SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 23, 2000
[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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Commission file number 0-19681
JOHN B. SANFILIPPO & SON, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 36-2419677
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
2299 Busse Road
Elk Grove Village, Illinois 60007
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code
(847) 593-2300
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
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As of May 4, 2000, 5,461,139 shares of the Registrant's Common Stock,
$.01 par value per share, excluding 117,900 treasury shares, and 3,687,426
shares of the Registrant's Class A Common Stock, $.01 par value per share,
were outstanding.
JOHN B. SANFILIPPO & SON, INC.
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INDEX TO FORM 10-Q
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PART I. FINANCIAL INFORMATION PAGE NO.
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Item 1 -- Consolidated Financial Statements:
- --------------------------------------------
Consolidated Statements of Operations for the quarters
and thirty-nine weeks ended March 23, 2000 and
March 25, 1999 3
Consolidated Balance Sheets as of March 23, 2000
and June 24, 1999 4
Consolidated Statements of Cash Flows for the thirty-nine
weeks ended March 23, 2000 and March 25, 1999 5
Notes to Consolidated Financial Statements 6
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
- -------------------------------------------------
Item 3 -- Quantitative and Qualitative Disclosures
About Market Risk 12
- ---------------------------------------------------
PART II. OTHER INFORMATION
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Item 2 -- Changes in Securities 13
Item 6 -- Exhibits and Reports on Form 8-K 13
SIGNATURE 14
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EXHIBIT INDEX 15
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OMITTED FINANCIAL STATEMENTS
- ----------------------------
None
PART I. FINANCIAL INFORMATION
Item 1 -- Financial Statements
- ------------------------------
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
For the Quarter Ended For the Thirty-nine Weeks Ended
--------------------- -------------------------------
March 23, March 25, March 23, March 25,
2000 1999 2000 1999
--------- --------- --------- ---------
Net sales $51,777 $57,762 $255,331 $244,923
Cost of sales 41,625 48,485 209,105 206,031
--------- --------- --------- ---------
Gross profit 10,152 9,277 46,226 38,892
--------- --------- --------- ---------
Selling expenses 6,230 6,313 25,882 22,616
Administrative expenses 1,857 1,992 6,247 7,250
--------- --------- --------- ---------
8,087 8,305 32,129 29,866
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Income from operations 2,065 972 14,097 9,026
--------- --------- --------- ---------
Other income (expense):
Interest expense (1,991) (2,421) (5,700) (7,033)
Interest income 4 10 29 23
Gain on disposition
of properties -- -- 58 10
Rental income 108 75 395 321
--------- --------- --------- ---------
(1,879) (2,336) (5,218) (6,679)
--------- --------- --------- ---------
Income (loss) before income taxes 186 (1,364) 8,879 2,347
Income tax (expense) benefit (75) 519 (3,552) (1,017)
--------- --------- --------- ---------
Net income (loss) $ 111 $ (845) $ 5,327 $ 1,330
========= ========= ========= =========
Basic and diluted earnings
(loss) per common share $ 0.01 $( 0.09) $ 0.58 $ 0.15
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
March 23, June 24,
2000 1999
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ASSETS
- ------
CURRENT ASSETS:
Cash $ 757 $ 1,393
Accounts receivable, net 14,192 24,105
Inventories 116,874 89,033
Deferred income taxes 519 519
Income taxes receivable -- 94
Prepaid expenses and other current assets 3,561 3,355
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TOTAL CURRENT ASSETS 135,903 118,499
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PROPERTIES:
Buildings 55,462 55,452
Machinery and equipment 76,291 73,794
Furniture and leasehold improvements 5,172 5,049
Vehicles 4,163 4,137
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141,088 138,432
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Less: Accumulated depreciation 72,637 67,550
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68,451 70,882
Land 1,892 1,892
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70,343 72,774
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OTHER ASSETS:
Goodwill and other intangibles 6,332 6,941
Miscellaneous 5,885 7,010
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12,217 13,951
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$218,463 $205,224
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Notes payable $ 45,434 $ 36,411
Current maturities of long-term debt 5,645 5,672
Accounts payable 12,071 9,839
Drafts payable 6,243 5,540
Accrued expenses 7,422 7,522
Income taxes payable 771 --
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TOTAL CURRENT LIABILITIES 77,586 64,984
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LONG-TERM DEBT 52,818 57,508
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LONG-TERM DEFERRED INCOME TAXES 2,738 2,738
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STOCKHOLDERS' EQUITY
Class A Common Stock, cumulative voting
rights of ten votes per share, $.01 par
value; 10,000,000 shares authorized,
3,687,426 issued and outstanding 37 37
Common Stock, non-cumulative voting rights
of one vote per share, $.01 par value;
10,000,000 shares authorized, 5,461,139
issued and outstanding 56 56
Capital in excess of par value 57,196 57,196
Retained earnings 29,236 23,909
Treasury stock (1,204) (1,204)
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85,321 79,994
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$218,463 $205,224
========== =========
The accompanying notes are an integral part of these financial statements.
