SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
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 September 27, 2001
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
---------- ----------
Commission file number 0-19681
JOHN B. SANFILIPPO & SON, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-2419677
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
2299 Busse Road
Elk Grove Village, Illinois 60007
(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
-------- --------
As of November 7, 2001, 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.
------------------------------
INDEX TO FORM 10-Q
------------------
PART I. FINANCIAL INFORMATION PAGE NO.
------------------------------ --------
Item 1 -- Consolidated Financial Statements (Unaudited):
Consolidated Statements of Operations for the quarters ended
September 27, 2001 and September 28, 2000 3
Consolidated Balance Sheets as of September 27, 2001
and June 28, 2001 4
Consolidated Statements of Cash Flows for the quarters ended
September 27, 2001 and September 28, 2000 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 13
PART II. OTHER INFORMATION
---------------------------
Item 2 -- Changes in Securities 14
Item 5 -- Other Information 14
Item 6 -- Exhibits and Reports on Form 8-K 14
SIGNATURE 15
---------
EXHIBIT INDEX 16
-------------
OMITTED FINANCIAL STATEMENTS
----------------------------
None
PART I. FINANCIAL INFORMATION
------------------------------
Item 1 -- Financial Statements (Unaudited)
JOHN B. SANFILIPPO & SON, INC.
------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
(Dollars in thousands, except earnings per share)
For the Quarter Ended
-----------------------------------------
September 27, 2001 September 28, 2000
------------------ ------------------
Net sales $84,759 $84,543
Cost of sales 73,567 72,813
-------- --------
Gross profit 11,192 11,730
-------- --------
Selling expenses 5,541 5,424
Administrative expenses 2,367 2,300
-------- --------
7,908 7,724
-------- --------
Income from operations 3,284 4,006
-------- --------
Other income (expense):
Interest expense (1,648) (2,073)
Rental income 159 148
Miscellaneous 4 4
-------- --------
(1,485) (1,921)
-------- --------
Income before income taxes 1,799 2,085
Income tax expense 720 834
-------- --------
Net income and comprehensive income $ 1,079 $ 1,251
======== ========
Basic and diluted earnings
per common share $ 0.12 $ 0.14
======== ========
The accompanying notes are an integral part of these financial statements.
JOHN B. SANFILIPPO & SON, INC.
------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars in thousands)
(Unaudited)
September 27, 2001 June 28, 2001
------------------ -------------
ASSETS
------
CURRENT ASSETS:
Cash $ 1,917 $ 1,098
Accounts receivable, net 32,998 25,890
Inventories 86,844 98,567
Deferred income taxes 633 633
Income taxes receivable 247 880
Prepaid expenses and other current
assets 3,154 1,931
--------- ---------
TOTAL CURRENT ASSETS 125,793 128,999
--------- ---------
PROPERTIES:
Buildings 60,107 55,711
Machinery and equipment 82,149 81,381
Furniture and leasehold improvements 5,239 5,211
Vehicles 4,033 4,097
Construction in progress -- 3,430
--------- ---------
151,528 149,830
Less: Accumulated depreciation 82,803 81,046
--------- ---------
68,725 68,784
Land 1,863 1,863
--------- ---------
70,588 70,647
--------- ---------
OTHER ASSETS:
Goodwill and other intangibles 5,210 5,348
Miscellaneous 6,980 5,246
--------- ---------
12,190 10,594
--------- ---------
$208,571 $210,240
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 24,357 $ 37,532
Current maturities of long-term debt 12,672 12,666
Accounts payable 21,462 11,429
Drafts payable 7,681 4,944
Accrued expenses 7,687 7,373
--------- ---------
TOTAL CURRENT LIABILITIES 73,859 73,944
--------- ---------
LONG-TERM DEBT 36,447 39,109
--------- ---------
LONG-TERM DEFERRED INCOME TAXES 2,841 2,841
--------- ---------
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 39,339 38,261
Treasury stock (1,204) (1,204)
--------- ---------
95,424 94,346
--------- ---------
$208,571 $210,240
========= =========
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 Quarter Ended
--------------------------------------
September 27, 2001 September 28, 2000
------------------ ------------------
Cash flows from operating activities:
Net income $ 1,079 $ 1,251
Adjustments:
Depreciation and amortization 2,104 2,085
Gain on disposition of properties (4) --
Change in current assets and
