| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 36-2419677 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
1703 North Randall Road Elgin, Illinois | 60123-7820 | |
(Address of Principal Executive Offices) | (Zip Code) | |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
Common Stock, $.01 par value per share | JBSS | The NASDAQ Stock Market LLC (NASDAQ Global Select Market) |
| Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
| Emerging growth company | ☐ | |||||
JOHN B. SANFILIPPO & SON, INC.
FORM
FOR THE QUARTER ENDED MARCH 24,SEPTEMBER 29, 2022
INDEX
Page | ||||
| 3 | ||||
| 4 | ||||
| 6 | ||||
| 7 | ||||
| 8 | ||||
For the Quarter Ended | For the Thirty-Nine Weeks Ended | |||||||||||||||
March 24, 2022 | March 25, 2021 | March 24, 2022 | March 25, 2021 | |||||||||||||
Net sales | $ | 218,584 | $ | 207,892 | $ | 698,120 | $ | 651,740 | ||||||||
Cost of sales | 179,175 | 161,846 | 554,678 | 513,567 | ||||||||||||
Gross profit | 39,409 | 46,046 | 143,442 | 138,173 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling expenses | 15,584 | 15,090 | 56,896 | 44,868 | ||||||||||||
Administrative expenses | 6,401 | 9,859 | 25,871 | 25,539 | ||||||||||||
Gain on sale of facility, net | 0 | 0 | (2,349 | ) | 0 | |||||||||||
Total operating expenses | 21,985 | 24,949 | 80,418 | 70,407 | ||||||||||||
Income from operations | 17,424 | 21,097 | 63,024 | 67,766 | ||||||||||||
Other expense: | ||||||||||||||||
Interest expense including $199, $162, $591 and $494 to related parties | 531 | 309 | 1,322 | 1,135 | ||||||||||||
Rental and miscellaneous expense, net | 403 | 379 | 1,074 | 1,176 | ||||||||||||
Other expense | 618 | 630 | 1,855 | 1,889 | ||||||||||||
Total other expense, net | 1,552 | 1,318 | 4,251 | 4,200 | ||||||||||||
Income before income taxes | 15,872 | 19,779 | 58,773 | 63,566 | ||||||||||||
Income tax expense | 3,995 | 5,078 | 14,400 | 16,168 | ||||||||||||
Net income | $ | 11,877 | $ | 14,701 | $ | 44,373 | $ | 47,398 | ||||||||
Other comprehensive income: | ||||||||||||||||
Amortization of prior service cost and actuarial loss included in net periodic pension cost | 363 | 416 | 1,091 | 1,246 | ||||||||||||
Income tax expense related to pension adjustments | (94 | ) | (104 | ) | (284 | ) | (311 | ) | ||||||||
Other comprehensive income, net of tax | 269 | 312 | 807 | 935 | ||||||||||||
Comprehensive income | $ | 12,146 | $ | 15,013 | $ | 45,180 | $ | 48,333 | ||||||||
Net income per common share-basic | $ | 1.03 | $ | 1.28 | $ | 3.85 | $ | 4.12 | ||||||||
Net income per common share-diluted | $ | 1.02 | $ | 1.27 | $ | 3.83 | $ | 4.10 | ||||||||
For the Quarter Ended | ||||||||
September 29, 2022 | September 23, 2021 | |||||||
Net sales | $ | 252,601 | $ | 226,329 | ||||
Cost of sales | 201,958 | 174,526 | ||||||
Gross profit | 50,643 | 51,803 | ||||||
Operating expenses: | ||||||||
Selling expenses | 17,982 | 17,745 | ||||||
Administrative expenses | 10,247 | 9,069 | ||||||
Gain on sale of facility, net | — | (2,349 | ) | |||||
Total operating expenses | 28,229 | 24,465 | ||||||
Income from operations | 22,414 | 27,338 | ||||||
Other expense: | ||||||||
Interest expense including $193 and $189 to related parties | 661 | 371 | ||||||
Rental and miscellaneous expense, net | 402 | 348 | ||||||
Pension expense (excluding service costs) | 349 | 618 | ||||||
Total other expense, net | 1,412 | 1,337 | ||||||
Income before income taxes | 21,002 | 26,001 | ||||||
Income tax expense | 5,457 | 6,752 | ||||||
Net income | $ | 15,545 | $ | 19,249 | ||||
Other comprehensive income: | ||||||||
Amortization of actuarial loss included in net periodic cost | 7 | 364 | ||||||
Income tax expense related to pension adjustments | (1 | ) | (95 | ) | ||||
Other comprehensive income, net of tax: | 6 | 269 | ||||||
Comprehensive income | $ | 15,551 | $ | 19,518 | ||||
Net income per common share-basic | $ | 1.35 | $ | 1.67 | ||||
Net income per common share-diluted | $ | 1.34 | $ | 1.66 | ||||
March 24, 2022 | June 24, 2021 | March 25, 2021 | September 29, 2022 | June 30, 2022 | September 23, 2021 | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||||||
Cash | $ | 667 | $ | 672 | $ | 1,043 | $ | 298 | $ | 415 | $ | 539 | ||||||||||||
Accounts receivable, less allowance for doubtful accounts of $280, $291 and $291 | 68,704 | 66,334 | 64,502 | |||||||||||||||||||||
Accounts receivable, less allowance for doubtful accounts of $305, $267 and $311 | 76,401 | 69,611 | 71,890 | |||||||||||||||||||||
Inventories | 211,127 | 147,998 | 151,757 | 192,098 | 204,855 | 152,603 | ||||||||||||||||||
Prepaid expenses and other current assets | 7,653 | 8,568 | 6,481 | 6,746 | 8,283 | 10,407 | ||||||||||||||||||
Assets held for sale | 0 | 1,595 | 0 | |||||||||||||||||||||
TOTAL CURRENT ASSETS | 288,151 | 225,167 | 223,783 | 275,543 | 283,164 | 235,439 | ||||||||||||||||||
PROPERTY, PLANT AND EQUIPMENT: | ||||||||||||||||||||||||
Land | 9,150 | 9,150 | 9,277 | 9,150 | 9,150 | 9,150 | ||||||||||||||||||
Buildings | 102,810 | 102,666 | 110,739 | 102,837 | 102,810 | 102,661 | ||||||||||||||||||
Machinery and equipment | 230,842 | 225,529 | 225,583 | 251,998 | 245,111 | 226,618 | ||||||||||||||||||
Furniture and leasehold improvements | 5,296 | 5,287 | 5,322 | 5,296 | 5,296 | 5,295 | ||||||||||||||||||
Vehicles | 614 | 614 | 604 | 614 | 614 | 614 | ||||||||||||||||||
Construction in progress | 18,077 | 12,301 | 9,662 | 6,926 | 6,471 | 16,593 | ||||||||||||||||||
| 366,789 | 355,547 | 361,187 | 376,821 | 369,452 | 360,931 | |||||||||||||||||||
Less: Accumulated depreciation | 249,358 | 238,471 | 247,812 | 255,948 | 252,371 | 242,422 | ||||||||||||||||||
| 117,431 | 117,076 | 113,375 | 120,873 | 117,081 | 118,509 | |||||||||||||||||||
Rental investment property, less accumulated depreciation of $13,431, $12,825 and $12,623 | 15,692 | 16,298 | 16,500 | |||||||||||||||||||||
Rental investment property, less accumulated depreciation of $13,834, $13,632 and $13,027 | 15,289 | 15,491 | 16,096 | |||||||||||||||||||||
TOTAL PROPERTY, PLANT AND EQUIPMENT | 133,123 | 133,374 | 129,875 | 136,162 | 132,572 | 134,605 | ||||||||||||||||||