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Thirty-nine Weeks Ended
March 23, March 25,
2000 1999
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Cash flows from operating activities:
Net income $ 5,327 $ 1,330
Adjustments:
Depreciation and amortization 5,977 5,869
Gain on disposition of properties (58) (10)
Change in current assets and current
liabilities:
Accounts receivable, net 9,913 5,445
Inventories (27,841) (14,344)
Prepaid expenses and other current assets (206) (327)
Accounts payable 2,232 (3,736)
Drafts payable 703 545
Accrued expenses (100) (448)
Income taxes payable/receivable 865 1,176
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Net cash used in operating activities (3,188) (4,500)
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Cash flows from investing activities:
Acquisition of properties (2,744) (2,815)
Proceeds from disposition of properties 61 25
Other 929 110
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Net cash used in investing activities (1,754) (2,680)
--------- ---------
Cash flows from financing activities:
Net borrowings on notes payable 9,023 10,323
Principal payments on long-term debt (4,717) (3,258)
--------- ---------
Net cash provided by financing activities 4,306 7,065
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Net decrease in cash (636) (115)
Cash:
Beginning of period 1,393 549
--------- ---------
End of period $ 757 $ 434
========= =========
Supplemental disclosures:
Interest paid $ 5,889 $ 7,550
Taxes paid 2,816 64
The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)
Note 1 - Basis of Presentation
- ------------------------------
The consolidated financial statements include the accounts of John B.
Sanfilippo & Son, Inc. and its wholly owned subsidiaries
(collectively, the "Company"). On June 25, 1999, John B. Sanfilippo
& Son, Inc. dissolved two of its three wholly owned subsidiaries,
Sunshine Nut Co., Inc. ("Sunshine") and Quantz Acquisition Co., Inc.
and merged such subsidiaries into and with the Company.
The Company's fiscal year ends on the last Thursday of June each year,
and typically consists of fifty-two weeks (four thirteen week
quarters). The fiscal year ending June 29, 2000 will consist of
fifty-three weeks, with the fourth quarter consisting of fourteen,
rather than thirteen weeks.
Note 2 - Inventories
- --------------------
Inventories are stated at the lower of cost (first in, first out) or
market. Inventories consist of the following:
March 23, June 24,
2000 1999
--------- --------
Raw material and supplies $ 72,923 $ 33,998
Work-in-process and finished goods 43,951 55,035
--------- --------
$116,874 $ 89,033
========= ========
Note 3 - Earnings Per Common Share
- ----------------------------------
Earnings per common share is calculated using the weighted average
number of shares of Common Stock and Class A Common Stock outstanding
during the period. The following tables present the required
disclosures:
For the Quarter Ended March 23, 2000 For the Quarter Ended March 25, 1999
------------------------------------ -------------------------------------
Income Shares Per-Share Income (loss) Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ------------- ------------- ---------
Net Income (loss) $111 $(845)
Basic Earnings (loss) Per Share
Income (loss) available to
common Stockholders 111 9,148,565 $0.01 (845) 9,148,565 $(0.09)
Effect of Dilutive Securities
Stock options 2,066 --
Diluted Earnings (loss) Per Share
Income (loss) available to
common Stockholders $111 9,150,631 $0.01 $(845) 9,148,565 $(0.09)
=========== ============= ========= ============= ============= =========
For the Thirty-nine Weeks Ended For the Thirty-nine Weeks Ended
March 23, 2000 March 25, 1999
----------------------------------- -----------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
Net Income $5,327 $1,330
Basic Earnings Per Share
Income available to common
Stockholders 5,327 9,148,565 $0.58 1,330 9,148,565 $0.15
Effect of Dilutive Securities
Stock options 148 644
Diluted Earnings Per Share
Income available to common
Stockholders $5,327 9,148,713 $0.58 $1,330 9,149,209 $0.15
=========== ============= ========= =========== ============= =========
The following table summarizes the weighted-average number of options
which were outstanding for the periods presented but were not included
in the computation of diluted earnings per share because the exercise
prices of the options were greater than the average market price of the
common shares for the period:
Weighted-Average
Number of Options Exercise Price
----------------- ----------------
Quarter Ended March 23, 2000 397,631 $ 8.79
Quarter Ended March 25, 1999 386,550 $ 9.78
Thirty-nine Weeks Ended March 23, 2000 379,589 $ 8.98
Thirty-nine Weeks Ended March 25, 1999 361,232 $10.26
Note 4 - Management's Statement
- -------------------------------
The unaudited financial statements included herein have been prepared by
the Company. In the opinion of the Company's management, these
statements present fairly the consolidated statements of operations,
consolidated balance sheets and consolidated statements of cash flows,
and reflect all normal recurring adjustments which, in the opinion of
management, are necessary for the fair presentation of the results of
the interim periods. The interim results of operations are not
necessarily indicative of the results to be expected for a full year.
The data presented on the balance sheet for the fiscal year ended June
24, 1999 were derived from audited financial statements. It is
suggested that these financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's
1999 Annual Report to Stockholders for the year ended June 24, 1999.
Item 2
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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General
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The Company's business is seasonal. Demand for peanut and other nut
products is highest during the months of October through December.
Peanuts, pecans, walnuts, almonds and cashews, the Company's principal
raw materials, are purchased primarily during the period from August to
February and are processed throughout the year. As a result of this
seasonality, the Company's personnel and working capital requirements
peak during the last four months of the calendar year. Also, due
primarily to the seasonal nature of the Company's business, the Company
maintains significant inventories of peanuts, pecans, walnuts, almonds
and other nuts at certain times of the year, especially during the
second and third quarters of the Company's fiscal year. Fluctuations in
the market prices of such nuts may affect the value of the Company's
inventory and thus the Company's profitability. At March 23, 2000, the
Company's inventories totaled approximately $116.9 million compared to
approximately $89.0 million at June 24, 1999, and approximately $113.9
million at March 25, 1999. The increase in inventories at March 23,
2000 when compared to March 25, 1999 is primarily due to a significant
increase in the levels of pecans on hand which resulted from a larger
crop size and higher purchases in fiscal 2000 compared to fiscal 1999.
