SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark one)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 29, 2022
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number
JOHN B. SANFILIPPO & SON, INC.
(Exact Name of Registrant as Specified in Itsits Charter)
Delaware | 36-2419677 | |
(State or incorporation or | (I.R.S. Employer Identification No.) | |
1703 North Randall Road Elgin, Illinois | 60123-7820 | |
(Address of | (Zip Code) |
(847) 289-1800
Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of | Trading Symbol(s) | Name of each exchange on | ||
Common Stock, $.01 par value per share | JBSS | The NASDAQ Stock Market LLC (NASDAQ Global Select Market) |
Indicate by check mark whether the registrant: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☒ Yes No ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationYes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,filer,” “smaller reporting company”company,” and “emerging growth company” in Rule (Check One)
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 RuleYes No
As of OctoberApril 28, 2022, 8,929,4592023, 8,958,426 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 SEPTEMBER 29, 2022For the Quarter Ended March 30, 2023
INDEX
Page | ||||
3 | ||||
3 | ||||
4 | ||||
6 | ||||
7 | ||||
8 | ||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18 | |||
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 29 | |||
29 | ||||
29 | ||||
29 | ||||
29 | ||||
32 |
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 | ||||||||
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 | ||||
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
| |||||||||||
| March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
| |||||
Net sales |
| $ | 238,535 |
|
| $ | 218,584 |
|
| $ | 765,464 |
|
| $ | 698,120 |
|
Cost of sales |
|
| 188,767 |
|
|
| 179,175 |
|
|
| 608,551 |
|
|
| 554,678 |
|
Gross profit |
|
| 49,768 |
|
|
| 39,409 |
|
|
| 156,913 |
|
|
| 143,442 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling expenses |
|
| 18,109 |
|
|
| 15,584 |
|
|
| 57,921 |
|
|
| 56,896 |
|
Administrative expenses |
|
| 9,841 |
|
|
| 6,401 |
|
|
| 30,296 |
|
|
| 25,871 |
|
Gain on sale of facility, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,349 | ) |
Total operating expenses |
|
| 27,950 |
|
|
| 21,985 |
|
|
| 88,217 |
|
|
| 80,418 |
|
Income from operations |
|
| 21,818 |
|
|
| 17,424 |
|
|
| 68,696 |
|
|
| 63,024 |
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense including $186, $199, $568 and |
|
| 552 |
|
|
| 531 |
|
|
| 1,828 |
|
|
| 1,322 |
|
Rental and miscellaneous expense, net |
|
| 371 |
|
|
| 403 |
|
|
| 1,084 |
|
|
| 1,074 |
|
Pension expense (excluding service costs) |
|
| 349 |
|
|
| 618 |
|
|
| 1,046 |
|
|
| 1,855 |
|
Total other expense, net |
|
| 1,272 |
|
|
| 1,552 |
|
|
| 3,958 |
|
|
| 4,251 |
|
Income before income taxes |
|
| 20,546 |
|
|
| 15,872 |
|
|
| 64,738 |
|
|
| 58,773 |
|
Income tax expense |
|
| 4,814 |
|
|
| 3,995 |
|
|
| 16,554 |
|
|
| 14,400 |
|
Net income |
| $ | 15,732 |
|
| $ | 11,877 |
|
| $ | 48,184 |
|
| $ | 44,373 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization of actuarial loss included in net |
|
| 7 |
|
|
| 363 |
|
|
| 21 |
|
|
| 1,091 |
|
Income tax expense related to pension adjustments |
|
| (2 | ) |
|
| (94 | ) |
|
| (5 | ) |
|
| (284 | ) |
Other comprehensive income, net of tax |
|
| 5 |
|
|
| 269 |
|
|
| 16 |
|
|
| 807 |
|
Comprehensive income |
| $ | 15,737 |
|
| $ | 12,146 |
|
| $ | 48,200 |
|
| $ | 45,180 |
|
Net income per common share-basic |
| $ | 1.36 |
|
| $ | 1.03 |
|
| $ | 4.16 |
|
| $ | 3.85 |
|
Net income per common share-diluted |
| $ | 1.35 |
|
| $ | 1.02 |
|
| $ | 4.14 |
|
| $ | 3.83 |
|
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)
September 29, 2022 | June 30, 2022 | September 23, 2021 | ||||||||||
ASSETS | ||||||||||||
CURRENT ASSETS: | ||||||||||||
Cash | $ | 298 | $ | 415 | $ | 539 | ||||||
Accounts receivable, less allowance for doubtful accounts of $305, $267 and $311 | 76,401 | 69,611 | 71,890 | |||||||||
Inventories | 192,098 | 204,855 | 152,603 | |||||||||
Prepaid expenses and other current assets | 6,746 | 8,283 | 10,407 | |||||||||
TOTAL CURRENT ASSETS | 275,543 | 283,164 | 235,439 | |||||||||
PROPERTY, PLANT AND EQUIPMENT: | ||||||||||||
Land | 9,150 | 9,150 | 9,150 | |||||||||
Buildings | 102,837 | 102,810 | 102,661 | |||||||||
Machinery and equipment | 251,998 | 245,111 | 226,618 | |||||||||
Furniture and leasehold improvements | 5,296 | 5,296 | 5,295 | |||||||||
Vehicles | 614 | 614 | 614 | |||||||||
Construction in progress | 6,926 | 6,471 | 16,593 | |||||||||
376,821 | 369,452 | 360,931 | ||||||||||
Less: Accumulated depreciation | 255,948 | 252,371 | 242,422 | |||||||||
120,873 | 117,081 | 118,509 | ||||||||||
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 | 136,162 | 132,572 | 134,605 | |||||||||
Intangible assets, net | 7,621 | 8,065 | 9,457 | |||||||||
Life insurance and other assets | 6,134 | 8,272 | 9,542 | |||||||||
Deferred income taxes | 3,231 | 3,236 | 5,297 | |||||||||
Goodwill | 9,650 | 9,650 | 9,650 | |||||||||
Operating lease right-of-use | 2,430 | 2,303 | 3,171 | |||||||||
TOTAL ASSETS | $ | 440,771 | $ | 447,262 | $ | 407,161 | ||||||
| March 30, |
|
| June 30, |
|
| March 24, |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
| |||
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
| |||
Cash |
| $ | 365 |
|
| $ | 415 |
|
| $ | 667 |
|
Accounts receivable, less allowance for doubtful accounts of $305, $267 |
|
| 74,534 |
|
|
| 69,611 |
|
|
| 68,704 |
|
Inventories |
|
| 190,351 |
|
|
| 204,855 |
|
|
| 211,127 |
|
Prepaid expenses and other current assets |
|
| 9,325 |
|
|
| 8,283 |
|
|
| 7,653 |
|
TOTAL CURRENT ASSETS |
|
| 274,575 |
|
|
| 283,164 |
|
|
| 288,151 |
|
PROPERTY, PLANT AND EQUIPMENT: |
|
|
|
|
|
|
|
|
| |||
Land |
|
| 9,150 |
|
|
| 9,150 |
|
|
| 9,150 |
|
Buildings |
|
| 102,840 |
|
|
| 102,810 |
|
|
| 102,810 |
|
Machinery and equipment |
|
| 259,289 |
|
|
| 245,111 |
|
|
| 230,842 |
|
Furniture and leasehold improvements |
|
| 5,275 |
|
|
| 5,296 |
|
|
| 5,296 |
|
Vehicles |
|
| 719 |
|
|
| 614 |
|
|
| 614 |
|
Construction in progress |
|
| 8,210 |
|
|
| 6,471 |
|
|
| 18,077 |
|