Intangible assets, net | 8,509 | 9,961 | 10,464 | 7,621 | 8,065 | 9,457 | ||||||||||||||||||
Cash surrender value of officers’ life insurance and other assets | 6,472 | 10,732 | 9,647 | |||||||||||||||||||||
Life insurance and other assets | 6,134 | 8,272 | 9,542 | |||||||||||||||||||||
Deferred income taxes | 5,104 | 6,087 | 5,051 | 3,231 | 3,236 | 5,297 | ||||||||||||||||||
Goodwill | 9,650 | 9,650 | 9,650 | 9,650 | 9,650 | 9,650 | ||||||||||||||||||
Operating lease right-of-use | 2,570 | 3,484 | 3,758 | 2,430 | 2,303 | 3,171 | ||||||||||||||||||
TOTAL ASSETS | $ | 453,579 | $ | 398,455 | $ | 392,228 | $ | 440,771 | $ | 447,262 | $ | 407,161 | ||||||||||||
March 24, 2022 | June 24, 2021 | March 25, 2021 | ||||||||||
LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||||||
CURRENT LIABILITIES: | ||||||||||||
Revolving credit facility borrowings | $ | 65,863 | $ | 8,653 | $ | 26,005 | ||||||
Current maturities of long-term debt, including related party debt of $600, $627 and $616 and net of unamortized debt issuance costs of $7, $15 and $17 | 3,961 | 3,875 | 3,828 | |||||||||
Accounts payable | 48,918 | 48,861 | 43,684 | |||||||||
Bank overdraft | 1,314 | 1,093 | 1,509 | |||||||||
Accrued payroll and related benefits | 12,646 | 24,109 | 19,224 | |||||||||
Other accrued expenses | 13,113 | 13,613 | 12,422 | |||||||||
TOTAL CURRENT LIABILITIES | 145,815 | 100,204 | 106,672 | |||||||||
LONG-TERM LIABILITIES: | ||||||||||||
Long-term debt, less current maturities, including related party debt of $7,933, $8,320 and $8,481and net of unamortized debt issuance costs of $0, $4 and $7 | 7,933 | 10,855 | 11,842 | |||||||||
Retirement plan | 35,935 | 34,919 | 32,433 | |||||||||
Long-term operating lease liabilities, net of current portion | 1,241 | 2,103 | 2,359 | |||||||||
Other | 7,876 | 7,880 | 8,019 | |||||||||
TOTAL LONG-TERM LIABILITIES | 52,985 | 55,757 | 54,653 | |||||||||
TOTAL LIABILITIES | 198,800 | 155,961 | 161,325 | |||||||||
COMMITMENTS AND CONTINGENCIES | 0 | 0 | 0 | |||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||
Class A Common Stock, convertible to Common Stock on a per share basis, cumulative voting rights of ten votes per share, $.01 par value; 10,000,000 shares authorized, 2,597,426 shares issued and outstanding | 26 | 26 | 26 | |||||||||
Common Stock, non-cumulative voting rights of one vote per share, $.01 par value; 17,000,000 shares authorized, 9,046,420, 8,988,812 and 8,988,812 shares issued | 90 | 90 | 90 | |||||||||
Capital in excess of par value | 127,910 | 126,271 | 125,693 | |||||||||
Retained earnings | 136,175 | 126,336 | 113,993 | |||||||||
Accumulated other comprehensive loss | (8,218 | ) | (9,025 | ) | (7,695 | ) | ||||||
Treasury stock, at cost; 117,900 shares of Common Stock | (1,204 | ) | (1,204 | ) | (1,204 | ) | ||||||
TOTAL STOCKHOLDERS’ EQUITY | 254,779 | 242,494 | 230,903 | |||||||||
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY | $ | 453,579 | $ | 398,455 | $ | 392,228 | ||||||
September 29, 2022 | June 30, 2022 | September 23, 2021 | ||||||||||
LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||||||
CURRENT LIABILITIES: | ||||||||||||
Revolving credit facility borrowings | $ | 42,624 | $ | 40,439 | $ | 45,264 | ||||||
Current maturities of long-term debt, net, including related party debt of $628, $614 and $572 | 2,046 | 3,149 | 3,858 | |||||||||
Accounts payable | 51,222 | 47,720 | 46,103 | |||||||||
Bank overdraft | 488 | 214 | 171 | |||||||||
Accrued payroll and related benefits | 12,166 | 18,888 | 11,410 | |||||||||
Other accrued expenses | 17,624 | 12,352 | 17,028 | |||||||||
TOTAL CURRENT LIABILITIES | 126,170 | 122,762 | 123,834 | |||||||||
LONG-TERM LIABILITIES: | ||||||||||||
Long-term debt, less current maturities, n including related party debt of $7,612, $7,774 and $8,240e t, | 7,612 | 7,774 | 9,939 | |||||||||
Retirement plan | 28,753 | 28,886 | 35,257 | |||||||||
Long-term operating lease liabilities, net of current portion | 1,242 | 1,076 | 1,804 | |||||||||
Other | 7,831 | 7,943 | 8,162 | |||||||||
TOTAL LONG-TERM LIABILITIES | 45,438 | 45,679 | 55,162 | |||||||||
TOTAL LIABILITIES | 171,608 | 168,441 | 178,996 | |||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||
Class A Common Stock, convertible to Common Stock on a per share basis, cumulative voting rights of ten votes per share, $.01 par value; 10,000,000 shares authorized, 2,597,426 shares issued and outstanding | 26 | 26 | 26 | |||||||||
Common Stock, non-cumulative voting rights of one vote per share, $.01 par value; 17,000,000 shares authorized 9,047,359, 9,047,359 and 8,989,980 shares issued | 90 | 90 | 90 | |||||||||
Capital in excess of par value | 129,572 | 128,800 | 126,958 | |||||||||
Retained earnings | 143,153 | 153,589 | 111,051 | |||||||||
Accumulated other comprehensive loss | (2,474 | ) | (2,480 | ) | (8,756 | ) | ||||||
Treasury stock, at cost; 117,900 shares of Common Stock | (1,204 | ) | (1,204 | ) | (1,204 | ) | ||||||
TOTAL STOCKHOLDERS’ EQUITY | 269,163 | 278,821 | 228,165 | |||||||||
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY | $ | 440,771 | $ | 447,262 | $ | 407,161 | ||||||
Class A Common Stock | Common Stock | Capital in Excess of Par Value | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | 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 of income tax expense of $95 | 269 | 269 | ||||||||||||||||||||||||||||||||||
| Equity award exercises, net of shares withheld for employee taxes | 1,168 | 0 | (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 of income tax expense of $95 | 269 | 269 | ||||||||||||||||||||||||||||||||||
Equity award exercises, net of shares withheld for employee taxes | 54,980 | 0 | (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 of income tax expense of $94 | 269 | 269 | ||||||||||||||||||||||||||||||||||
Equity award exercises, net of shares withheld for employee taxes | 1,460 | 0 | (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 | ||||||||||||||||||