This increase in inventories is partially offset by (i) lower levels of
peanuts on hand due to a smaller peanut crop size in fiscal 2000
compared to fiscal 1999; and (ii) lower per unit purchase costs for
walnuts and almonds in fiscal 2000 compared to fiscal 1999. See "Factors
That May Affect Future Results -- Availability of Raw Materials and
Market Price Fluctuations."
The Company's fiscal year ends on the last Thursday of June each year,
and references herein to "fiscal" years are to the fiscal years ended
in the indicated calendar year (for example, "fiscal 2000" refers to
the Company's fiscal year ending June 29, 2000). The Company's fiscal
year typically consists of fifty-two weeks (four thirteen week
quarters). Fiscal 2000 will consist of fifty-three weeks, with the
fourth quarter of fiscal 2000 consisting of fourteen, rather than
thirteen, weeks.
RESULTS OF OPERATIONS
- ---------------------
Net Sales. Net sales decreased from approximately $57.8 million for the
third quarter of fiscal 1999 to approximately $51.8 million for the
third quarter of fiscal 2000, a decrease of approximately $6.0 million,
or 10.4%. The decrease was attributable primarily to (i) lower unit
volume sales to the Company's retail and industrial customers; and (ii)
decreases in unit selling prices due to lower commodity costs. The unit
volume decrease is attributable to heavy sales in the second quarter of
fiscal 2000 that had not moved through the distribution channels. Net
sales increased from approximately $244.9 million for the first thirty-
nine weeks of fiscal 1999 to approximately $255.3 million for the first
thirty-nine weeks of fiscal 2000, an increase of approximately $10.4
million, or 4.2%. The increase was due primarily to higher unit volume
sales to the Company's retail, food service and export customers. The
increase in retail sales was due primarily to higher unit volume sales
of the Company's Fisher brand.
Gross Profit. Gross profit for the third quarter of fiscal 2000
increased approximately 9.4% to approximately $10.2 million from
approximately $9.3 million for the third quarter of fiscal 1999. Gross
profit margin increased from approximately 16.1% for the third quarter
of fiscal 1999 to approximately 19.6% for the third quarter of fiscal
2000. The increase in gross profit margin was due primarily to: (i)
lower commodity costs in the third quarter of fiscal 2000 compared to
fiscal 1999; and (ii) improved controls over manufacturing costs in the
third quarter of fiscal 2000 compared to fiscal 1999. Gross profit for
first thirty-nine weeks of fiscal 2000 increased approximately 18.9% to
approximately $46.2 million from approximately $38.9 million for the
first thirty-nine weeks of fiscal 1999. Gross profit margin increased
from approximately 15.9% for the first thirty-nine weeks of fiscal 1999
to approximately 18.1% for the first thirty-nine weeks of fiscal 2000.
The increase in gross profit margin was due primarily to an increase in
unit volume sales of the Company's Fisherr brand, as a percentage of the
Company's total net sales. Also, favorably impacting the gross profit
margin was a decrease in industrial sales as a percentage of total net
sales for both the quarterly and year-to-date periods. Industrial sales
generally carry lower margins than sales to the Company's retail and
food service customers.
Selling and Administrative Expenses. Selling and administrative
expenses as a percentage of net sales increased from approximately 14.4%
for the third quarter of fiscal 1999 to approximately 15.6% for the
third quarter of fiscal 2000. Selling and administrative expenses as a
percentage of net sales increased slightly from approximately 12.2% for
the first thirty-nine weeks of fiscal 1999 to approximately 12.6% for
the first thirty-nine weeks of fiscal 2000. Selling expenses as a
percentage of net sales increased from approximately 10.9% for the third
quarter of fiscal 1999 to approximately 12.0% for the third quarter of
fiscal 2000. This increase is primarily due to a lower revenue base in
the third quarter of fiscal 2000. Selling expenses as a percentage of
net sales increased from approximately 9.2% for the first thirty-nine
weeks of fiscal 1999 to approximately 10.1% for the first thirty-nine
weeks of fiscal 2000. This increase was due primarily to an expansion of
promotional activity to support the Company's growth in its retail
business. Administrative expenses as a percentage of net sales increased
from approximately 3.4% for the third quarter of fiscal 1999 to
approximately 3.6% for the third quarter of fiscal 2000. This increase
is primarily due to a lower revenue base in the third quarter of fiscal
2000. Administrative expenses as a percentage of net sales decreased
from approximately 3.0% for the first thirty-nine weeks of fiscal 1999
to approximately 2.4% for the first thirty-nine weeks of fiscal 2000.
The decrease was due primarily to: (i) the consolidation of the
administrative functions of Sunshine with the Company's administrative
functions during the fourth quarter of fiscal 1999; (ii) the spreading
of administrative expenses over a higher revenue base; and (iii) an
increase in litigation expense recognized in the second quarter of
fiscal 1999 pertaining to a lawsuit which was subsequently settled.
Income from Operations. Due to the factors discussed above, income from
operations increased from approximately $1.0 million, or 1.7% of net
sales, for the third quarter of fiscal 1999, to approximately $2.1
million, or 4.0% of net sales, for the third quarter of fiscal 2000.