|
| 385,483 |
|
|
| 369,452 |
|
|
| 366,789 |
| |
Less: Accumulated depreciation |
|
| 263,718 |
|
|
| 252,371 |
|
|
| 249,358 |
|
|
| 121,765 |
|
|
| 117,081 |
|
|
| 117,431 |
| |
Rental investment property, less accumulated depreciation of $14,238, |
|
| 14,885 |
|
|
| 15,491 |
|
|
| 15,692 |
|
TOTAL PROPERTY, PLANT AND EQUIPMENT |
|
| 136,650 |
|
|
| 132,572 |
|
|
| 133,123 |
|
|
|
|
|
|
|
|
|
|
| |||
Intangible assets, net |
|
| 7,100 |
|
|
| 8,065 |
|
|
| 8,509 |
|
Life insurance and other assets |
|
| 6,029 |
|
|
| 8,272 |
|
|
| 6,472 |
|
Deferred income taxes |
|
| 2,374 |
|
|
| 3,236 |
|
|
| 5,104 |
|
Goodwill |
|
| 11,750 |
|
|
| 9,650 |
|
|
| 9,650 |
|
Operating lease right-of-use assets |
|
| 6,582 |
|
|
| 2,303 |
|
|
| 2,570 |
|
TOTAL ASSETS |
| $ | 445,060 |
|
| $ | 447,262 |
|
| $ | 453,579 |
|
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)
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 | ||||||
| March 30, |
|
| June 30, |
|
| March 24, |
| ||||
LIABILITIES & STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
| |||
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
| |||
Revolving credit facility borrowings |
| $ | 27,825 |
|
| $ | 40,439 |
|
| $ | 65,863 |
|
Current maturities of long-term debt, net, including |
|
| 657 |
|
|
| 3,149 |
|
|
| 3,961 |
|
Accounts payable |
|
| 42,264 |
|
|
| 47,720 |
|
|
| 48,918 |
|
Bank overdraft |
|
| 458 |
|
|
| 214 |
|
|
| 1,314 |
|
Accrued payroll and related benefits |
|
| 17,061 |
|
|
| 18,888 |
|
|
| 12,646 |
|
Other accrued expenses |
|
| 14,493 |
|
|
| 12,352 |
|
|
| 13,113 |
|
TOTAL CURRENT LIABILITIES |
|
| 102,758 |
|
|
| 122,762 |
|
|
| 145,815 |
|
|
|
|
|
|
|
|
|
|
| |||
LONG-TERM LIABILITIES: |
|
|
|
|
|
|
|
|
| |||
Long-term debt, less current maturities, net, including |
|
| 7,276 |
|
|
| 7,774 |
|
|
| 7,933 |
|
Retirement plan |
|
| 29,471 |
|
|
| 28,886 |
|
|
| 35,935 |
|
Long-term operating lease liabilities, net of current portion |
|
| 4,905 |
|
|
| 1,076 |
|
|
| 1,241 |
|
Other |
|
| 8,332 |
|
|
| 7,943 |
|
|
| 7,876 |
|
TOTAL LONG-TERM LIABILITIES |
|
| 49,984 |
|
|
| 45,679 |
|
|
| 52,985 |
|
TOTAL LIABILITIES |
|
| 152,742 |
|
|
| 168,441 |
|
|
| 198,800 |
|
|
|
|
|
|
|
|
|
|
| |||
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
STOCKHOLDERS' EQUITY: |
|
|
|
|
|
|
|
|
| |||
Class A Common Stock, convertible to Common Stock on |
|
| 26 |
|
|
| 26 |
|
|
| 26 |
|
Common Stock, non-cumulative voting rights of one vote |
|
| 91 |
|
|
| 90 |
|
|
| 90 |
|
Capital in excess of par value |
|
| 131,649 |
|
|
| 128,800 |
|
|
| 127,910 |
|
Retained earnings |
|
| 164,220 |
|
|
| 153,589 |
|
|
| 136,175 |
|
Accumulated other comprehensive loss |
|
| (2,464 | ) |
|
| (2,480 | ) |
|
| (8,218 | ) |
Treasury stock, at cost; 117,900 shares of Common Stock |
|
| (1,204 | ) |
|
| (1,204 | ) |
|
| (1,204 | ) |
TOTAL STOCKHOLDERS’ EQUITY |
|
| 292,318 |
|
|
| 278,821 |
|
|
| 254,779 |
|
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY |
| $ | 445,060 |
|
| $ | 447,262 |
|
| $ | 453,579 |
|
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)
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 | 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 | ||||||||||||||||||
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Shares |
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|
| 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 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 |
|
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 Quarter Ended | ||||||||
September 29, 2022 | September 23, 2021 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 15,545 | $ | 19,249 | ||||
Depreciation and amortization | 4,961 | 4,596 | ||||||
Loss (gain) on disposition of assets, net | 5 | (2,299 | ) | |||||
Deferred income tax expense | 5 | 790 | ||||||
Stock-based compensation expense | 772 | 703 | ||||||
Change in assets and liabilities: | ||||||||
Accounts receivable, net | (6,790 | ) | (5,556 | ) | ||||
Inventories | 12,757 | (4,605 | ) | |||||
Prepaid expenses and other current assets | 1,537 | (1,839 | ) | |||||
Accounts payable | 3,216 | (1,631 | ) | |||||
Accrued expenses | (5,265 | ) | (12,089 | ) | ||||
Income taxes payable | 3,815 | 2,805 | ||||||
Other long-term assets and liabilities | 215 | 172 | ||||||
Other, net | (127 | ) | 607 | |||||
Net cash provided by operating activities | 30,646 | 903 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property, plant and equipment | (5,918 | ) | (5,110 | ) | ||||
Proceeds from disposition of assets, net | — | 3,945 | ||||||
Other, net | (56 | ) | (72 | ) | ||||
Net cash used in investing activities | (5,974 | ) | (1,237 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net short-term borrowings | 2,185 | 36,611 | ||||||
Principal payments on long-term debt | (1,267 | ) | (938 | ) | ||||
Increase (decrease) in bank overdraft | 274 | (922 | ) | |||||
Dividends paid | (25,981 | ) | (34,534 | ) | ||||
Taxes paid related to net share settlement of equity awards | — | (16 | ) | |||||
Net cash (used in) provided by financing activities | (24,789 | ) | 201 | |||||
NET DECREASE IN CASH | (117 | ) | (133 | ) | ||||
Cash, beginning of period | 415 | 672 | ||||||
Cash, end of period | $ | 298 | $ | 539 | ||||
| For the Thirty-Nine Weeks Ended |
| ||||||
| March 30, |
|
| March 24, |
| |||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net income |
| $ | 48,184 |
|
| $ | 44,373 |
|
Depreciation and amortization |
|
| 15,323 |
|
|
| 13,619 |
|
Loss (gain) on disposition of assets, net |
|
| 47 |
|
|
| (1,754 | ) |
Deferred income tax expense |
|
| 862 |
|
|
| 983 |
|
Stock-based compensation expense |
|
| 3,228 |
|
|
| 2,649 |
|
Change in assets and liabilities: |
|
|
|
|
|
| ||
Accounts receivable, net |
|
| (4,923 | ) |
|
| (2,370 | ) |
Inventories |
|
| 14,744 |
|
|
| (63,129 | ) |
Prepaid expenses and other current assets |
|
| 535 |
|
|
| 915 |
|
Accounts payable |
|
| (5,285 | ) |
|
| 1,767 |
|
Accrued expenses |
|
| 1,312 |
|
|
| (10,046 | ) |
Income taxes payable |
|
| (2,575 | ) |
|
| (1,917 | ) |
Other long-term assets and liabilities |
|
| 335 |
|
|
| 532 |
|
Other, net |
|
| 602 |
|
|
| 1,823 |
|
Net cash provided by (used in) operating activities |
|
| 72,389 |