Class A Common Stock | Common Stock | Capital in Excess of Par Value | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||
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 of income tax expense of $1 | 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 | ||||||||||||||||||
Class A Common Stock | Common Stock | Capital in Excess of Par Value | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Total | ||||||||||||||||||||||||||||||||
Balance, June 25, 2020 | 2,597,426 | $ | 26 | 8,939,890 | $ | 89 | $ | 123,899 | $ | 124,058 | $ | (8,630 | ) | $ | (1,204 | ) | $ | 238,238 | ||||||||||||||||||
Net income | 12,812 | 12,812 | ||||||||||||||||||||||||||||||||||
Cash dividends ($2.50 per share) | (28,685 | ) | (28,685 | ) | ||||||||||||||||||||||||||||||||
Pension liability amortization, net of income tax expense of $104 | 312 | 312 | ||||||||||||||||||||||||||||||||||
Equity award exercises | 221 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | 622 | 622 | ||||||||||||||||||||||||||||||||||
Balance, September 24, 2020 | 2,597,426 | $ | 26 | 8,940,111 | $ | 89 | $ | 124,521 | $ | 108,185 | $ | (8,318 | ) | $ | (1,204 | ) | $ | 223,299 | ||||||||||||||||||
Net income | 19,885 | 19,885 | ||||||||||||||||||||||||||||||||||
Pension liability amortization, net of income tax expense of $103 | 311 | 311 | ||||||||||||||||||||||||||||||||||
| Equity award exercises, net of shares withheld for employee taxes | 43,477 | 1 | (487 | ) | (486 | ) | ||||||||||||||||||||||||||||||
Stock-based compensation expense | 998 | 998 | ||||||||||||||||||||||||||||||||||
Balance, December 24, 2020 | 2,597,426 | $ | 26 | 8,983,588 | $ | 90 | $ | 125,032 | $ | 128,070 | $ | (8,007 | ) | $ | (1,204 | ) | $ | 244,007 | ||||||||||||||||||
Net income | 14,701 | 14,701 | ||||||||||||||||||||||||||||||||||
Cash dividends ($2.50 per share) | (28,778 | ) | (28,778 | ) | ||||||||||||||||||||||||||||||||
Pension liability amortization, net of income tax expense of $104 | 312 | 312 | ||||||||||||||||||||||||||||||||||
| Equity award exercises, net of shares withheld for employee taxes | 5,224 | 0 | (49 | ) | (49 | ) | ||||||||||||||||||||||||||||||
Stock-based compensation expense | 710 | 710 | ||||||||||||||||||||||||||||||||||
Balance, March 25, 2021 | 2,597,426 | $ | 26 | 8,988,812 | $ | 90 | $ | 125,693 | $ | 113,993 | $ | (7,695 | ) | $ | (1,204 | ) | $ | 230,903 | ||||||||||||||||||
Class A Common Stock | Common Stock | Capital in Excess of Par Value | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||
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 of income tax expense of $95 | 269 | 269 | ||||||||||||||||||||||||||||||||||
Equity award exercises, net of shares withheld for employee taxes | 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 | ||||||||||||||||||
For the Thirty-Nine Weeks Ended | For the Quarter Ended | |||||||||||||||
March 24, 2022 | March 25, 2021 | September 29, 2022 | September 23, 2021 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net income | $ | 44,373 | $ | 47,398 | $ | 15,545 | $ | 19,249 | ||||||||
Depreciation and amortization | 13,619 | 13,665 | 4,961 | 4,596 | ||||||||||||
Gain on disposition of assets, net | (1,754 | ) | (2,733 | ) | ||||||||||||
Loss (gain) on disposition of assets, net | 5 | (2,299 | ) | |||||||||||||
Deferred income tax expense | 983 | 1,737 | 5 | 790 | ||||||||||||
Stock-based compensation expense | 2,649 | 2,330 | 772 | 703 | ||||||||||||
Change in assets and liabilities: | ||||||||||||||||
Accounts receivable, net | (2,370 | ) | (7,553 | ) | (6,790 | ) | (5,556 | ) | ||||||||
Inventories | (63,129 | ) | 20,311 | 12,757 | (4,605 | ) | ||||||||||
Prepaid expenses and other current assets | 915 | 1,834 | 1,537 | (1,839 | ) | |||||||||||
Accounts payable | 1,767 | 7,498 | 3,216 | (1,631 | ) | |||||||||||
Accrued expenses | (10,046 | ) | (6,138 | ) | (5,265 | ) | (12,089 | ) | ||||||||
Income taxes payable | (1,917 | ) | (3,727 | ) | 3,815 | 2,805 | ||||||||||
Other long-term assets and liabilities | 532 | 605 | 215 | 172 | ||||||||||||
Other, net | 1,823 | 1,799 | (127 | ) | 607 | |||||||||||
Net cash (used in) provided by operating activities | (12,555 | ) | 77,026 | |||||||||||||
Net cash provided by operating activities | 30,646 | 903 | ||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Purchases of property, plant and equipment | (12,836 | ) | (15,769 | ) | (5,918 | ) | (5,110 | ) | ||||||||
Proceeds from insurance recoveries | 0 | 2,506 | ||||||||||||||
Proceeds from dispositions of assets, net | 3,950 | 299 | ||||||||||||||
Proceeds from the sale of life insurance policies | 3,225 | 0 | ||||||||||||||
Other | (827 | ) | (656 | ) | ||||||||||||
Proceeds from disposition of assets, net | — | 3,945 | ||||||||||||||
Other, net | (56 | ) | (72 | ) | ||||||||||||
Net cash used in investing activities | (6,488 | ) | (13,620 | ) | (5,974 | ) | (1,237 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Net short-term borrowings (repayments) | 57,210 | (1,003 | ) | |||||||||||||
Net short-term borrowings | 2,185 | 36,611 | ||||||||||||||
Principal payments on long-term debt | (2,849 | ) | (4,365 | ) | (1,267 | ) | (938 | ) | ||||||||
Increase (decrease) in bank overdraft | 221 | (532 | ) | 274 | (922 | ) | ||||||||||
Dividends paid | (34,534 | ) | (57,463 | ) | (25,981 | ) | (34,534 | ) | ||||||||
Taxes paid related to net share settlement of equity awards | (1,010 | ) | (535 | ) | — | (16 | ) | |||||||||
Net cash provided by (used in) financing activities | 19,038 | (63,898 | ) | |||||||||||||
Net cash (used in) provided by financing activities | (24,789 | ) | 201 | |||||||||||||
NET DECREASE IN CASH | (5 | ) | (492 | ) | (117 | ) | (133 | ) | ||||||||
Cash, beginning of period | 672 | 1,535 | 415 | 672 | ||||||||||||
Cash, end of period | $ | 667 | $ | 1,043 | $ | 298 | $ | 539 | ||||||||
For the Quarter Ended | For the Thirty-Nine Weeks Ended | For the Quarter Ended | ||||||||||||||||||||||
Distribution Channel | March 24, 2022 | March 25, 2021 | March 24, 2022 | March 25, 2021 | September 29, 2022 | September 23, 2021 | ||||||||||||||||||