For the first thirty-nine weeks of fiscal 2000, income from operations
increased to approximately $14.1 million, or 5.5% of net sales, from
approximately $9.0 million, or 3.7% of net sales, for the first thirty-
nine weeks of fiscal 1999.
Interest Expense. Interest expense decreased from approximately $2.4
million for the third quarter of fiscal 1999 to approximately $2.0
million for the third quarter of fiscal 2000. For the first thirty-nine
weeks of fiscal 2000, interest expense was approximately $5.7 million,
compared to approximately $7.0 million for the first thirty-nine weeks
of fiscal 1999. The decreases in interest expense, for both the
quarterly and year-to-date periods, were due primarily to a lower
average level of borrowings resulting from lower average levels of
inventories.
Income Taxes. The Company recorded income tax expense of approximately
$0.1 million, or 40.0% of income before income taxes, for the third
quarter of fiscal 2000, and approximately $3.6 million, or 40.0% of
income before income taxes for the first thirty-nine weeks of fiscal
2000.
Liquidity and Capital Resources
- -------------------------------
During the third quarter of fiscal 2000, the Company continued to
finance its activities through a bank credit facility (the "Bank Credit
Facility"), $35.0 million borrowed under a long-term financing facility
originally entered into by the Company in 1992 (the "Long-Term Financing
Facility") and $25.0 million borrowed on September 12, 1995 under a
long-term financing arrangement (the "Additional Long-Term Financing").
Net cash used in operating activities was approximately $3.2 million for
the first thirty-nine weeks of fiscal 2000 compared to approximately
$4.5 million for the first thirty-nine weeks of fiscal 1999. The
decrease in cash used in operating activities was due primarily to
improved operating results for the first thirty-nine weeks of fiscal
2000 compared to fiscal 1999, offset partially by increased pecan
purchases in the third quarter of fiscal 2000 compared to fiscal 1999.
During the first thirty-nine weeks of fiscal 2000, the Company invested
approximately $2.7 million in capital expenditures, compared to
approximately $2.8 million for the first thirty-nine weeks of fiscal
1999, and repaid approximately $4.7 million of long-term debt, compared
to approximately $3.3 million for the first thirty-nine weeks of fiscal
1999.
The Bank Credit Facility is comprised of (i) a working capital revolving
loan which provides for working capital financing of up to approximately
$62.3 million, in the aggregate, and matures on March 31, 2001, and (ii)
a letter of credit of approximately $7.7 million to secure the
industrial development bonds which matures on June 1, 2002. Borrowings
under the working capital revolving loan accrue interest at a rate (the
weighted average of which was 6.79% at March 23, 2000) determined
pursuant to a formula based on the agent bank's quoted rate and the
Eurodollar Interbank rate.
Of the total $35.0 million of borrowings under the Long-Term Financing
Facility, $25.0 million matures on August 15, 2004, bears interest rates
ranging from 7.34% to 9.18% per annum payable quarterly, and requires
equal semi-annual principal installments based on a ten-year
amortization schedule. The remaining $10.0 million of this indebtedness
matures on May 15, 2006, bears interest at the rate of 9.16% per annum
payable quarterly, and requires equal semi-annual principal installments
based on a ten-year amortization schedule. As of March 23, 2000, the
total principal amount outstanding under the Long-Term Financing
Facility was approximately $17.7 million.
The Additional Long-Term Financing has a maturity date of September 1,
2005 and (i) as to $10.0 million of the principal amount thereof, bears
interest at an annual rate of 8.3% payable semiannually and requires
annual principal payments of approximately $1.4 million each through
maturity, and (ii) as to the other $15.0 million of the principal amount
thereof, bears interest at an annual rate of 9.38% payable semiannually
and requires principal payments of $5.0 million each on September 1,
2003 and September 1, 2004, with a final payment of $5.0 million at
maturity on September 1, 2005. As of March 23, 2000, the total principal
amount outstanding under the Additional Long-Term Financing was
approximately $23.6 million.
The terms of the Company's financing facilities, as amended, include
certain restrictive covenants that, among other things: (i) require the
Company to maintain specified financial ratios; (ii) limit the Company's
capital expenditures to $7.5 million annually; and (iii) require that
Jasper B. Sanfilippo (the Company's Chairman of the Board and Chief
Executive Officer) and Mathias A. Valentine (a director and the
Company's President) together with their respective immediate family
members and certain trusts created for the benefit of their respective
sons and daughters, continue to own shares representing the right to
elect a majority of the directors of the Company. In addition, (i) the
Long-Term Financing Facility limits the Company's payment of dividends
to a cumulative amount not to exceed 25% of the Company's cumulative net
income from and after January 1, 1996, (ii) the Additional Long-Term
Financing limits cumulative dividends to the sum of (a) 50% of the
Company's cumulative net income (or minus 100% of the Company's
cumulative net loss) from and after January 1, 1995 to the date the
dividend is declared, (b) the cumulative amount of the net proceeds
received by the Company during the same period from any sale of its
capital stock, and (c) $5.0 million, and (iii) the Bank Credit Facility
limits dividends to the lesser of (a) 25% of net income for the previous
fiscal year, or (b) $5.0 million and prohibits the Company from
redeeming shares of capital stock.