|
|
| (12,555 | ) |
|
|
|
|
|
|
| ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
| ||
Purchases of property, plant and equipment |
|
| (15,586 | ) |
|
| (12,836 | ) |
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 | ) |
Net cash used in investing activities |
|
| (19,142 | ) |
|
| (6,488 | ) |
|
|
|
|
|
|
| ||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
| ||
Net short-term (repayments) borrowings |
|
| (12,614 | ) |
|
| 57,210 |
|
Principal payments on long-term debt |
|
| (2,995 | ) |
|
| (2,849 | ) |
Increase in bank overdraft |
|
| 244 |
|
|
| 221 |
|
Dividends paid |
|
| (37,553 | ) |
|
| (34,534 | ) |
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 DECREASE IN CASH |
|
| (50 | ) |
|
| (5 | ) |
Cash, beginning of period |
|
| 415 |
|
|
| 672 |
|
Cash, end of period |
| $ | 365 |
|
| $ | 667 |
|
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
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 oursnackssnack and trail mixes, nutrition bars, snack bites, sunflower kernels, dried fruit, corn snacks, chickpea snacks, sesame sticks and other sesame snack products under our brand names 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. 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, 2022 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 2022 Annual Report on Form
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 23 – 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.
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, asterms. This allows the customer canto 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.
Some of our products are sold through specific incentive programs consisting ofincluding, but not limited to, promotional allowances, volume and customer rebates, among others, 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,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. Contract asset balances at September 29, 2022 and September 23, 2021 were $562 and $58, respectively, and are recorded in the caption “Prepaid expenses and other current assets” on the Consolidated Balance Sheets. There was no contract asset balance at June 30, 2022.for any 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 |
| |||||||||||
Distribution Channel |
| March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
| ||||
Consumer |
| $ | 185,128 |
|
| $ | 173,648 |
|
| $ | 606,188 |
|
| $ | 556,888 |
|
Commercial Ingredients |
|
| 30,901 |
|
|
| 25,514 |
|
|
| 90,827 |
|
|
| 81,426 |
|
Contract Packaging |
|
| 22,506 |
|
|
| 19,422 |
|
|
| 68,449 |
|
|
| 59,806 |
|
Total |
| $ | 238,535 |
|
| $ | 218,584 |
|
| $ | 765,464 |
|
| $ | 698,120 |
|
For the Quarter Ended | ||||||||
Distribution Channel | September 29, 2022 | September 23, 2021 | ||||||
Consumer | $ | 196,547 | $ | 179,761 | ||||
Commercial Ingredients | 31,507 | 28,156 | ||||||
Contract Packaging | 24,547 | 18,412 | ||||||
Total | $ | 252,601 | $ | 226,329 | ||||
Note 3 -4 – 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
10
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 lease4.85.5 years.
It is our accounting policy to not apply lease recognition requirements to short-termshort 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 Sheet.Sheets. We have also made the policy election to not separate lease and
The following table provides supplemental information related to operating lease
March 30, |
|
| June 30, |
|
| March 24, |
|
| Affected Line Item in Consolidated Balance Sheet | ||||
Assets |
|
|
|
|
|
|
|
|
|
| |||
Operating lease right-of-use assets | $ | 6,582 |
|
| $ | 2,303 |
|
| $ | 2,570 |
|
| Operating lease right-of-use assets |
Total lease right-of-use assets | $ | 6,582 |
|
| $ | 2,303 |
|
| $ | 2,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Liabilities |
|
|
|
|
|
|
|
|
|
| |||
Current: |
|
|
|
|
|
|
|
|
|
| |||
Operating leases | $ | 1,752 |
|
| $ | 1,258 |
|
| $ | 1,355 |
|
| Other accrued expenses |
Noncurrent: |
|
|
|
|
|
|
|
|
|
| |||
Operating leases |
| 4,905 |
|
|
| 1,076 |
|
|
| 1,241 |
|
| Long-term operating lease liabilities |
Total lease liabilities | $ | 6,657 |
|
| $ | 2,334 |
|
| $ | 2,596 |
|
|
|
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 | ||||||||
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 |
| |||||||||||
| March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
| |||||
Operating lease costs (a) |
| $ | 529 |
|
| $ | 470 |
|
| $ | 1,544 |
|
| $ | 1,384 |
|
Variable lease costs (b) |
|
| 74 |
|
|
| 15 |
|
|
| 189 |
|
|
| 51 |
|
Total lease cost |
| $ | 603 |
|
| $ | 485 |
|
| $ | 1,733 |
|
| $ | 1,435 |
|
For the Quarter Ended | ||||||||
September 29, 2022 | September 23, 2021 | |||||||
Operating lease costs (a) | $ | 474 | $ | 444 | ||||
Variable lease costs (b) | 57 | 17 | ||||||
Total lease cost | $ | 531 | $ | 461 | ||||
(b) Variable lease costs consist of sales tax and lease overtime charges. |
Supplemental cash flow and other information related to leases was as follows:
| For the Thirty-Nine Weeks Ended |
| ||||||
| March 30, |
|
| March 24, |
| |||
Operating cash flows information: |
|
|
|
|
|
| ||
Cash paid for amounts included in measurements for lease liabilities |
| $ | 1,249 |
|
| $ | 1,199 |
|
|
|
|
|
|
|
| ||
Non-cash activity: |
|
|
|
|
|
| ||
Right-of-use assets obtained in exchange for new operating lease obligations |
| $ | 5,458 |
|
| $ | 167 |
|
| March 30, |
|
| June 30, |
|
| March 24, |
| ||||
Weighted average remaining lease term (in years) |
|
| 4.6 |
|
|
| 2.3 |
|
|
| 2.4 |
|
Weighted average discount rate |
|
| 6.6 | % |
|
| 4.3 | % |
|
| 4.2 | % |
11
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 |
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 | % |
Maturities of operating lease liabilities as of September 29, 2022March 30, 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 |
|
June 26, 2025 |
|
| 1,541 |
|
June 25, 2026 |
|
| 1,347 |
|
June 24, 2027 |
|
| 1,158 |
|
June 29, 2028 |
|
| 1,000 |
|
Thereafter |
|
| 139 |
|
Total lease payment |
|
| 7,739 |
|
Less imputed interest |
|
| (1,082 | ) |
Present value of operating lease liabilities |
| $ | 6,657 |
|
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 | ||
