 2024 compared to $24.8 million for the same period last year. Net borrowings under our Credit Facility were $6.0 million during the first quarter of fiscal 2024 compared to net borrowings of $2.2 million for the first quarter of fiscal 2023. The increase in credit facility borrowings was primarily due to increased use of working capital for inventory in the current quarter. Dividends paid in the first quarter of fiscal 2024 were approximately $2.8 million lower than dividends paid in the same period last year. Long term debt payments in the first quarter of
21
Financing Activities Cash used in financing activities was $53.3 million during the first thirty-nine weeks of fiscal 2023 compared to cash provided of $19.0 million for the same period last year. Net repayments under our Credit Facility were $12.6 million during the first thirty-nine weeks of fiscal 2023 compared to net borrowings of $57.2 million for the first thirty-nine weeks of fiscal 2022. The decrease in credit facility borrowings was primarily due to decreasing commodity acquisition costs. Dividends paid in the first half of fiscal 20232024 were approximately $3.0$1.1 million higherlower than dividends paidpayments in the same period last year.year due to the mortgage that was repaid in full in the third quarter of the fiscal 2023.
Real Estate Matters
In August 2008, we completed the consolidation of our Chicago-based facilities into our Elgin headquarters (“Elgin Site”). The Elgin Site includes both an office building and a warehouse. We are currently attempting to find additional tenants for the available space in the office building at the Elgin Site. Until additional tenant(s) are found, we will not receive the benefit of rental income associated with such space. Approximately 69%65% of the rentable area in the office building is currently vacant. Approximately 29% of the rentable area has not been built-out. There can be no assurance that we will be able to lease the unoccupied space and further capital expenditures will likely be necessary to lease the remaining space.
Financing Arrangements
On February 7, 2008, we entered into the Former Credit Agreement (as defined below) with a bank group (the “Bank Lenders”) providing a $117.5 million revolving loan commitment and letter of credit subfacility. Also on February 7, 2008, we entered into a Loan Agreement with an insurance company providing us with term loans for an aggregate amount of $45.0 million (as amended, the “Mortgage Facility”).
On March 5, 2020, we entered into an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) which amended and restated our Credit Agreement dated as of February 7, 2008 (the “Former Credit Agreement”). The Amended and Restated Credit Agreement provides for a $117.5 million senior secured revolving credit facility with the same borrowing capacity, interest rates and applicable margin as the Former Credit Agreement and extends the term of the Former Credit Agreement from July 7, 2021 to March 5, 2025.
The Amended and Restated Credit Facility is secured by substantially all of our assets other than machinery and equipment, real property, and fixtures and matures on March 5, 2025. The Mortgage Facility was secured by mortgages on essentially all of
On May 8, 2023, we entered into the First Amendment to our owned real property located in Elgin, IllinoisAmended and Gustine, California, but such mortgages have been released in connectionRestated Credit Agreement (the "First Amendment") which replaced the London interbank offered rate (LIBOR) interest rate option with the Secured Overnight Financing Rate ("SOFR"). The First Amendment updated the accrued interest rate to a rate based on SOFR plus an applicable margin based upon the borrowing base calculation, ranging from 1.35% to 1.85%.
On September 29, 2023, we entered into the Second Amendment, which (among other things) increased the amount available to borrow under the Credit Facility to $150.0 million (from $117.5 million) and extended the maturity and repayment of such facility as described below.date to September 29, 2028 (from March 5, 2025).
Credit Facility
At our election, borrowings under the Credit Facility currently accrue interest at either (i) a rate determined pursuant to the administrative agent’s prime rate plus an applicable margin determined by reference to the amount of loans which may be advanced under the borrowing base calculation, ranging from 0.25% to 0.75% or (ii) a rate based upon the London interbank offered rateon SOFR plus an applicable margin based upon the borrowing base calculation, ranging from 1.25% to 1.75%.as noted above.