As of March 23, 2000, the Company had approximately $15.3 million of
available credit under the Bank Credit Facility. Approximately $2.7
million was incurred on capital expenditures for the first thirty-nine
weeks of fiscal 2000. The Company believes that cash flow from
operating activities and funds available under the Bank Credit Facility
(assuming the Company maintains compliance with the restrictive
covenants under the Bank Credit Facility currently in effect, or, in the
event of any subsequent non-compliance, is able to obtain any necessary
waivers) will be sufficient to meet working capital requirements and
anticipated capital expenditures for the foreseeable future.
Year 2000
- ---------
As of the date of this report, the Company`s information systems were
not adversely affected by the change to the calendar year 2000. There
were no internal system disruptions and the Company is not aware of any
failures affecting third parties with which the Company conducts
business. The Company will continue to monitor the situation for any
internal or third party disruptions, but expects none at this time.
Costs incurred by the Company related to Year 2000 issues were not
material.
Factors That May Affect Future Results
- --------------------------------------
(a) Availability of Raw Materials and Market Price Fluctuations
- ----------------------------------------------------------------
The availability and cost of raw materials for the production of the
Company's products, including peanuts, pecans, other nuts, dried fruit
and chocolate, are subject to crop size and yield fluctuations caused by
factors beyond the Company's control, such as weather conditions and
plant diseases. Additionally, the supply of edible nuts and other raw
materials used in the Company's products could be reduced upon any
determination by the United States Department of Agriculture ("USDA")
or other government agency that certain pesticides, herbicides or other
chemicals used by growers have left harmful residues on portions of the
crop or that the crop has been contaminated by aflatoxin or other
agents. Shortages in the supply of and increases in the prices of nuts
and other raw materials used by the Company in its products could have
an adverse impact on the Company's profitability. Furthermore,
fluctuations in the market prices of nuts, dried fruit or chocolate may
affect the value of the Company's inventory and the Company's
profitability. The Company has a significant inventory of nuts, dried
fruit and chocolate that would be adversely affected by any decrease in
the market price of such raw materials. See "General".
(b) Competitive Environment
- ---------------------------
The Company operates in a highly competitive environment. The Company's
principal products compete against food and snack products manufactured
and sold by numerous regional and national companies, some of which are
substantially larger and have greater resources than the Company, such
as Planters Specialty Company (an operating unit of Nabisco, Inc.) and
Ralcorp Holdings, Inc. The Company also competes with other shellers in
the industrial market and with regional processors in the retail and
wholesale markets. In order to maintain or increase its market share,
the Company must continue to price its products competitively, which may
lower revenue per unit and cause declines in gross margin, if the
Company is unable to increase unit volumes as well as reduce its costs.
(c) Fixed Price Commitments
- ---------------------------
From time to time, the Company enters into fixed price commitments with
its customers. Such commitments typically represent approximately 10%
of the Company's annual net sales and are normally entered into after
the Company's cost to acquire the nut products necessary to satisfy the
fixed price commitment is substantially fixed. However, the Company
will continue to enter into fixed price commitments with respect to
certain of its nut products prior to fixing its acquisition cost when,
in management's judgment, market or crop harvest conditions so warrant.
To the extent the Company does so, these fixed price commitments may
result in losses. Historically, such losses have generally been offset
by gains on other fixed price commitments. However, there can be no
assurance that losses from fixed price commitments may not have a
material adverse effect on the Company's results of operations.
(d) Federal Regulation of Peanut Prices, Quotas and Poundage Allotments
- -----------------------------------------------------------------------
Peanuts are an important part of the Company's product line.
Approximately 50% of the total poundage of products processed annually
by the Company are peanuts, peanut butter and other products containing
peanuts. The production and marketing of peanuts are regulated by the
USDA under the Agricultural Adjustment Act of 1938 (the "Agricultural
Adjustment Act"). The Agricultural Adjustment Act, and regulations
promulgated thereunder, support the peanut crop by: (i) limiting peanut
imports; (ii) limiting the amount of peanuts that American farmers are
allowed to take to the domestic market each year; and (iii) setting a
minimum price that a sheller must pay for peanuts which may be sold for
domestic consumption. The amount of peanuts that American farmers can
sell each year is determined by the Secretary of Agriculture and is
based upon the prior year's peanut consumption in the United States.
Only peanuts that qualify under the quota may be sold for domestic food
products and seed. The peanut quota for the 1999 crop year is
approximately 1.2 million tons. Peanuts in excess of the quota are
called "additional peanuts" and generally may only be exported or used
domestically for crushing into oil or meal. Current regulations permit
additional peanuts to be domestically processed and exported as finished
goods to any foreign country. The quota support price for the 1999 crop
year is approximately $610 per ton.
The 1996 Farm Bill extended the federal support and subsidy program for
peanuts for seven years. However, there are no assurances that Congress
will not change or eliminate the program prior to its scheduled
expiration. Changes in the federal peanut program could significantly
affect the supply of, and price for, peanuts. While the Company has
successfully operated in a market shaped by the federal peanut program
for many years, the Company believes that it could adapt to a market
without federal regulation if that were to become necessary. However,
the Company has no experience in operating in such a peanut market, and
no assurances can be given that the elimination or modification of the
federal peanut program would not adversely affect the Company's
business. Future changes in import quota limitations or the quota
support price for peanuts at a time when the Company is maintaining a
significant inventory of peanuts or has significant outstanding purchase
commitments could adversely affect the Company's business by lowering
the market value of the peanuts in its inventory or the peanuts which it
is committed to buy. While the Company believes that its ability to use
its raw peanut inventories in its own processing operations gives it
greater protection against these changes than is possessed by certain
competitors whose operations are limited to either shelling or
processing, no assurances can be given that future changes in, or the
elimination of, the federal peanut program or import quotas will not
adversely affect the Company's business.