At September 29, 2022,March 30, 2023, the Company has additional operatinghad an immaterial amount of leases of approximately $505 that havehad not yet commenced and therefore are not reflected in the Consolidated Balance Sheet and tables above. The leases are scheduled to commence in the second and third quarters of fiscal 2023 with initial lease terms ranging from 3 to 5 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:straight-line
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 29, 2022 | September 23, 2021 | |||||||
Lease income related to lease payments | $ | 402 | $ | 410 |
The future minimum, undiscounted fixed cash flows underand thereafter is presented below.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 26, 2025 |
|
| 1,282 |
|
June 25, 2026 |
|
| 697 |
|
June 24, 2027 |
|
| 614 |
|
June 29, 2028 |
|
| — |
|
| $ | 4,927 |
|
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 | ||
Note 45 – Inventories
Inventories consist of the following:
| March 30, |
|
| June 30, |
|
| March 24, |
| ||||
Raw material and supplies |
| $ | 90,110 |
|
| $ | 77,558 |
|
| $ | 104,810 |
|
Work-in-process and finished goods |
|
| 100,241 |
|
|
| 127,297 |
|
|
| 106,317 |
|
Total |
| $ | 190,351 |
|
| $ | 204,855 |
|
| $ | 211,127 |
|
12
September 29, 2022 | June 30, 2022 | September 23, 2021 | ||||||||||
Raw material and supplies | $ | 60,657 | $ | 77,558 | $ | 55,159 | ||||||
Work-in-process | 131,441 | 127,297 | 97,444 | |||||||||
Total | $ | 192,098 | $ | 204,855 | $ | 152,603 | ||||||
Note 56 – Goodwill and Intangible Assets
Identifiable intangible assets that are subject to amortization consist of the following:
| March 30, |
|
| June 30, |
|
| March 24, |
| ||||
Customer relationships |
| $ | 21,350 |
|
| $ | 21,100 |
|
| $ | 21,100 |
|
Brand names |
|
| 17,070 |
|
|
| 16,990 |
|
|
| 16,990 |
|
Non-compete agreement |
|
| 300 |
|
|
| 270 |
|
|
| 270 |
|
|
| 38,720 |
|
|
| 38,360 |
|
|
| 38,360 |
| |
Less accumulated amortization: |
|
|
|
|
|
|
|
|
| |||
Customer relationships |
|
| (19,572 | ) |
|
| (18,795 | ) |
|
| (18,537 | ) |
Brand names |
|
| (11,776 | ) |
|
| (11,252 | ) |
|
| (11,080 | ) |
Non-compete agreement |
|
| (272 | ) |
|
| (248 | ) |
|
| (234 | ) |
|
| (31,620 | ) |
|
| (30,295 | ) |
|
| (29,851 | ) | |
Net intangible assets |
| $ | 7,100 |
|
| $ | 8,065 |
|
| $ | 8,509 |
|
September 29, 2022 | June 30, 2022 | September 23, 2021 | ||||||||||
Customer relationships | $ | 21,100 | $ | 21,100 | $ | 21,100 | ||||||
Brand names | 16,990 | 16,990 | 16,990 | |||||||||
Non-compete agreement | 270 | 270 | 270 | |||||||||
38,360 | 38,360 | 38,360 | ||||||||||
Less accumulated amortization: | ||||||||||||
Customer relationships | (19,053 | ) | (18,795 | ) | (17,961 | ) | ||||||
Brand names | (11,425 | ) | (11,252 | ) | (10,735 | ) | ||||||
Non-compete agreement | (261 | ) | (248 | ) | (207 | ) | ||||||
(30,739 | ) | (30,295 | ) | (28,903 | ) | |||||||
Net intangible assets | $ | 7,621 | $ | 8,065 | $ | 9,457 | ||||||
Customer relationships are being amortized on an accelerated basis. The brand names remaining to be amortized consist of theand
Total amortization expense related to intangible assets, which is classified in administrative expense in the Consolidated Statement of Comprehensive Income, was $444$441 and $1,325 for the quarter and thirty-nine weeks ended September 29, 2022.March 30, 2023, respectively. Amortization expense for the remainder of fiscal 2023 is expected to be approximately $1,213,$442 and expected amortization expense for the next five fiscal years is as follows:
Fiscal Year Ending |
|
|
| |
June 27, 2024 |
| $ | 1,565 |
|
June 26, 2025 |
|
| 1,213 |
|
June 25, 2026 |
|
| 880 |
|
June 24, 2027 |
|
| 706 |
|
June 29, 2028 |
|
| 528 |
|
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, 2023 was comprised of $9,650 relates entirely to$9,650 from the Squirrel Brand acquisition completed in the second quarter of fiscal 2018. There was no change2018 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 during the quarter ended September 29, 2022.since June 25, 2021 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 |
|
Note 67 – Credit Facility
Our Amended and Restated Credit Agreement dated March 5, 2020 provides for a $117,500$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 September 29, 2022,March 30, 2023, we had $70,686$85,485 of available credit under the Credit Facility which reflects borrowings of $42,624$27,825 and reduced availability as a result of $4,190$4,190 in outstanding letters of credit. As of September 29, 2022,March 30, 2023, we were in compliance with all financial covenants under the Credit Facility and Mortgage Facility.
13
Note 7 8 – 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 |
| |||||||||||
| March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
| |||||
Weighted average number of shares |
|
| 11,592,362 |
|
|
| 11,548,554 |
|
|
| 11,570,954 |
|
|
| 11,533,338 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Restricted stock units |
|
| 63,832 |
|
|
| 53,412 |
|
|
| 61,702 |
|
|
| 55,745 |
|
Weighted average number of shares |
|
| 11,656,194 |
|
|
| 11,601,966 |
|
|
| 11,632,656 |
|
|
| 11,589,083 |
|
For the Quarter Ended | ||||||||
September 29, 2022 | September 23, 2021 | |||||||
Weighted average number of shares outstanding – basic | 11,553,432 | 11,519,472 | ||||||
Effect of dilutive securities: | ||||||||
Restricted stock units | 63,681 | 69,012 | ||||||
Weighted average number of shares outstanding – diluted | 11,617,113 | 11,588,484 | ||||||
There were no anti-dilutive awards excluded from the computation of diluted earnings per share for either periodany periods presented.
Note 89 – Stock-Based Compensation Plans
The following is a summary of restricted stock unit (“RSU”("RSU") activity. Compensation expense attributable to stock-based compensation duringactivity for the first quarterthirty-nine weeks 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, 2023, and fiscal 2022 was $772 and $703, respectively. there were 38,490 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:
| 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 |
|
As of September 29, 2022,March 30, 2023, there was $3,359$5,539 of total unrecognized compensation expense related to1.21.6 years.