Consumer | $ | 173,648 | $ | 169,415 | $ | 556,888 | $ | 528,201 | $ | 196,547 | $ | 179,761 | ||||||||||||
Commercial Ingredients | 25,514 | 21,052 | 81,426 | 64,399 | 31,507 | 28,156 | ||||||||||||||||||
Contract Packaging | 19,422 | 17,425 | 59,806 | 59,140 | 24,547 | 18,412 | ||||||||||||||||||
Total | $ | 218,584 | $ | 207,892 | $ | 698,120 | $ | 651,740 | $ | 252,601 | $ | 226,329 | ||||||||||||
March 24, 2022 | June 24, 2021 | March 25, 2021 | Affected Line Item in Consolidated Balance Sheet | |||||||||||
Assets | ||||||||||||||
Operating lease right-of-use | $ | 2,570 | $ | 3,484 | $ | 3,758 | Operating lease right-of-use assets | |||||||
Total lease right-of-use | $ | 2,570 | $ | 3,484 | $ | 3,758 | ||||||||
Liabilities | ||||||||||||||
Current: | ||||||||||||||
Operating leases | $ | 1,355 | $ | 1,430 | $ | 1,449 | Other accrued expenses | |||||||
Noncurrent: | ||||||||||||||
Operating leases | 1,241 | 2,103 | 2,359 | Long-term operating lease liabilities | ||||||||||
Total lease liabilities | $ | 2,596 | $ | 3,533 | $ | 3,808 | ||||||||
September 29, 2022 | June 30, 2022 | September 23, 2021 | Affected Line Item in Consolidated Balance Sheet | |||||||||||
Assets | ||||||||||||||
Operating lease right-of-use | $ | 2,430 | $ | 2,303 | $ | 3,171 | Operating lease right-of-use | |||||||
Total lease right-of-use | $ | 2,430 | $ | 2,303 | $ | 3,171 | ||||||||
Liabilities | ||||||||||||||
Current: | ||||||||||||||
Operating leases | $ | 1,215 | $ | 1,258 | $ | 1,412 | Other accrued expenses | |||||||
Noncurrent: | ||||||||||||||
Operating leases | 1,242 | 1,076 | 1,804 | Long-term operating lease liabilities | ||||||||||
Total lease liabilities | $ | 2,457 | $ | 2,334 | $ | 3,216 | ||||||||
For the Quarter Ended | For the Thirty-Nine Weeks Ended | For the Quarter Ended | ||||||||||||||||||||||
March 24, 2022 | March 25, 2021 | March 24, 2022 | March 25, 2021 | September 29, 2022 | September 23, 2021 | |||||||||||||||||||
Operating lease costs (a) | $ | 470 | $ | 437 | $ | 1,384 | $ | 1,387 | $ | 474 | $ | 444 | ||||||||||||
Variable lease costs (b) | 15 | 17 | 51 | 54 | 57 | 17 | ||||||||||||||||||
Total Lease Cost | $ | 485 | $ | 454 | $ | 1,435 | $ | 1,441 | ||||||||||||||||
| Total lease cost | $ | 531 | $ | 461 | ||||||||||||||||||||
| (a) | Includes short-term leases which are immaterial. |
| (b) | Variable lease costs consist of sales |
For the Thirty-Nine Weeks Ended | ||||||||
March 24, 2022 | March 25, 2021 | |||||||
Operating cash flows information: | ||||||||
| Cash paid for amounts included in measurements for lease liabilities | $ | 1,199 | $ | 1,171 | ||||
Non-cash activity: | ||||||||
Right-of-use assets obtained in exchange for new operating lease obligations | $ | 167 | $ | 490 | ||||
For the Quarter Ended | ||||||||
September 29, 2022 | September 23, 2021 | |||||||
Operating cash flows information: | ||||||||
Cash paid for amounts included in measurements for lease liabilities | $ | 402 | $ | 397 | ||||
Non-cash activity: | ||||||||
Right-of-use | $ | 496 | $ | 45 | ||||
March 24, 2022 | June 24, 2021 | March 25, 2021 | ||||||||||
Weighted Average Remaining Lease Term (in years) | 2.4 | 2.8 | 3.0 | |||||||||
Weighted Average Discount Rate | 4.2 | % | 4.3 | % | 4.3 | % | ||||||
September 29, 2022 | June 30, 2022 | September 23, 2021 | ||||||||||
| Weighted average remaining lease term (in years) | 2.5 | 2.3 | 2.6 | |||||||||
| Weighted average discount rate | 4.6 | % | 4.3 | % | 4.2 | % | ||||||
Fiscal year ending | ||||
June 30, 2022 (excluding the thirty-nine weeks ended March 24, 2022) | $ | 373 | ||
June 29, 2023 | 1,297 | |||
June 27, 2024 | 654 | |||
June 26, 2025 | 278 | |||
June 25, 2026 | 103 | |||
June 24, 2027 | 18 | |||
Thereafter | 0 | |||
Total lease payments | 2,723 | |||
Less imputed interest | (127 | ) | ||
Present value of operating lease liabilities | $ | 2,596 | ||
Fiscal Year Ending | ||||
June 29, 2023 (excluding the quarter ended September 29, 2022) | $ | 1,055 | ||
June 27, 2024 | 808 | |||
June 26, 2025 | 432 | |||
June 25, 2026 | 244 | |||
June 24, 2027 | 65 | |||
June 29, 2028 | 3 | |||
Thereafter | — | |||
Total lease payments | 2,607 | |||
Less imputed interest | (150 | ) | ||
Present value of operating lease liabilities | $ | 2,457 | ||
For the Quarter Ended | For the Thirty-Nine Weeks Ended | |||||||||||||||
March 24, 2022 | March 25, 2021 | March 24, 2022 | March 25, 2021 | |||||||||||||
Lease income related to lease payments | $ | 402 | $ | 451 | $ | 1,220 | $ | 1,354 | ||||||||
For the Quarter Ended | ||||||||
September 29, 2022 | September 23, 2021 | |||||||
Lease income related to lease payments | $ | 402 | $ | 410 | ||||
Fiscal year ending | ||||
June 30, 2022 (excluding the thirty-nine weeks ended March 24, 2022) | $ | 443 | ||
June 29, 2023 | 1,794 | |||
June 27, 2024 | 1,818 | |||
June 26, 2025 | 1,228 | |||
June 25, 2026 | 670 | |||
June 24, 2027 | 614 | |||
Thereafter | 0 | |||
| $ | 6,567 | |||
Fiscal Year Ending | ||||
June 29, 2023 (excluding the quarter ended September 29, 2022) | $ | 1,348 | ||
June 27, 2024 | 1,818 | |||
June 26, 2025 | 1,228 | |||
June 25, 2026 | 670 | |||
June 24, 2027 | 614 | |||
June 29, 2028 | — | |||
Total | $ | 5,678 | ||
March 24, 2022 | June 24, 2021 | March 25, 2021 | ||||||||||||||||||||||
September 29, 2022 | June 30, 2022 | September 23, 2021 | ||||||||||||||||||||||
Raw material and supplies | $ | 104,810 | $ | 64,219 | $ | 73,068 | $ | 60,657 | $ | 77,558 | $ | 55,159 | ||||||||||||
Work-in-process | 106,317 | 83,779 | 78,689 | 131,441 | 127,297 | 97,444 | ||||||||||||||||||
Total | $ | 211,127 | $ | 147,998 | $ | 151,757 | $ | 192,098 | $ | 204,855 | $ | 152,603 | ||||||||||||
March 24, 2022 | June 24, 2021 | March 25, 2021 | ||||||||||||||||||||||
September 29, 2022 | June 30, 2022 | September 23, 2021 | ||||||||||||||||||||||
Customer relationships | $ | 21,100 | $ | 21,100 | $ | 21,100 | $ | 21,100 | $ | 21,100 | $ | 21,100 | ||||||||||||
Brand names | 16,990 | 16,990 | 16,990 | 16,990 | 16,990 | 16,990 | ||||||||||||||||||
Non-compete agreement | 270 | 270 | 270 | 270 | 270 | 270 | ||||||||||||||||||