(e) Financial Covenants
- ------------------------
From time to time, the Company has not complied with certain financial
covenants under its three primary financing facilities. A default under
one of the Company's three primary financing arrangements constitutes a
cross-default under the other primary financing arrangements.
Therefore, in the event of any non-compliance, the Company would be
required to obtain a waiver from each of its three primary lenders for a
single default.
While the Company has always obtained waivers from its primary lenders
for past non-compliance with its financial covenants, and believes it
would be able to obtain similar waivers in the future, there can be no
assurance that, in the event of any non-compliance, the Company's
lenders would always provide such waivers. If the Company were unable
to secure any necessary waivers from its primary lenders, the primary
lenders would have the right to accelerate the balances due under the
financing facilities. If such balances were accelerated, the Company
may be required to borrow money at higher costs. See "Liquidity and
Capital Resources".
Item 3
- ------
Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------
The Company has not entered into transactions using derivative financial
instruments. The Company believes that its exposure to market risk
related to its other financial instruments (which are the debt
instruments under "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources")
is not material.
PART II. OTHER INFORMATION
- ---------------------------
Item 2 -- Changes in Securities
- -------------------------------
As described above under "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" under Part I of this report, there are restrictive covenants
under the Company's financing facilities which limit the payment of
dividends.
Item 6 -- Exhibits and Reports on Form 8-K
- ------------------------------------------
(a) The exhibits filed herewith are listed in the exhibit index which
follows the signature page and immediately precedes the exhibits
filed.
(b) Reports on Form 8-K: There were no Current Reports on Form 8-K
filed during the quarter ended March 23, 2000.
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.
JOHN B. SANFILIPPO & SON, INC.
Date: May 4, 2000 By: /s/ Gary P. Jensen
-------------------
Gary P. Jensen
Executive Vice President
Finance and Chief Financial
Officer
EXHIBIT INDEX
-------------
Exhibit
Number Description
- ------- --------------------------------------------------------------
2 None
3.1 Restated Certificate of Incorporation of Registrant(2)
3.2 Certificate of Correction to Restated Certificate(2)
3.3 Bylaws of Registrant(1)
4.1 Specimen Common Stock Certificate(3)
4.2 Specimen Class A Common Stock Certificate(3)
4.3 Second Amended and Restated Note Agreement by and between the
Registrant and The Prudential Insurance Company of America
("Prudential") dated January 24, 1997 (the "Long-Term Financing
Facility")(18)
4.4 7.87% Series A Senior Note dated September 29, 1992 in the original
principal amount of $4.0 million due August 15, 2004 executed by the
Registrant in favor of Prudential(5)
4.5 8.22% Series B Senior Note dated September 29, 1992 in the original
principal amount of $6.0 million due August 15, 2004 executed by the
Registrant in favor of Prudential(5)
4.6 8.22% Series C Senior Note dated September 29, 1992 in the original
principal amount of $4.0 million due August 15, 2004 executed by the
Registrant in favor of Prudential(5)
4.7 8.33% Series D Senior Note dated January 15, 1993 in the original
principal amount of $3.0 million due August 15, 2004 executed by the
Registrant in favor of Prudential(6)
4.8 6.49% Series E Senior Note dated September 15, 1993 in the original
principal amount of $8.0 million due August 15, 2004 executed by the
Registrant in favor of Prudential(9)
4.9 8.31% Series F Senior Note dated June 23, 1994 in the original
principal amount of $8.0 million due May 15, 2006 executed by the
Registrant in favor of Prudential(10)
4.10 8.31% Series F Senior Note dated June 23, 1994 in the original
principal amount of $2.0 million due May 15, 2006 executed by the
Registrant in favor of Prudential(10)
4.11 Amended and Restated Guaranty Agreement dated as of October 19, 1993
by Sunshine in favor of Prudential(8)
4.12 Amendment to the Second Amended and Restated Note Agreement dated
May 21, 1997 by and among Prudential, Sunshine and the Registrant(19)
4.13 Amendment to the Second Amended and Restated Note Agreement dated
March 31, 1998 by and among Prudential, the Registrant, Sunshine, and
Quantz Acquisition Co., Inc. ("Quantz")(20)
4.14 Guaranty Agreement dated as of March 31, 1998 by JBS International,
Inc. ("JBSI") in favor of Prudential(20)
4.15 Amendment and Waiver to the Second Amended and Restated Note Agreement
dated February 5, 1999 by and among Prudential, the Registrant,
Sunshine, JBSI and Quantz(23)
4.16 Note Purchase Agreement dated as of August 30, 1995 between the
Registrant and Teachers Insurance and Annuity Association of America
("Teachers")(15)
4.17 8.30% Senior Note due 2005 in the original principal amount of $10.0
million, dated September 12, 1995 and executed by the Registrant in
favor of Teachers(15)
4.18 9.38% Senior Subordinated Note due 2005 in the original principal