14
Note 9 10 – Retirement Plan
The Supplemental Employee Retirement Plan (“Retirement Plan”) is an unfunded,benefit 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 |
| |||||||||||
|
| March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
| ||||
Service cost |
| $ | 200 |
|
| $ | 248 |
|
| $ | 601 |
|
| $ | 743 |
|
Interest cost |
|
| 342 |
|
|
| 255 |
|
|
| 1,025 |
|
|
| 764 |
|
Amortization of loss |
|
| 7 |
|
|
| 363 |
|
|
| 21 |
|
|
| 1,091 |
|
Net periodic benefit cost |
| $ | 549 |
|
| $ | 866 |
|
| $ | 1,647 |
|
| $ | 2,598 |
|
For the Quarter Ended | ||||||||
September 29, 2022 | September 23, 2021 | |||||||
Service cost | $ | 200 | $ | 248 | ||||
Interest cost | 342 | 254 | ||||||
Amortization of loss | 7 | 364 | ||||||
Net periodic benefit cost | $ | 549 | $ | 866 | ||||
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 1011 – Accumulated Other Comprehensive Loss
The table below sets forth the changes to accumulated other comprehensive loss (“AOCL”) for the quarterthirty-nine weeks ended September 29, 2022March 30, 2023 and September 23, 2021.March 24, 2022.These changes are all related to our defined benefit pension plan.
| For the Thirty-Nine Weeks Ended |
| ||||||
Changes to AOCL (a) |
| March 30, |
|
| March 24, |
| ||
Balance at beginning of period |
| $ | (2,480 | ) |
| $ | (9,025 | ) |
Other comprehensive income before reclassifications |
|
| — |
|
|
| — |
|
Amounts reclassified from accumulated other comprehensive loss |
|
| 21 |
|
|
| 1,091 |
|
Tax effect |
|
| (5 | ) |
|
| (284 | ) |
Net current-period other comprehensive income |
|
| 16 |
|
|
| 807 |
|
Balance at end of period |
| $ | (2,464 | ) |
| $ | (8,218 | ) |
Changes to AOCL (a) | For the Quarter Ended | |||||||
September 29, 2022 | September 23, 2021 | |||||||
Balance at beginning of period | $ | (2,480 | ) | | $ | (9,025 | ) | |
Other comprehensive income before reclassifications | — | — | ||||||
Amounts reclassified from accumulated other comprehensive loss | 7 | 364 | ||||||
Tax effect | (1 | ) | (95 | ) | ||||
Net current-period other comprehensive income | 6 | 269 | ||||||
Balance at end of period | $ | (2,474 | ) | $ | (8,756 | ) | ||
The reclassifications out of AOCL for the quarter and thirty-nine weeks ended September 29,March 30, 2023 and March 24, 2022 and September 23, 2021 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 | ) |
|
|
15
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 | ) | ||||
Note 1112 – 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 1213 – Fair Value of Financial Instruments
The Financial Accounting Standards Board (“FASB”) 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
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, |
| ||||
Carrying value of current and long-term debt: |
| $ | 7,933 |
|
| $ | 10,927 |
|
| $ | 11,901 |
|
Fair value of current and long-term debt: |
|
| 6,865 |
|
|
| 11,179 |
|
|
| 12,669 |
|
September 29, 2022 | June 30, 2022 | September 23, 2021 | ||||||||||
Carrying value of current and long-term debt: | $ | 9,660 | $ | 10,927 | $ | 13,812 | ||||||
Fair value of current and long-term debt: | 9,583 | 11,179 | 15,360 |
The estimated fair value of our current and 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 1314 – 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,$4,000, subject to customary adjustments to reflect closing costs, which resulted in a $2,349$2,349 gain.
Note 1415 – 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.
On November 3, 2022, May 2, 2023, our Board of Directors declared a special cash dividend of $1.00$1.50 per share on all issued“November 2022“May 2023 Dividends”). The November 2022May 2023 Dividends will be paid on December 21, 2022 June 22, 2023 to stockholders of record as of the close of business on December 2, 2022.
17
Item 2. Management’sManagement'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 Brand andSouthern Style Nuts brand 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 under our brand names 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. This Long-Range Plan also contemplates increasing our sales through product innovation and targeted, opportunistic acquisitions. We plan to execute on our Long-Range Plan by providing our non-branded customers with value-added solutions based on our extensive industry and consumer expertise.expertise with innovative products such as our newly developed product line of private brand nutrition bars which were introduced during the current third quarter. 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 e-commerceJust the Cheese platforms. brand completed during the second quarter of fiscal 2023.
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, nut flours, snack nuts, trail mix and snacking.other snacking categories. We continue to see strong e-commerce performance 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 significantthe impacts of ongoing inflation in food and other input prices, rising interest rates that reduce economic growth, potential for economic downturn in the markets in which we operate and continued supply chain challenges and the continued impacts of COVID-19.challenges. We have also experienced a tightening in the 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 consumerconsumers' purchasing preferences evolve. Due to significant inflation, including 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, and also due to any actual or potential economic downturn, consumers may purchase fewer snack products,products. We have seen this through the decline in the recipe and snack nut categories during the current fiscal year, as consumers 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,retailers, such as mass merchandising retailers, club stores and dollar stores. E-commerce platforms showed growth during the first quarterstores, not all of fiscal 2023 but at a lower rate thanwhich we saw during the first quarter of fiscal 2022.distribute or sell to.
16
Supply Chain and Transportation
In recent quarters, we have faced challenges with shortages and cost increases for shipping pallets, packaging, imported ingredients, transportation and shipping 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 issunflower lecithin used in certain ofmany confectionery ingredients. Global supply is improving but is reliant on continued Ukraine shipments. We have been able to temporarily mitigate our product packaging.risk for these ingredients by working with customers and suppliers to secure additional sourcing or reformulate products. Overall packaging costs appear to be leveling off but remain well above historical levels. In addition, we are seeing some relief in select ingredient categories with reformulations and substitutions, but lead-times remain long compared to historical lead-times.
We have also experienced supply chain issues related to a shortage in capacity in the transportation industry. 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 periodic 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 third quarter of fiscal 2022 and has continued to ease into fiscal 2023 as inflation resulted in risingdue to inflationary costs which decreaseddecreasing demand in the freight market. However, intermodalAlthough we have seen stabilization in truckload capacity and volume at U.S. ports and improvements with driver hiring, there are still remains tight.warehouse and dock staff shortages and fuel and energy concerns due to continued unrest abroad coupled with persistent inflation. 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 transportation cost improvement, and while we have mitigateddespite our mitigation of some of the transportation shortages and maintainedmaintaining 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 that 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 adverselynegatively 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; 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, 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 secureto create a challenge in securing adequate supplies to fulfill customer orders, or we cannot obtain the transportation and labor services we need,needed, such shortages and supply chain issues could have an unfavorable impact on net sales and our operations during the remainder of fiscal year 2023. In addition,2023 and into fiscal 2024. Additionally, as costs increase due to these issues or due to overall inflationary pressures, in general, 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.
19
During fiscal 2023, we may continue to face challenges as a result of the COVID-19 pandemic and the uncertainty of future local, state and federal restrictions aimed to mitigate and control the pandemic. During fiscal 2022, as various COVID-19 vaccines and therapeutic measures became more widely distributed and accepted by the public and indoor dining restrictions were again loosened, we saw a significant improvement in sales volume with our foodservice, restaurant, convenience store and non-essential retail customers.
17
QUARTERLY HIGHLIGHTS
Our net sales of $252.6$238.5 million for the firstthird quarter of fiscal 2023 increased 11.6%9.1% from our net sales of $226.3$218.6 million for the firstthird 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.
Sales volume, measured as pounds sold to customers, increased 1.8%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% compared to the first quarterthirty-nine weeks of fiscal 2022.