| 38,360 | 38,360 | 38,360 | 38,360 | 38,360 | 38,360 | |||||||||||||||||||
Less accumulated amortization: | ||||||||||||||||||||||||
Customer relationships | (18,537 | ) | (17,643 | ) | (17,326 | ) | (19,053 | ) | (18,795 | ) | (17,961 | ) | ||||||||||||
Brand names | (11,080 | ) | (10,562 | ) | (10,390 | ) | (11,425 | ) | (11,252 | ) | (10,735 | ) | ||||||||||||
Non-compete agreement | (234 | ) | (194 | ) | (180 | ) | (261 | ) | (248 | ) | (207 | ) | ||||||||||||
| (29,851 | ) | (28,399 | ) | (27,896 | ) | (30,739 | ) | (30,295 | ) | (28,903 | ) | |||||||||||||
Net intangible assets | $ | 8,509 | $ | 9,961 | $ | 10,464 | $ | 7,621 | $ | 8,065 | $ | 9,457 | ||||||||||||
Fiscal year ending | ||||
June 29, 2023 | $ | 1,657 | ||
June 27, 2024 | 1,414 | |||
June 26, 2025 | 1,156 | |||
June 25, 2026 | 861 | |||
June 24, 2027 | 690 |
Fiscal Year Ending | ||||
June 27, 2024 | 1,414 | |||
June 26, 2025 | 1,156 | |||
June 25, 2026 | 861 | |||
June 24, 2027 | 690 | |||
June 29, 2028 | 521 | |||
For the Quarter Ended | For the Thirty-Nine Weeks Ended | For the Quarter Ended | ||||||||||||||||||||||
March 24, 2022 | March 25, 2021 | March 24, 2022 | March 25, 2021 | September 29, 2022 | September 23, 2021 | |||||||||||||||||||
Weighted average number of shares outstanding – basic | 11,548,554 | 11,515,465 | 11,533,338 | 11,495,504 | 11,553,432 | 11,519,472 | ||||||||||||||||||
Effect of dilutive securities: | ||||||||||||||||||||||||
Restricted stock units | 53,412 | 58,552 | 55,745 | 57,206 | 63,681 | 69,012 | ||||||||||||||||||
Weighted average number of shares outstanding – diluted | 11,601,966 | 11,574,017 | 11,589,083 | 11,552,710 | 11,617,113 | 11,588,484 | ||||||||||||||||||
Restricted Stock Units | Shares | Weighted Average Grant Date Fair Value | ||||||
Outstanding at June 24, 2021 | 159,846 | $ | 58.05 | |||||
Activity: | ||||||||
Granted | 53,524 | 75.94 | ||||||
Vested (a) | (69,130 | ) | 46.05 | |||||
Forfeited | (717 | ) | 75.83 | |||||
Outstanding at March 24, 2022 | 143,523 | $ | 70.42 | |||||
For the Quarter Ended | For the Thirty-Nine Weeks Ended | |||||||||||||||
March 24, 2022 | March 25, 2021 | March 24, 2022 | March 25, 2021 | |||||||||||||
Stock-based compensation expense | $ | 878 | $ | 710 | $ | 2,649 | $ | 2,330 | ||||||||
For the Quarter Ended | For the Thirty-Nine Weeks Ended | For the Quarter Ended | ||||||||||||||||||||||
March 24, 2022 | March 25, 2021 | March 24, 2022 | March 25, 2021 | September 29, 2022 | September 23, 2021 | |||||||||||||||||||
Service cost | $ | 248 | $ | 236 | $ | 743 | $ | 708 | $ | 200 | $ | 248 | ||||||||||||
Interest cost | 255 | 214 | 764 | 643 | 342 | 254 | ||||||||||||||||||
Amortization of prior service cost | 0 | 120 | 0 | 359 | ||||||||||||||||||||
Amortization of loss | 363 | 296 | 1,091 | 887 | 7 | 364 | ||||||||||||||||||
Net periodic benefit cost | $ | 866 | $ | 866 | $ | 2,598 | $ | 2,597 | $ | 549 | $ | 866 | ||||||||||||
Changes to AOCL (a) | For the Thirty-Nine Weeks Ended | For the Quarter Ended | ||||||||||||||
March 24, 2022 | March 25, 2021 | September 29, 2022 | September 23, 2021 | |||||||||||||
Balance at beginning of period | $ | (9,025 | ) | $ | (8,630 | ) | $ | (2,480 | ) | | $ | (9,025 | ) | |||
Other comprehensive income before reclassifications | 0 | 0 | — | — | ||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | 1,091 | 1,246 | 7 | 364 | ||||||||||||
Tax effect | (284 | ) | (311 | ) | (1 | ) | (95 | ) | ||||||||
Net current-period other comprehensive income | 807 | 935 | 6 | 269 | ||||||||||||
Balance at end of period | $ | (8,218 | ) | $ | (7,695 | ) | $ | (2,474 | ) | $ | (8,756 | ) | ||||
(a) | Amounts in parenthesis indicate debits/expense. |
Affected line item in the Consolidated Statements of Comprehensive Income | ||||||||||||||||||||
For the Quarter Ended | For the Thirty-Nine Weeks Ended | |||||||||||||||||||
Reclassifications from AOCL to earnings (b) | March 24, 2022 | March 25, 2021 | March 24, 2022 | March 25, 2021 | ||||||||||||||||
Amortization of defined benefit pension items: | ||||||||||||||||||||
Unrecognized prior service cost | $ | 0 | $ | (120 | ) | $ | 0 | $ | (359 | ) | Other expense | |||||||||
Unrecognized net loss | (363 | ) | (296 | ) | (1,091 | ) | (887 | ) | Other expense | |||||||||||
Total before tax | (363 | ) | (416 | ) | (1,091 | ) | (1,246 | ) | ||||||||||||
Tax effect | 94 | 104 | 284 | 311 | Income tax expense | |||||||||||||||
Amortization of defined pension items, net of tax | $ | (269 | ) | $ | (312 | ) | $ | (807 | ) | $ | (935 | ) | ||||||||
For the Quarter Ended | Affected Line Item in the Consolidated Statements of Comprehensive Income | |||||||||
Reclassifications from AOCL to Earnings (b) | September 29, 2022 | September 23, 2021 | ||||||||
Amortization of defined benefit pension items: | ||||||||||
Unrecognized net loss | (7 | ) | (364 | ) | Pension expense (excluding service costs) | |||||
Tax effect | 1 | 95 | Income tax expense | |||||||
Amortization of defined pension items, | $ | (6 | ) | $ | (269 | ) | ||||
| (b) | Amounts in parenthesis indicate debits to expense. See Note 9 – “Retirement Plan” above for additional details. |
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. | ||
September 29, 2022 | June 30, 2022 | September 23, 2021 | ||||||||||||||||||||||
March 24, 2022 | June 24, 2021 | March 25, 2021 | ||||||||||||||||||||||
| Carrying value of current and long-term debt: | $ | 11,901 | $ | 14,749 | $ | 15,694 | $ | 9,660 | $ | 10,927 | $ | 13,812 | ||||||||||||
| Fair value of current and long-term debt: | 12,669 | 16,210 | 16,250 | 9,583 | 11,179 | 15,360 | ||||||||||||||||||
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
| • | References herein to fiscal 2023 and fiscal 2022 are to the 52-week fiscal year ending June 29, 2023 and the 53-week fiscal year ended June 30, 2022, respectively. |
References herein to the thirdfirst quarter of fiscal 20222023 and fiscal 20212022 are to the quarters ended March 24,September 29, 2022 and March 25,September 23, 2021, respectively.