amount of $15.0 million, dated September 12, 1995 and executed by the
Registrant in favor of Teachers(15)
4.19 Guaranty Agreement dated as of August 30, 1995 by Sunshine in favor of
Teachers (Senior Notes)(15)
4.20 Guaranty Agreement dated as of August 30, 1995 by Sunshine in favor of
Teachers (Senior Subordinated Notes)(15)
4.21 Amendment, Consent and Waiver, dated as of March 27, 1996, by and
among Teachers, Sunshine and the Registrant(17)
4.22 Amendment No. 2 to Note Purchase Agreement dated as of January 24,
1997 by and among Teachers, Sunshine and the Registrant(18)
4.23 Amendment to Note Purchase Agreement dated May 19, 1997 by and among
Teachers, Sunshine and the Registrant(20)
4.24 Amendment No. 3 to Note Purchase Agreement dated as of March 31, 1998
by and among Teachers, Sunshine, Quantz and the Registrant(20)
4.25 Guaranty Agreement dated as of March 31, 1998 by JBSI in favor of
Teachers (Senior Notes)(20)
4.26 Guaranty Agreement dated as of March 31, 1998 by JBSI in favor of
Teachers (Senior Subordinated Notes)(20)
4.27 Amendment and Waiver to Note Purchase Agreement dated February 5, 1999
by and among Teachers, Sunshine, Quantz, JBSI and the Registrant(23)
4.28 Amendment and Waiver to Note Purchase Agreement dated October 26, 1999
between Teachers and the Registrant(24)
10.1 Certain documents relating to $8.0 million Decatur County-Bainbridge
Industrial Development Authority Industrial Development Revenue Bonds
(John B. Sanfilippo & Son, Inc. Project) Series 1987 dated as of
June 1, 1987(1)
10.2 Industrial Building Lease dated as of October 1, 1991 between JesCorp.,
Inc. and LNB, as Trustee under Trust Agreement dated March 17, 1989
and known as Trust No. 114243(14)
10.3 Industrial Building Lease (the "Touhy Avenue Lease") dated November
1, 1985 between Registrant and LNB, as Trustee under Trust Agreement
dated September 20, 1966 and known as Trust No. 34837(11)
10.4 First Amendment to the Touhy Avenue Lease dated June 1, 1987(11)
10.5 Second Amendment to the Touhy Avenue Lease dated December 14, 1990(11)
10.6 Third Amendment to the Touhy Avenue Lease dated September 1, 1991(16)
10.7 Industrial Real Estate Lease (the "Lemon Avenue Lease") dated May 7,
1991 between Registrant, Majestic Realty Co. and Patrician
Associates, Inc(1)
10.8 First Amendment to the Lemon Avenue Lease dated January 10, 1996(17)
10.9 Mortgage, Assignment of Rents and Security Agreement made on
September 29, 1992 by LaSalle Trust, not personally but as Successor
Trustee under Trust Agreement dated February 7, 1979 known as Trust
Number 100628 in favor of the Registrant relating to the properties
commonly known as 2299 Busse Road and 1717 Arthur Avenue, Elk Grove
Village, Illinois(5)
10.10 Industrial Building Lease dated June 1, 1985 between Registrant and
LNB, as Trustee under Trust Agreement dated February 7, 1979 and
known as Trust No. 100628(1)
10.11 First Amendment to Industrial Building Lease dated September 29, 1992
by and between the Registrant and LaSalle Trust, not personally but
as Successor Trustee under Trust Agreement dated February 7, 1979
and known as Trust Number 100628(5)
10.12 Second Amendment to Industrial Building Lease dated March 3, 1995, by
and between the Registrant and LaSalle Trust, not personally but as
Successor Trustee under Trust Agreement dated February 7, 1979 and
known as Trust Number 100628(12)
10.13 Third Amendment to Industrial Building Lease dated August 15, 1998, by
and between the Registrant and LaSalle Trust, not personally but as
Successor Trustee under Trust Agreement dated February 7, 1979 and
known as Trust Number 100628(21)
10.14 Ground Lease dated January 1, 1995, between the Registrant and LaSalle
Trust, not personally but as Successor Trustee under Trust Agreement
dated February 7, 1979 and known as Trust Number 100628(12)
10.15 Party Wall Agreement, dated March 3, 1995, between the Registrant,
LaSalle Trust, not personally but as Successor Trustee under Trust
Agreement dated February 7, 1979 and known as Trust Number 100628 and
the Arthur/Busse Limited Partnership(12)
10.16 Secured Promissory Note in the amount of $6,223,321.81 dated
September 29, 1992 executed by Arthur/Busse Limited Partnership in
favor of the Registrant(5)
10.17 Tax Indemnification Agreement between Registrant and certain
Stockholders of Registrant prior to its initial public offering(2)
10.18 Indemnification Agreement between Registrant and certain Stockholders
of Registrant prior to its initial public offering(2)
10.19 The Registrant's 1991 Stock Option Plan(1)
10.20 First Amendment to the Registrant's 1991 Stock Option Plan(4)
10.21 John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number
One among John E. Sanfilippo, as trustee of the Jasper and Marian
Sanfilippo Irrevocable Trust, dated September 23, 1990, Jasper B.
Sanfilippo, Marian R. Sanfilippo and Registrant, and Collateral
Assignment from John E. Sanfilippo as trustee of the Jasper and
Marian Sanfilippo Irrevocable Trust, dated September 23, 1990, as
assignor, to Registrant, as assignee(7)
10.22 John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number
Two among Michael J. Valentine, as trustee of the Valentine Life
Insurance Trust, dated May 15, 1991, Mathias Valentine, Mary
Valentine and Registrant, and Collateral Assignment from Michael J.