Gross profit decreased $1.2increased by $10.4 million, and our gross profit margin, as a percentage of net sales, decreasedincreased to 20.0%20.9% for the firstthird quarter of fiscal 2023 compared to 22.9%18.0% for the firstthird 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.
Total operating expenses for the firstthird quarter of fiscal 2023 increased $3.8by $6.0 million, or 15.4%27.1%, compared to the first quarter of fiscal 2022, primarily due to a non-recurring gain on the sale of a facility that occurred in the firstthird quarter of fiscal 2022. As a percentage of net sales, total operating expenses in the firstthird quarter of fiscal 2023 increased to 11.2%11.7% from 10.8%10.1% for the firstthird 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.
The total value of inventories on hand at the end of the firstthird quarter of fiscal 2023 increased $39.5decreased $20.8 million, or 25.9%9.8%, in comparison to the total value of inventories on hand at the end of the firstthird quarter of fiscal 2022.
We expecthave seen acquisition costs for mostall major tree nuts to be flat or decrease and acquisition costs for peanuts to increase modestly in the 2022 crop year (which falls into our current 2023 fiscal year). We also expect acquisition costs for dried fruit to increase modestly. While we began to procurecompleted procurement of inshell walnuts during the first quarterhalf of fiscal 2023,2022, and the final total payments due to our walnut growers will not bewere determined untilin the second and/or third quarters of fiscal 2023. We will determine thecurrent quarter. 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 payments to walnut growers were completed in the third quarter of fiscal 2023. Remaining amounts to be paid to walnut growers as of March 30, 2023 are final and are not subject to revision. We have estimated the liability toincreased our walnut growers and our walnut inventory costs using currently available information. Any difference between our estimatedgrower liability and the actual payments will be determinedby approximately $1.2 million during the second and/or third quartersquarter of fiscal 2023, as the final payments due to walnut growers are slightly more than the amounts estimated at the end of the second quarter. This increase is insignificant compared to our total inshell walnut procurement costs for the year, and will be recognized inthe portion of the adjustment to cost of sales was immaterial to our financial results at that time.of operations.
20
18
RESULTS OF OPERATIONS
Net Sales
Our net sales increased 11.6%9.1% to $252.6$238.5 million in the firstthird quarter of fiscal 2023 compared to net sales of $226.3$218.6 million for the third quarter of fiscal 2022. The increase in net sales was attributable to a 5.0% increase in sales volume, which is defined as pounds sold to customers, and a 3.9% increase in the weighted average sales price per pound. 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 increase in sales volume was primarily driven by increased sales of peanut butter.
For the first quarterthirty-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 9.6% increase in the weighted average sales price per pound and a 1.8% increase in sales pounds, which is defined as pounds sold to customers. The8.8% increase in the weighted average selling price per pound, was attributable to price increases implementedand a 0.8% increase in sales volume. The increase in the third quarter of fiscal 2022 in response toweighted average selling price resulted from higher commodity acquisition costs for all major tree nutspecans, cashews, peanuts and peanuts.dried fruit.
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 Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
| ||||||||||||||||||
Product Type | September 29, 2022 | September 23, 2021 |
| March 30, |
|
| March 24, |
|
| March 30, |
|
| March 24, |
| ||||||||||
Peanuts | 19.3 | % | 17.7 | % | ||||||||||||||||||||
Peanuts & Peanut Butter |
|
| 20.1 | % |
|
| 18.8 | % |
|
| 18.5 | % |
|
| 17.6 | % | ||||||||
Pecans | 10.3 | 8.6 |
|
| 8.0 |
|
|
| 6.9 |
|
|
| 12.2 |
|
|
| 10.7 |
| ||||||
Cashews & Mixed Nuts | 20.1 | 22.4 |
|
| 22.0 |
|
|
| 23.8 |
|
|
| 20.9 |
|
|
| 22.7 |
| ||||||
Walnuts | 5.7 | 5.7 |
|
| 4.8 |
|
|
| 4.6 |
|
|
| 5.8 |
|
|
| 5.9 |
| ||||||
Almonds | 9.0 | 10.6 |
|
| 9.3 |
|
|
| 10.7 |
|
|
| 8.9 |
|
|
| 10.1 |
| ||||||
Trail & Snack Mixes | 28.9 | 28.2 |
|
| 28.2 |
|
|
| 28.4 |
|
|
| 27.0 |
|
|
| 26.7 |
| ||||||
Other | 6.7 | 6.8 |
|
| 7.6 |
|
|
| 6.8 |
|
|
| 6.7 |
|
|
| 6.3 |
| ||||||
|
| |||||||||||||||||||||||
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 | September 29, 2022 | Percentage of Total | September 23, 2021 | Percentage of Total | $ Change | Percent Change |
| March 30, |
|
| Percentage |
|
| March 24, |
|
| Percentage |
|
| $ |
|
| % |
| ||||||||||||||||||||||||
Consumer (1) | $ | 196,547 | 77.8 | % | $ | 179,761 | 79.4 | % | $ | 16,786 | 9.3 | % |
| $ | 185,128 |
|
|
| 77.6 | % |
| $ | 173,648 |
|
|
| 79.4 | % |
| $ | 11,480 |
|
|
| 6.6 | % | ||||||||||||
Commercial Ingredients | 31,507 | 12.5 | 28,156 | 12.4 | 3,351 | 11.9 |
|
| 30,901 |
|
|
| 13.0 |
|
|
| 25,514 |
|
|
| 11.7 |
|
| $ | 5,387 |
|
|
| 21.1 |
| ||||||||||||||||||
Contract Packaging | 24,547 | 9.7 | 18,412 | 8.2 | 6,135 | 33.3 |
|
| 22,506 |
|
|
| 9.4 |
|
|
| 19,422 |
|
|
| 8.9 |
|
| $ | 3,084 |
|
|
| 15.9 |
| ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total | $ | 252,601 | 100.0 | % | $ | 226,329 | 100.0 | % | $ | 26,272 | 11.6 | % |
| $ | 238,535 |
|
|
| 100.0 | % |
| $ | 218,584 |
|
|
| 100.0 | % |
| $ | 19,951 |
|
|
| 9.1 | % | ||||||||||||
|
|
|
|
|
|
(1) Sales of branded products were approximately 18% of total consumer sales during each of the third quarters of fiscal 2023 and fiscal 2022. Fisher branded products were approximately 52% and 55% of branded sales during the third quarter of fiscal 2023 and fiscal 2022, respectively, with Orchard Valley Harvest brandedproducts accounting for the majority of the remaining branded product sales. 21 Table of ContentsThe following table shows a comparison of net sales by distribution channel (dollars in thousands):
(1) Sales of branded products were approximately 22% of total consumer sales during each of the first thirty-nine weeks of fiscal 2023 and fiscal 2022. Fisher branded products were approximately 66% and 64% of branded sales during the first thirty-nine weeks of fiscal 2023 and fiscal 2022, respectively, with Orchard Valley Harvest brandedproducts accounting for the majority of the remaining branded product sales.
|
Net sales in the consumer distribution channel increased 9.3% in dollars$11.5 million, or 6.6%, and decreased 0.6% in sales volume increased 2.1% in the firstthird quarter of fiscal 2023 compared to the third quarter of fiscal 2022. The sales volume increase was mostly driven by an increase in private brand sales volume due to new private brand peanut butter business at a mass merchandising retailer and increased peanut butter distribution at a grocery store retailer. Also contributing to the increase was a 20.8% increase in sales volumeof Orchard Valley Harvest products due to the timing of sales to 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. Sales volume of Fisher recipe nuts increased 6.4% as a result of increased distribution at a mass merchandising retailer.