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 Company’s Credit Facility and Mortgage Facility, as defined below, are sometimes collectively referred to as “our financing arrangements.”
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
During fiscal 2022, we created a Long-Range Plan to drive profitabledefine our future growth as identified inpriorities. Our Long-Range Plan focuses on growing our Strategic Plan, includes continuing to grow
We will continue to focus our promotional and retailers.
We face a number of challenges in the future, which include intensified competition on pricingsignificant inflation, potential for economic downturn, supply chain challenges and the continued impacts of COVID-19. We have also experienced a tightening in the labor market for market share from both private brandthose employed at our production facilities, which has led to increased labor costs.
Inflation and name brand nut products. Consumer Trends
We face changing industry trends as consumer purchasing preferences evolve. Due to the recent widespreadsignificant inflation, and increasingincluding higher commodity acquisition costs in fiscal 2022, we have seen higher selling prices at retail. With higher prices across our categories and the broader food market, consumers may purchase fewer snack products, shift their preferences to private brands or lower priced nuts or purchase snack products outside the nut and trail mix category. With the inflationary environment, we are also seeing signs of consumers shifting to more value-focused channels, such as mass merchandising retailers, club stores and dollar stores. E-commerce platforms are still showingshowed growth during the first quarter of fiscal 2023 but at a lower rate than we saw during the pandemic. Additionally, infirst quarter of fiscal 2022.
16
Supply Chain and Transportation
In recent monthsquarters, we have faced challenges with shortages and cost increases for shipping pallets, packaging, imported ingredients, transportation and shipping availability and labor at our production facilities.availability. The conflict in Ukraine has further exacerbated supply chain disruptions, especially related to sunflower oil used in roasting our nut products and aluminum which is used in certain of our product packaging.
We have also experienced supply chain issues related to a shortage in capacity in the transportation delays dueindustry. Compounding the driver shortage was an increase in demand driven by additional spending on consumer goods during fiscal 2021 and fiscal 2022, which led to congestionperiodic shortages of shipping containers, container chassis, space on container ships and trains and capacity constraints at U.S. ports. This tightening in transportation capacity began to ease during the portsthird quarter of fiscal 2022 and a general shortagehas continued to ease into fiscal 2023 as inflation resulted in rising costs which decreased demand in the freight market. However, intermodal capacity still remains tight. Fuel prices that were at record highs during spring and summer 2022 have begun to decrease, yet still remain volatile. While there are indicators of drivers. transportation cost improvement, and while we have mitigated some of the transportation shortages and maintained 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, or that any transportation capacity easing will continue or transportation prices will return to more normalized levels.
These shortages and related challenges have impacted our operations and resulted in increased expenses and manufacturing inefficiencies that have adversely impacted (and may continue to impact) our net income. We anticipate pricing relief in some of these areas in the coming quarters if and as shortages decrease and supply chains normalize, butnormalize; however, we expect that some costs may remain elevated or unpredictable for a longer period of time. time, particularly as the conflict in Ukraine continues.
We are working, and will continue to work, with our vendors, customers and suppliers to source additional raw materials and packaging supplies and to remain flexible in obtaining the transportation and labor services we need. If these shortages and other supply chain issues continue and we cannot secure adequate supplies to fulfill customer orders or cannot obtain the transportation and labor services we
COVID-19
During fiscal 2023, we may continue to face challenges in our fiscal 2022 as a result of the
17
QUARTERLY HIGHLIGHTS
Our net sales of $218.6$252.6 million for the thirdfirst quarter of fiscal 20222023 increased 5.1%11.6% from our net sales of $207.9$226.3 million for the thirdfirst quarter of fiscal 2021. Net sales for the first thirty-nine weeks of fiscal 2022 increased $46.4 million, or 7.1%, to $698.1 million compared to the first thirty-nine weeks of fiscal 2021.
Sales volume, measured as pounds sold to customers, decreased 2.0 million pounds, or 2.8%, in the third quarter of fiscal 2022, compared to the third quarter of fiscal 2021. Sales volume for the first thirty-nine weeks of fiscal 2022 increased 12.3 million pounds, or 5.6%,1.8% compared to the first thirty-nine weeksquarter of fiscal 2021.
Gross profit decreased $6.6$1.2 million, and our gross profit margin, as a percentage of net sales, decreased to 18.0%20.0% for the thirdfirst quarter of fiscal 20222023 compared to 22.1%22.9% for the thirdfirst quarter of fiscal 2021. Gross profit increased $5.3 million and our gross profit margin decreased to 20.5% from 21.2% for the first thirty-nine weeks of fiscal 2022 compared to the first thirty-nine weeks of fiscal 2021.
Total operating expenses for the thirdfirst quarter of fiscal 2023 increased $3.8 million, or 15.4%, compared to the first quarter of fiscal 2022, decreased $3.0 million, or 11.9%, comparedprimarily due to a non-recurring gain on the thirdsale of a facility that occurred in the first quarter of fiscal 2021.2022. As a percentage of net sales, total operating expenses in the thirdfirst quarter of fiscal 2022 decreased2023 increased to 10.1%11.2% from 12.0%10.8% for the thirdfirst quarter of fiscal 2021. For the first thirty-nine weeks of fiscal 2022, total operating expenses increased $10.0 million, and total operating expenses as a percentage of net sales increased to 11.5% from 10.8% compared to the first thirty-nine weeks of fiscal 2021.
The total value of inventories on hand at the end of the thirdfirst quarter of fiscal 20222023 increased $59.4$39.5 million, or 39.1%25.9%, in comparison to the total value of inventories on hand at the end of the thirdfirst quarter of fiscal 2021.
We have seenexpect acquisition costs for dried fruit and most major nut categoriestree nuts to be flat or decrease and acquisition costs for peanuts to increase modestly in the 20212022 crop year (which falls into our current 20222023 fiscal year). We have completed procurement ofalso expect acquisition costs for dried fruit to increase modestly. While we began to procure inshell walnuts during the first halfquarter of fiscal 2022, and2023, the final total payments due to our walnut growers werewill not be determined inuntil the current quarter. Thesecond and/or third quarters of fiscal 2023. 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 2022. Remaining amounts to2023 and will be paid to walnut growers as of March 24, 2022 are final and are not subject to revision. We decreasedrecognized in our walnut grower liability by approximately $1.3 million during the third quarter of fiscal 2022, as the final payments due to walnut growers are slightly less than the amounts estimatedfinancial results at the end of the second quarter. This decrease 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.
18
RESULTS OF OPERATIONS
Net Sales
Our net sales increased 5.1%11.6% to $218.6$252.6 million in the thirdfirst quarter of fiscal 20222023 compared to net sales of $207.9$226.3 million for the thirdfirst quarter of fiscal 2021.2022. The increase in net sales was primarily attributable to an 8.1%a 9.6% increase in the weighted average sales price per pound and was offset in part by a 2.8% decrease1.8% increase in sales pounds, which is defined as pounds sold to customers. The increase in the weighted average selling price per pound was attributable to price increases implemented duringin the current third quarter of fiscal 2022 in response to higher commodity acquisition costs for all major tree nuts and peanuts and increases in freight, labor and other input costs.