At March 30,September 28, 2023, the weighted average interest rate for the Credit Facility was 7.2%7.3%. The terms of the Credit Facility contain covenants that, among other things, require us to restrict investments, indebtedness, acquisitions and certain sales of assets and limit annual cash dividends or distributions, transactions with affiliates, redemptions of capital stock and prepayment of indebtedness (if such prepayment, among other things, is of a subordinate debt). If loan availability under the borrowing base calculation falls below $25.0 million, we will be required to maintain a specified fixed charge coverage ratio, tested on a monthly basis, until loan availability equals or exceeds $25.0 million for three consecutive months. All cash received from customers is required to be applied against the Credit Facility. The Bank Lenders have the option to accelerate and demand immediate repayment of our obligations under the Credit Facility in the event of default on the payments required under the Credit Facility, a change in control in the ownership of the Company, non-compliance with the financial covenant or upon the occurrence of other defaults by us under the Credit Facility. As of March 30,September 28, 2023, we were in compliance with all covenants under the Credit Facility and we currently expect to be in compliance with the financial covenant in the Credit Facility for the foreseeable future. At March 30,September 28, 2023, we had $85.5$107.3 million of available credit under the Credit Facility. If this entire amount were borrowed at March 30,September 28, 2023, we would still be in compliance with all restrictive covenants under the Credit Facility.
Mortgage Facility
The Mortgage Facility was repaid in full in February 2023 and the related mortgages on our owned real property located in Elgin, Illinois and Gustine, California have been released.
2622
Selma Property
In September 2006, we sold our Selma, Texas properties (the “Selma Properties”) to two related party partnerships for $14.3 million and are leasing them back. The selling price was determined by an independent appraiser to be the fair market value which also approximated our carrying value. The lease for the Selma Properties has a ten-year term at a fair market value rent with three five-year renewal options. In September 2015, we exercised two of the five-year renewal options which extended the lease term to September 2026. The lease extension also reduced the monthly lease payment on the Selma Properties, beginning in September 2016, to reflect then current market conditions. At the end of each five-year renewal option, the base monthly lease amounts are reassessed, and the monthly payments increased to $114 beginning in September 2021. One five-year renewal option remains. Also, we have an option to purchase the Selma Properties from the owner at 95% (100% in certain circumstances) of the then fair market value, but not less than the original $14.3 million purchase price. The provisions of the arrangement are not eligible for sale-leaseback accounting and the $14.3 million was recorded as a debt obligation. No gain or loss was recorded on the Selma Properties transaction. As of March 30,September 28, 2023, $7.9$7.6 million of the debt obligation was outstanding.
Critical Accounting Policies and Estimates
For information regarding our Critical Accounting Policies and Estimates, see the “Critical Accounting Policies and Estimates” section of “Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K for the fiscal year ended June 30, 2022.29, 2023.
Recent Accounting Pronouncements
Refer to Note 1513 – “Recent Accounting Pronouncements” of the Notes to Consolidated Financial Statements, contained in Part I, Item 1 of this form 10-Q, for a discussion of recently issued and adopted accounting pronouncements.
2723
FORWARD LOOKING STATEMENTS
Some of the statements in this reportrelease are forward-looking. These forward-looking statements may be generally identified by the use of forward-looking words and phrases such as “will”, “intends”, “may”, “believes”, “anticipates”, “should” and “expects” and are based on the Company’s current expectations or beliefs concerning future events and involve risks and uncertainties. Consequently, the Company’s actual results could differ materially. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors that affect the subject of these statements, except where expressly required to do so by law. Among the factors that could cause results to differ materially from current expectations are: (i) sales activity for the Company’s products, such as a decline in sales to one or more key customers, (of branded products, private label products or otherwise), or to customers or in the nut category generally, in some or all channels, a change in product mix to lower price products, a decline in sales of private brand products or changing consumer preferences, including a shift from higher margin products to lower margin products; (ii) changes in the availability and costs of raw materials and ingredients and the impact of fixed price commitments with customers; (iii) the ability to pass on price increases to customers if commodity costs rise and the potential for a negative impact on demand for, and sales of, our products from price increases; (iv) the ability to measure and estimate bulk inventory, fluctuations in the value and quantity of the Company’s nut inventories due to fluctuations in the market prices of nuts and bulk inventory estimation adjustments, respectively; (v) the Company’s ability to appropriately respond to, or lessen the negative impact of, competitive and pricing pressures, including competition in the recipe nut category;pressures; (vi) losses associated with product recalls, product contamination, food labeling or other food safety issues, or the potential for lost sales or product liability if customers lose confidence in the safety of the Company’s products or in nuts or nut products in general, or are harmed as a result of using the Company’s products; (vii) the ability of the Company to control costs (including inflationary costs) and manage shortages in areas such as inputs, transportation and labor; (viii) uncertainty in economic conditions, including the potential for inflation or economic downturn; (ix) the timing and occurrence (or nonoccurrence) of other transactions and events which may be subject to circumstances beyond the Company’s control; (x) the adverse effect of labor unrest or disputes, litigation and/or legal settlements, including potential unfavorable outcomes exceeding any amounts accrued; (xi) losses due to significant disruptions at any of our production or processing facilities or employee unavailability due to labor shortages, illness or quarantine;shortages; (xii) the ability to implement our Long-Range Plan, including growing our branded and private brand product sales, diversifying our product offerings (including by the launch of new products) and expanding into alternative sales channels; (xiii) technology disruptions or failures or the occurrence of cybersecurity incidents or breaches; (xiv) the inability to protect the Company’s brand value, intellectual property or avoid intellectual property disputes; (xv) our ability to manage the impacts of changing weather patterns on raw material availability due to climate change; and (xvi) our ability to operate and integrate the abilityacquired snack bar related assets of the Company to respond to or manage the outbreak of COVID-19 or other infectious diseasesTreeHouse and the various implications thereof.realize efficiencies and synergies from such acquisition.