In the first quarterthirty-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 athe grocery customer that occurredstore retailer cited in the fourth quarter of fiscal 2022,quarterly comparison, which was largely offset by increased distribution and a new product offering at a mass merchandising retailer. Sales volume for Fisher snack nuts decreased 3.0% primarily due to an item discontinuance with a customer. Sales volume for Fisher recipe nuts increased 20.0% due to increased distribution at a mass merchandising retailer and at twoa grocery store customers. Sales volumeretailer.of Orchard Valley Harvest produce products increased 15.7% from increased distribution at a major customer in the non-food sector as this retailer continues to recover from COVID-19 restrictions and increased distribution at a customer in the club channel.
19
Net sales in the commercial ingredients distribution channel increased 11.9%21.1% in dollars and 2.4%18.9% in sales volume in the firstthird quarter of fiscal 2023 compared to the firstthird quarter of fiscal 2022. The increase in sales volume increase was due to a 15.0%30.5% increase in sales volume to foodservice customers which was relateddue to newincreased 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. These increases wereThis increase was partially offset by a decrease in sales of peanut crushing stock to peanut oil processors and lower sales of bulk products to other food manufacturers.manufacturers as a result of reduced consumption from softened consumer spending.
Net sales in the contract packaging distribution channel increased 33.3%15.9% in dollars and 19.3%7.5% in sales volume in the firstthird quarter of fiscal 2023 compared to the third quarter of fiscal 2022. The increase in sales volume was primarily due to increased peanut and cashew distribution by an existing major customer.
In the first quarterthirty-nine weeks of fiscal 2023, net sales in the contract packaging distribution channel increased 14.5% in dollars and sales volume increased 4.2% compared to the same period of fiscal 2022. The increase in sales volume was primarily attributable to the timing of promotional activity by a major customerreason cited in the quarterly comparison and business with a new customer.
Gross Profit
Gross profit decreased $1.2increased by $10.4 million, or 2.2%26.3%, to $50.6$49.8 million for the firstthird quarter of fiscal 2023 compared to the firstthird quarter of fiscal 2022, primarily due to higher acquisition costs for all major tree nuts and peanuts and other inflationary cost increases, including labor and manufacturing supplies.2022. Our gross profit margin, as a percentage of net sales, decreasedincreased to 20.0%20.9% for the firstthird quarter of fiscal 2023 compared to 22.9%18.0% for the firstthird quarter of fiscal 2022, drivenas gross profit margins returned to more normalized levels. The prior comparable quarter gross profit margin was negatively impacted by higher than anticipated commodity acquisition costs and other inflationary cost increases. The increase in gross profit was mainly due to the reasons noted above which were substantially offset by an increase in the weighted average selling price per pound and increased 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 firstthird quarter of fiscal 2023 increased $3.8by $6.0 million, or 27.1%, to $28.2$28.0 million. Operating expenses for the first quarter of fiscal 2023 increased to 11.2% of net sales from 10.8%11.7% of net sales for the firstthird quarter of fiscal 2022 as the increase in total expense was largely offset by a higher2023 compared to 10.1% of net sales base.for the third quarter of fiscal 2022.
Selling expenses for the firstthird quarter of fiscal 2023 were $18.0$18.1 million, an increase of $0.2$2.5 million, or 1.3%16.2%, from the firstthird quarter of fiscal 2022. The increase was driven primarily by a $0.9$2.3 million increase in base and incentive compensation expense, primarily related to incentive compensation, which was largelya $0.4 million increase in consumer insight research and related consulting expenses, a $0.2 million increase in sales broker commission expense and a $0.2 million increase in sample expense related to a new product line launched in the current third quarter. 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 third quarter of fiscal 2023 were $9.8 million compared to $6.4 million for the third quarter of fiscal 2022. The increase was due to a $2.8 million 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 quarterthirty-nine weeks of fiscal 2023 were $10.2$30.3 million, an increase of $1.2$4.4 million, or 13.0%17.1%, fromcompared to the first quartersame period of fiscal 2022. The increase was driven byprimarily due to a $1.2$4.0 million increase in base and incentive compensation expense, primarily related to incentive compensation.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 quarterthirty-nine weeks of fiscal 2022 was the result of the sale of our Garysburg, North Carolina facility.
Income from Operations
Due to the factors discussed above, income from operations decreased to $22.4was $21.8 million, or 8.9%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% of net sales, for the first quarterthirty-nine weeks of fiscal 2023 from $27.3compared to $63.0 million, or 12.1%9.0% of net sales, for the first quarterthirty-nine weeks of fiscal 2022.
Interest Expense
Interest expense was $0.7$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 million for the first quarterthirty-nine weeks of fiscal 2023 compared to $0.4$1.3 million for the first quarterthirty-nine weeks of fiscal 2022. The increase in interest expense for both the quarterly and year to date comparisons was primarily due to higher weighted average interest rates combined with higher average short-term debt levels.rates.
Rental and Miscellaneous Expense, Net
Net rental and miscellaneous expense was $0.4 million for both the third quarter of fiscal 2023 and fiscal 2022. Net rental and miscellaneous expense was $1.1 million for both the first quarterthirty-nine weeks of fiscal 2023 compared to $0.3 million for the first quarterand fiscal 2022.
23
Pension Expense (Excluding Service Costs)
Pension expense (excluding service costs) was $0.3 million for the firstthird 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 quarterthirty-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) isfor 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.
20
Income Tax Expense
Income tax expense was $5.5$4.8 million, or 26.0%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 firstthird 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 million, or 25.6% of income before income taxes, compared to $6.8$14.4 million, or 26.0%24.5% of income before income taxes, for the firstcomparable 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 second quarter of fiscal 2022.2022 that did not reoccur in the current fiscal year.
Net Income
Net income was $15.5$15.7 million, or $1.35$1.36 per common share basic and $1.34$1.35 per common share diluted, for the firstthird quarter of fiscal 2023, compared to $19.2$11.9 million, or $1.67$1.03 per common share basic and $1.66$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 per common share diluted, for the first quarterthirty-nine weeks of fiscal 2023, compared to net income of $44.4 million, or $3.85 per common share basic and $3.83 per common share diluted, for the first thirty-nine weeks of fiscal 2022.