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 | |||||||||||||||
Product Type | March 24, 2022 | March 25, 2021 | March 24, 2022 | March 25, 2021 | ||||||||||||
Peanuts | 18.8 | % | 19.5 | % | 17.6 | % | 19.2 | % | ||||||||
Pecans | 6.9 | 7.8 | 10.7 | 10.7 | ||||||||||||
Cashews & Mixed Nuts | 23.8 | 23.1 | 22.7 | 23.3 | ||||||||||||
Walnuts | 4.6 | 5.4 | 5.9 | 6.4 | ||||||||||||
Almonds | 10.7 | 10.5 | 10.1 | 10.7 | ||||||||||||
Trail & Snack Mixes | 28.4 | 27.8 | 26.7 | 24.1 | ||||||||||||
Other | 6.8 | 5.9 | 6.3 | 5.6 | ||||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
| For the Quarter Ended | ||||||||
Product Type | September 29, 2022 | September 23, 2021 | ||||||
Peanuts | 19.3 | % | 17.7 | % | ||||
Pecans | 10.3 | 8.6 | ||||||
Cashews & Mixed Nuts | 20.1 | 22.4 | ||||||
Walnuts | 5.7 | 5.7 | ||||||
Almonds | 9.0 | 10.6 | ||||||
Trail & Snack Mixes | 28.9 | 28.2 | ||||||
Other | 6.7 | 6.8 | ||||||
|
|
|
| |||||
Total | 100.0 | % | 100.0 | % | ||||
|
|
|
| |||||
The following table shows a comparison of net sales by distribution channel (dollars in thousands):
For the Quarter Ended | ||||||||||||||||||||||||
Distribution Channel | March 24, 2022 | Percentage of Total | March 25, 2021 | Percentage of Total | $ Change | Percent Change | ||||||||||||||||||
Consumer (1) | $ | 173,648 | 79.4 | % | $ | 169,415 | 81.5 | % | $ | 4,233 | 2.5 | % | ||||||||||||
Commercial Ingredients | 25,514 | 11.7 | 21,052 | 10.1 | 4,462 | 21.2 | ||||||||||||||||||
Contract Packaging | 19,422 | 8.9 | 17,425 | 8.4 | 1,997 | 11.5 | ||||||||||||||||||
Total | $ | 218,584 | 100.0 | % | $ | 207,892 | 100.0 | % | $ | 10,692 | 5.1 | % | ||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||
Distribution Channel | September 29, 2022 | Percentage of Total | September 23, 2021 | Percentage of Total | $ Change | Percent Change | ||||||||||||||||||
Consumer (1) | $ | 196,547 | 77.8 | % | $ | 179,761 | 79.4 | % | $ | 16,786 | 9.3 | % | ||||||||||||
Commercial Ingredients | 31,507 | 12.5 | 28,156 | 12.4 | 3,351 | 11.9 | ||||||||||||||||||
Contract Packaging | 24,547 | 9.7 | 18,412 | 8.2 | 6,135 | 33.3 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 252,601 | 100.0 | % | $ | 226,329 | 100.0 | % | $ | 26,272 | 11.6 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| (1) | Sales of branded products were approximately Fisher Orchard Valley Harvest |
For the Thirty-nine Weeks Ended | ||||||||||||||||||||||||
Distribution Channel | March 24, 2022 | Percentage of Total | March 25, 2021 | Percentage of Total | $ Change | Percent Change | ||||||||||||||||||
Consumer (1) | $ | 556,888 | 79.8 | % | $ | 528,201 | 81.0 | % | $ | 28,687 | 5.4 | % | ||||||||||||
Commercial Ingredients | 81,426 | 11.6 | 64,399 | 9.9 | 17,027 | 26.4 | ||||||||||||||||||
Contract Packaging | 59,806 | 8.6 | 59,140 | 9.1 | 666 | 1.1 | ||||||||||||||||||
Total | $ | 698,120 | 100.0 | % | $ | 651,740 | 100.0 | % | $ | 46,380 | 7.1 | % | ||||||||||||
Net sales in the consumer distribution channel increased 2.5%9.3% in dollars and decreased 5.8%0.6% in sales volume in the thirdfirst quarter of fiscal 20222023 compared to the thirdfirst quarter of fiscal 2021.2022. The sales volume decrease was driven primarily by lost private brand distribution at a 57.1% decrease in peanut butter sales volume due to the planned downtime associated with the upgrade of our peanut butter linegrocery customer that occurred and was completed in the current third quarter. The discontinuance of our inshell peanut product line, which occurred in the fourth quarter of fiscal 2021, also contributed to the sales volume decrease.2022, which was largely offset by increased distribution and a new product offering at a mass merchandising retailer. Sales volume for
19
Net sales in the commercial ingredients distribution channel increased 21.2%11.9% in dollars and 11.2%2.4% in sales volume in the thirdfirst quarter of fiscal 20222023 compared to the thirdfirst quarter of fiscal 2021.2022. The sales volume increase was due to a 15.0% increase in sales volume to foodservice customers, which was duerelated to a 19.9% increase in sales volume in our foodservice business. The sales volume increase in our foodservice business was attributable to improved conditionsnew distribution at existing customers and the continued recovery in the restaurant industry from fewer
Net sales in the contract packaging distribution channel increased 11.5%33.3% in dollars and 3.1%19.3% in sales volume in the thirdfirst quarter of fiscal 20222023 compared to the thirdfirst quarter of fiscal 2021.2022. The increase in sales volume was primarily attributable to the timing of promotional activity by a major customer and business with a new customer that startedcustomer.
Gross Profit
Gross profit decreased $1.2 million, or 2.2%, to ship in the third quarter.
Operating Expenses
Total operating expenses for the thirdfirst quarter of fiscal 2021. The decreases in gross profit and gross profit margin were mainly attributable2023 increased $3.8 million to higher commodity acquisition costs for pecans, almonds and walnuts and other inflationary cost increases including labor, freight and manufacturing supplies.
Selling expenses for the first thirty-nine weeksquarter of fiscal 2022 compared to 21.2% for2023 were $18.0 million, an increase of $0.2 million, or 1.3%, from the first thirty-nine weeksquarter of fiscal 2021.2022. The increase was driven primarily by a $0.9 million increase in gross profit in the yearbase and incentive compensation expense, primarily related to date comparison was due to increased sales volume, which was partially offset by the reasons cited in the quarterly comparison. The decrease in gross profit margin was attributable to higher commodity acquisition costs for pecans, cashews and almonds,incentive compensation, which was largely offset by increased sales volume.
Administrative expenses for the first quarter of fiscal 2023 were largely offset$10.2 million, an increase of $1.2 million, or 13.0%, from the first quarter of fiscal 2022. The increase was driven by a $1.6$1.2 million decreaseincrease in base and incentive compensation expense, primarily related to incentive compensation.
The $2.3 million gain on sale of facility isin the first quarter of fiscal 2022 was the result of the sale of our Garysburg, North Carolina facility that occurred in the first quarter of fiscal 2022.
Income from Operations
Due to the factors discussed above, income from operations was $17.4decreased to $22.4 million, or 8.0% of net sales, for the third quarter of fiscal 2022 compared to $21.1 million, or 10.1% of net sales, for the third quarter of fiscal 2021.