Valentine, as trustee of the Valentine Life Insurance Trust, dated
May 15, 1991, as assignor, and Registrant, as assignee(7)
10.23 Outsource Agreement between the Registrant and Preferred Products,
Inc. dated January 19, 1995 [CONFIDENTIAL TREATMENT REQUESTED](12)
10.24 Letter Agreement between the Registrant and Preferred Products, Inc.,
dated February 24, 1995, amending the Outsource Agreement dated
January 19, 1994 [CONFIDENTIAL TREATMENT REQUESTED](12)
10.25 The Registrant's 1995 Equity Incentive Plan(13)
10.26 Promissory Note (the "ILIC Promissory Note") in the original principal
amount of $2.5 million, dated September 27, 1995 and executed by the
Registrant in favor of Indianapolis Life Insurance Company ("ILIC")(16)
10.27 First Mortgage and Security Agreement (the "ILIC" Mortgage") by and
between the Registrant, as mortgagor, and ILIC, as mortgagee, dated
September 27, 1995, and securing the ILIC Promissory Note and
relating to the property commonly known as 3001 Malmo Drive,
Arlington Heights, Illinois (16)
10.28 Assignment of Rents, Leases, Income and Profits dated September 27,
1995, executed by the Registrant in favor of ILIC and relating to the
ILIC Promissory Note, the ILIC Mortgage and the Arlington Heights
facility(16)
10.29 Environmental Risk Agreement dated September 27, 1995, executed by the
Registrant in favor of ILIC and relating to the ILIC Promissory Note,
the ILIC Mortgage and the Arlington Heights facility(16)
10.30 Credit Agreement dated as of March 31, 1998 among the Registrant,
Sunshine, Quantz, JBSI, U.S. Bancorp Ag Credit, Inc. ("USB") as Agent,
Keybank National Association ("KNA"), and LNB(20)
10.31 Revolving Credit Note in the principal amount of $35.0 million
executed by the Registrant, Sunshine, Quantz and JBSI in favor of
USB, dated as of March 31, 1998(20)
10.32 Revolving Credit Note in the principal amount of $15.0 million
executed by the Registrant, Sunshine, Quantz and JBSI in favor of
KNA, dated as of March 31, 1998(20)
10.33 Revolving Credit Note in the principal amount of $20.0 million executed
by the Registrant, Sunshine, Quantz and JBSI in favor of LSB, dated
as of March 31, 1998(20)
10.34 The Registrant's 1998 Equity Incentive Plan(22)
10.35 Employment Agreement by and between Sunshine and Steven G. Taylor
dated May 1, 1999(25)
11 None
15 None
18 None
19 None
22-24 None
27 Financial Data Schedule
99 None
(1) Incorporated by reference to the Registrant's Registration
Statement on Form S-1, Registration No. 33-43353, as filed with the
Commission on October 15, 1991 (Commission File No. 0-19681).
(2) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1991 (Commission File
No. 0-19681).
(3) Incorporated by reference to the Registrant's Registration
Statement on Form S-1 (Amendment No. 3), Registration No. 33-43353,
as filed with the Commission on November 25, 1991 (Commission File
No. 0-19681).
(4) Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the second quarter ended June 25, 1992 (Commission
File No. 0-19681).
(5) Incorporated by reference to the Registrant's Current Report on
Form 8-K dated September 29, 1992 (Commission File No. 0-19681).
(6) Incorporated by reference to the Registrant's Current Report on
Form 8-K dated January 15, 1993 (Commission File No. 0-19681).
(7) Incorporated by reference to the Registrant's Registration
Statement on Form S-1, Registration No. 33-59366, as filed with the
Commission on March 11, 1993 (Commission File No. 0-19681).
(8) Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the third quarter ended September 30, 1993
(Commission File No. 0-19681).
(9) Incorporated by reference to the Registrant's Current Report on
Form 8-K dated September 15, 1993 (Commission file No. 0-19681).
(10) Incorporated by reference to the Registrant's Current Report and
Form 8-K dated June 23, 1994 (Commission File No. 0-19681).
(11) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1993 (Commission File
No. 0-19681).
(12) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 (Commission File
No. 0-19681).
(13) Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the first quarter ended March 30, 1995 (Commission
File No. 0-19681).
(14) Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the second quarter ended June 29, 1995 (Commission
File No. 0-19681).
(15) Incorporated by reference to the Registrant's Current Report on
Form 8-K dated September 12, 1995 (Commission File No. 0-19681).
(16) Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the third quarter ended September 28, 1995
(Commission file No. 0-19681).
(17) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1995 (Commission file
No. 0-19681).
(18) Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 (Commission
file No. 0-19681).
(19) Incorporated by reference to the Registrant's Current Report on
Form 8-K dated May 21, 1997 (Commission file No. 0-19681).
(20) Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the third quarter ended March 26, 1998 (Commission
file No. 0-19681).
(21) Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the fiscal year ended June 25, 1998 (Commission file
No. 0-19681).
(22) Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the first quarter ended September 24, 1998 (Commission
file No. 0-19681).
(23) Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the second quarter ended December 24, 1998 (Commission
file No. 0-19681).
(24) Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the first quarter ended September 23, 1999 (Commission
file No. 0-19681).
(25) Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the second quarter ended December 23, 1999 (Commission
file No. 0-19681).