24
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 nut programs, return cash to our stockholders through dividends, repay indebtedness and repay indebtedness.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, 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 quarterthree quarters of fiscal 2023 and 2022, respectively (dollars in thousands):
September 29, 2022 | September 23, 2021 | $ Change |
| March 30, |
|
| March 24, |
|
| $ |
| |||||||||||||
Operating activities | $ | 30,646 | $ | 903 | $ | 29,743 |
| $ | 72,389 |
|
| $ | (12,555 | ) |
| $ | 84,944 |
| ||||||
Investing activities | (5,974 | ) | (1,237 | ) | (4,737 | ) |
|
| (19,142 | ) |
|
| (6,488 | ) |
|
| (12,654 | ) | ||||||
Financing activities | (24,789 | ) | 201 | (24,990 | ) |
|
| (53,297 | ) |
|
| 19,038 |
|
|
| (72,335 | ) | |||||||
|
|
| ||||||||||||||||||||||
Net decrease in cash | $ | (117 | ) | $ | (133 | ) | $ | 16 |
| $ | (50 | ) |
| $ | (5 | ) |
| $ | (45 | ) | ||||
|
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Operating Activities Net cash provided by operating activities was $30.6$72.4 million for the first quarterthirty-nine weeks of fiscal 2023 compared to $0.9net cash used in operating activities of $12.6 million for the first quartercomparative period of fiscal 2022. The increase in operating cash flow iswas primarily due primarily to a decreased use of working capital mainly for inventory. Inventories decreased $12.8 million in fiscal 2023inventory compared to a $4.6 million increase in inventories inthe first thirty-nine weeks of fiscal 2022 which resulted inas a net sourceresult of cash of $17.4 million.decreasing commodity acquisition costs.
Total inventories were $192.1$190.4 million at September 29, 2022,March 30, 2023, a decrease of $12.8$14.5 million, or 6.2%7.1%, from the inventory balance at June 30, 2022, and an increasea decrease of $39.5$20.8 million, or 25.9%9.8%, from the inventory balance at September 23, 2021.March 24, 2022. The decrease in inventoryinventories at September 29, 2022March 30, 2023 compared to June 30, 2022 was primarily due to lower commodity acquisition costs for all major tree nuts and lower quantities of work-in-process and finished goods on hand, which were partially offset by higher quantities of pecans, walnuts, cashews and walnuts on hand, whichother 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 increased quantities of finished goods. The increase in inventory at September 29, 2022 compared to September 23, 2021 was primarily due to greater quantities of finished goods, work in process and inshell pecans on hand combined with higher commodity acquisition costs for pecans.peanuts and other raw materials and higher quantities of other raw materials and cashews on hand.
Raw nut and dried fruit input stocks, some of which are classified as work in process,work-in-process, increased 0.6by 1.1 million pounds, or 1.9%1.8%, at September 29, 2022March 30, 2023 compared to September 23, 2021.March 24, 2022 due to higher quantities of inshell walnuts and cashews on hand, partially offset by lower quantities of almonds and inshell pecans. The weighted average cost per pound of raw nut and dried fruit input stocks on hand at the end of the firstthird quarter of fiscal 2023 increased 20.6%decreased 24.1% compared to the end of the firstthird quarter of fiscal 2022 primarily due to higherlower commodity acquisition costs for pecans.all major tree nuts.
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Investing Activities Cash used in investing activities was $6.0$19.1 million during the first quarterthirty-nine weeks of fiscal 2023 compared to $1.2$6.5 million for the same period last year. The increase in cash used in investing activities was mainlypartially attributable to the $3.9 million of net proceeds received from the disposition of the Garysburg, North Carolina facility, which occurred in the first quarter of fiscal 2022, and did not recurthe $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 quarter.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 expendituresasset purchases were $5.9$15.6 million during the first quarterthirty-nine weeks of fiscal 2023 and $5.1compared to $12.8 million duringfor the first thirty-nine weeks of fiscal 2022. We expect total capital expenditures for new equipment, facility upgrades, and food safety enhancements for fiscal 2023 to be approximately $18.0$20.0 to $23.0 million. 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.
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Financing Activities Cash used in financing activities was $24.8$53.3 million during the first quarterthirty-nine weeks of fiscal 2023 compared to cash provided of $0.2$19.0 million for the same period last year. Net short-term borrowingsrepayments under our Credit Facility were $2.2$12.6 million during the first quarterthirty-nine weeks of fiscal 2023 compared to net borrowings of $36.6$57.2 million for the first quarterthirty-nine weeks of fiscal 2022. The decrease in short termcredit facility borrowings was primarily due to a decreased use of working capitaldecreasing commodity acquisition costs. Dividends paid in the current quarter. The dividends paid infirst half of fiscal 2023 were approximately $8.6$3.0 million lesshigher than dividends paid in the same period of fiscal 2022.last year.
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 70%69% 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 (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 (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 iswas secured by mortgages on essentially all of our owned real property located in Elgin, Illinois and Gustine, California, (the “Encumbered Properties”).but such mortgages have been released in connection with the maturity and repayment of such facility as described below.
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 rate (“LIBOR”) plus an applicable margin based upon the borrowing base calculation, ranging from 1.25% to 1.75%.
At September 29, 2022,March 30, 2023, the weighted average interest rate for the Credit Facility was 5.4%7.2%. 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
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ownership of the Company, non-compliance with the financial covenant or upon the occurrence of other defaults by us under the Credit Facility (including a default under the Mortgage Facility).Facility. As of September 29, 2022,March 30, 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 September 29, 2022,March 30, 2023, we had $70.7$85.5 million of available credit under the Credit Facility. If this entire amount were borrowed at September 29, 2022,March 30, 2023, we would still be in compliance with all restrictive covenants under the Credit Facility.
Mortgage Facility
The Mortgage Facility matureswas repaid in full in February 2023 and the related mortgages 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 Facilityour owned real property located in the amountElgin, Illinois and Gustine, California have been released.
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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 September 29, 2022, $8.2March 30, 2023, $7.9 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’sManagement's Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K for the fiscal year ended June 30, 2022.
Recent Accounting Pronouncements
Refer to Note 1415 – “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.
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FORWARD LOOKING STATEMENTS
Some of the statements in this report 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 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 COVID-19 or armed hostilities;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; (xii) the ability to implement our Long-Range Plan, including growing our branded and private brand product sales, diversifying our product offerings and expanding into alternative sales channels; (xiii) technology disruptions or failures;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) the ability of the Company to respond to or manage the outbreak of COVID-19 or other infectious diseases and the various implications thereof.
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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.
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 September 29, 2022.March 30, 2023. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 29, 2022,March 30, 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 September 29, 2022March 30, 2023 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II—II—OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of legal proceedings, see Note 1112 – “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. There were no significant changes to the risk factors identified on the Form 10-K for the fiscal year ended June 30, 2022 during the firstthird quarter of fiscal 2023.
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.
Item 6. Exhibits
The exhibits filed herewith are listed in the exhibit index below.
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EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
Exhibit No. | Description | |
3.1 | ||
3.2 | ||
*10.1 | ||
*10.2 | ||
*10.3 | ||
*10.4 | ||
*10.5 | ||
*10.6 | ||
*10.7 |
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|
| |
*10.8 | ||
*10.9 | ||
* | 10.10 | |
*10.11 | ||
10.12 | ||
10.13 | ||
10.14 |
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Exhibit No. | Description | |
10.15 | ||
10.16 | ||
*10.17 | ||
*10.18 | ||
*10.19 | ||
*10.20 | ||
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) |
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* Indicates a management contract or compensatory plan or arrangement.
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SIGNATURE
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 November 3, 2022.May 2, 2023.
JOHN B. SANFILIPPO & SON, INC. | ||
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By | ||
/s/ Frank S. Pellegrino | ||
Frank S. Pellegrino | ||
Chief Financial Officer, Executive Vice President, Finance and Administration |
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