Interest Expense
Interest expense was $0.5 million for the third quarter of fiscal 2022 compared to $0.3 million in the third quarter of fiscal 2021. Interest expense for the first three quarters of fiscal 2022 was $1.3 million compared to $1.1$0.7 million for the first three quartersquarter of fiscal 2021.2023 compared to $0.4 million for the first quarter of 2022. The increase in interest expense for both the quarterly and yearwas primarily due to date comparisons was a result ofhigher weighted average interest rates combined with higher average short-term debt levels driven mainly by increased commodity acquisition costs.
Rental and Miscellaneous Expense, Net
Net rental and miscellaneous expense was $0.4 million for both the thirdfirst quarter of fiscal 2022 and fiscal 2021. Net rental and miscellaneous expense was $1.12023 compared to $0.3 million for the first thirty-nine weeksquarter of fiscal 2022 compared to $1.22022.
Pension Expense (Excluding Service Costs)
Pension expense (excluding service costs) was $0.3 million for the first thirty-nine weeksquarter of fiscal 2021.
20
Income Tax Expense
Income tax expense was $4.0$5.5 million, or 25.2%26.0% of income before income taxes for the thirdfirst quarter of fiscal 20222023 compared to $5.1$6.8 million, or 25.7%26.0% of income before income taxes, for the thirdfirst quarter of fiscal 2021. For the first thirty-nine weeks of fiscal 2022, income tax expense was $14.4 million, or 24.5% of income before income taxes, compared to $16.2 million, or 25.4% of income before income taxes, for the comparable period last year.
Net Income
Net income was $11.9$15.5 million, or $1.03$1.35 per common share basic and $1.02$1.34 per common share diluted, for the thirdfirst quarter of fiscal 2022,2023, compared to $14.7$19.2 million, or $1.28$1.67 per common share basic and $1.27$1.66 per common share diluted, for the third quarter of fiscal 2021.
LIQUIDITY AND CAPITAL RESOURCES
General
The primary uses of cash are to fund our current operations, fulfill contractual obligations, pursue our StrategicLong-Range Plan through growing our branded and private label nut programs and repay indebtedness. 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 and explore other growth strategies outlined in our StrategicLong-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 20222023 and 2021,2022, respectively (dollars in thousands):
For the Thirty-Nine Weeks Ended | ||||||||||||
March 24, 2022 | March 25, 2021 | $ Change | ||||||||||
Operating activities | $ | (12,555 | ) | $ | 77,026 | $ | (89,581 | ) | ||||
Investing activities | (6,488 | ) | (13,620 | ) | 7,132 | |||||||
Financing activities | 19,038 | (63,898 | ) | 82,936 | ||||||||
Net decrease in cash | $ | (5 | ) | $ | (492 | ) | $ | 487 | ||||
| September 29, 2022 | September 23, 2021 | $ Change | ||||||||||
Operating activities | $ | 30,646 | $ | 903 | $ | 29,743 | ||||||
Investing activities | (5,974 | ) | (1,237 | ) | (4,737 | ) | ||||||
Financing activities | (24,789 | ) | 201 | (24,990 | ) | |||||||
|
|
|
|
|
| |||||||
Net decrease in cash | $ | (117 | ) | $ | (133 | ) | $ | 16 | ||||
|
|
|
|
|
| |||||||
Operating Activities
Total inventories were $211.1$192.1 million at March 24,September 29, 2022, an increasea decrease of $63.1$12.8 million, or 42.7%6.2%, from the inventory balance at June 24, 2021,30, 2022, and an increase of $59.4$39.5 million, or 39.1%25.9%, from the inventory balance at March 25,September 23, 2021. The decrease in inventory at September 29, 2022 compared to June 30, 2022 was primarily due to lower quantities of pecans and walnuts on hand, which was partially offset by increased quantities of finished goods. The increase in inventory at March 24,September 29, 2022 compared to June 24,September 23, 2021 was primarily due to greater quantities of pecans, walnuts, almondsfinished goods, work in process and finished goodsinshell pecans on hand combined with higher commodity acquisition costs for all major tree nuts. The increase in inventories at March 24, 2022 compared to March 25, 2021 was primarily due to higher commodity acquisition costs for all raw nut and dried fruit input stocks, as well as higher quantities of almonds and finished goods on hand.
Raw nut and dried fruit input stocks, some of which are classified as
21
Investing Activities
Financing Activities
Real Estate Matters
In August 2008, we completed the consolidation of our Chicago-based facilities into theour Elgin Site.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 70% of the rentable area in the office building is currently vacant. Approximately 29% of the rentable area has not been
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 (the “Mortgage Lender”) providing us with two term loans, one in the amount of $36.0 million (“Tranche A”) and the other in the amount of $9.0 million (“Tranche B”), for an aggregate amount of $45.0 million (the(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 is secured by mortgages on essentially all of our owned real property located in Elgin, Illinois and Gustine, California (the “Encumbered Properties”).
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% (“Base Rate”) or (ii) a rate based upon the London interbank offered rate (“LIBOR”) plus an applicable margin based upon the borrowing base calculation, ranging from 1.25% to 1.75%.
At March 24,September 29, 2022, the weighted average interest rate for the Credit Facility was 2.2%5.4%. 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
22
ownership of the Company,
Mortgage Facility
The Mortgage Facility matures on March 1, 2023. On March 1, 2018 the interest rate on the Mortgage Facility was fixed at 4.25% per annum. Monthly principal payments on the Mortgage Facility in the amount of $0.3 million commenced on June 1, 2008.
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
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
Recent Accounting Pronouncements
Refer to Note 14 – “Recent Accounting Pronouncements” of the Notes to Consolidated Financial Statements, contained in Part I, Item 1 of this form
23
FORWARD LOOKING STATEMENTS
Some of the statements in this report are forward-looking (including statements concerning our expectations regarding market risk and the impact of the purchasing decisions of major customers).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 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; (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, particularly in light of
24
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—I - Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form
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
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
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of legal proceedings, see Note 11 – “Commitments and Contingent Liabilities” in Part I, Item 1 of this Form
Item 1A. Risk Factors
In addition to the other information set forth in this report on Form
See Part I, Item 2 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in this Form
Item 6. Exhibits
The exhibits filed herewith are listed in the exhibit index below.
25
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation
Exhibit No. | Description | |
| 3.1 | ||
| 3.2 | ||
| *10.1 | ||
| *10.2 | ||
| *10.3 | ||
| *10.4 | ||
| *10.5 | ||
| *10.6 | ||
| *10.7 | Form of Non-Employee Director Restricted Stock Unit Award Agreement (non-deferral) under 2014 Omnibus Plan (fiscal 2020, 2021 and 2022 awards cycle) (incorporated by reference from Exhibit 10.38 to the Form 10-Q for the quarter ended December 24, 2015) | |
26
27
| 10.16 | ||
| *10.17 | Executive Transition Agreement, dated November 3, 2021, by and between John B. Sanfilippo & Son, Inc. and Christopher Gardier | |
| 31.1 | Certification of Jeffrey T. Sanfilippo pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended | |
| 31.2 | Certification of Frank S. Pellegrino pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended | |
| 32.1 | Certification of Jeffrey T. Sanfilippo pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended | |
| 32.2 | Certification of Frank S. Pellegrino pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended | |
| 101.INS | Inline eXtensible Business Reporting Language (XBRL) Instance | |
| 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. |
28
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 April 27,November 3, 2022.
JOHN B. SANFILIPPO & SON, INC. | ||
By | ||
/s/ FRANK S. PELLEGRINO | ||
| Frank S. Pellegrino | ||
| Chief Financial Officer, Executive Vice President, Finance and Administration | ||
29