2824
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in our assessment of our sensitivity to market risk since our presentation set forth in Part I - Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.29, 2023.
Item 4. Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of March 30,September 28, 2023. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 30,September 28, 2023, the Company’s disclosure controls and procedures were effective.
In connection with the evaluation by our management, including our Chief Executive Officer and Chief Financial Officer, there were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended March 30,September 28, 2023 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of legal proceedings, see Note 1211 – “Commitments and Contingent Liabilities” in Part I, Item 1 of this Form 10-Q.
Item 1A. Risk Factors
In addition to the other information set forth in this report on Form 10-Q, you should also consider the factors, risks and uncertainties which could materially affect our Company’s business, financial condition or future results as discussed in Part I, Item 1A – “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.29, 2023. There were no significant changes to the risk factors identified on the Form 10-K for the fiscal year ended June 30, 202229, 2023 during the thirdfirst quarter of fiscal 2023.2024.
See Part I, Item 2 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in this Form 10-Q, and see Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022.29, 2023.
Item 5. Other Information
Rule 10b5-1 Trading Arrangement
The following table shows our directors and officers that adopted a trading plan intended to satisfy the conditions under Rule 10b5-1(c) of the Exchange Act:
Name & Position | Adoption Date | Shares of the Company's Common Stock | Expiration Date(1) | |||||
Ellen C. Taaffe, Director | September 20, 2023 | 1,070 | June 20, 2024 | |||||
Jeffrey T. Sanfilippo, Chief Executive Officer | September 25, 2023 | 5,212 | September 25, 2024 | |||||
Jasper B. Sanfilippo, Jr., Chief Operating Officer | September 25, 2023 | 5,212 | September 25, 2024 | |||||
James J. Sanfilippo, Director | September 26, 2023 | 1,070 | September 30, 2024 |
During the three months ended September 28, 2023, other than noted above, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).
Item 6. Exhibits
The exhibits filed herewith are listed in the exhibit index below.
2925
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
Exhibit No. | Description |
2.1 | |
|
|
3.1 | |
|
|
3.2 | |
|
|
*10.1 | |
|
|
*10.2 | |
|
|
*10.3 | |
|
|
*10.4 | |
|
|
*10.5 | |
|
|
*10.6 |
|
|
|
*10.7 |
|
|
|
*10.8 | |
|
|
*10.9 | |
|
|
*10.10 | |
|
|
*10.11 | |
|
|
*10.12 | Amended and Restated Sanfilippo Value Added Plan, dated August 23, 2023 |
10.13 | |
|
|
10.14 | |
10.15 |
26
Exhibit No. | Description |
*10.16 | |
|
|
|
30
|
|
|
|
| |
|
|
| |
|
|
* | |
|
|
* | |
*10.22 | |
|
|
* | |
| |
|
|
31.1 | |
|
|
31.2 | |
|
|
32.1 | |
|
|
32.2 | |
|
|
101.INS | Inline eXtensible Business Reporting Language (XBRL) Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
101.SCH | Inline XBRL Taxonomy Extension Schema Document |
|
|
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
* Indicates a management contract or compensatory plan or arrangement.
3127
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on MayNovember 2, 2023.
JOHN B. SANFILIPPO & SON, INC. | |
|
|
By |
|
| /s/ Frank S. Pellegrino |
Frank S. Pellegrino | |
Chief Financial Officer, Executive Vice President, Finance and Administration |
3228