current liabilities:
Accounts receivable, net (7,108) (7,336)
Inventories 11,723 7,796
Prepaid expenses and other
current assets (1,223) 258
Accounts payable 10,033 7,791
Drafts payable 2,737 2,564
Accrued expenses 314 1,262
Income taxes receivable/payable 633 410
--------- ---------
Net cash provided by operating activities 20,288 16,081
--------- ---------
Cash flows from investing activities:
Acquisition of properties (1,841) (2,666)
Proceeds from disposition of properties 14 --
Other (1,811) 37
--------- ---------
Net cash used in investing activities (3,638) (2,629)
--------- ---------
Cash flows from financing activities:
Net borrowings on notes payable (13,175) (11,284)
Principal payments on long-term debt (2,656) (2,654)
--------- ---------
Net cash used in financing activities (15,831) (13,938)
--------- ---------
Net increase (decrease) in cash 819 (486)
Cash:
Beginning of period 1,098 1,113
--------- ---------
End of period $ 1,917 $ 627
========= =========
Supplemental disclosures:
Interest paid $ 2,087 $ 2,510
Taxes paid 97 425
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 subsidiary (collectively, 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).
Note 2 -- Inventories
---------------------
Inventories are stated at the lower of cost (first in, first out) or market.
Inventories consist of the following:
September 27, June 28,
2001 2001
------------- --------
Raw material and supplies $27,672 $ 30,154
Work-in-process and finished goods 59,172 68,413
------------- --------
$86,844 $98,567
============= ========
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 September 27, 2001 For the Quarter Ended September 28, 2000
---------------------------------------- ----------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
Net Income $1,079 $1,251
Basic Earnings Per Share
Income available to common
stockholders $1,079 9,148,565 $0.12 $1,251 9,148,565 $0.14
Effect of Dilutive Securities
Stock options 37,521 --
Diluted Earnings Per Common
Share
Income available to common
stockholders $1,079 9,186,086 $0.12 $1,251 9,148,565 $0.14
=========== ============= ========= =========== ============= =========
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 September 27, 2001 262,687 $10.22
Quarter Ended September 28, 2000 538,078 $ 8.12
Note 4 -- Recent Accounting Pronouncements
------------------------------------------
The Company early adopted certain matters addressed in Emerging Issues Task
Force ("EITF") 00-14, "Accounting for Certain Sales Incentives," and EITF
00-25, "Vendor Income Statement Characterization of Consideration Paid to a
Reseller of the Vendor's Products". Certain costs, which were recorded as
selling and administrative expenses, are now recorded as a reduction in
revenue. Similar reclassifications have been made to prior period comparative
information. These reclassifications were not material and had no impact on the
Company's net income or financial position.
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
141, "Business Combinations", and SFAS 142, "Goodwill and Other Intangible
Assets". SFAS 141 requires that all business combinations initiated after June
30, 2001 be accounted for under the purchase method. With the adoption of SFAS
142, goodwill is no longer subject to amortization over its estimated useful
life. Instead, goodwill will be subject to at least an annual assessment for
impairment by applying a fair-value-based test. In addition, under the new
rules, acquired intangible assets will be separately recognized if the benefit
of the intangible asset is obtained through contractual or other legal rights,
or if the intangible asset can be sold, transferred, licensed, rented or
exchanged, regardless of the acquirer's intent to do so. The provisions of
SFAS 142 must be applied with fiscal years beginning after December 15, 2001.
The Company will adopt SFAS 142 beginning June 28, 2002. Management is
currently assessing the implementation guidance being provided by the FASB and
other regulatory bodies and has not yet determined the effect, if any, the new
rules will have on the Company's financial position or results of operations.
Any adjustments arising from the initial impairment assessment would be
reported as the cumulative effect of a change in accounting principle.
Note 5 -- 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 28, 2001 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 2001 Annual Report on
Form 10-K for the year ended June 28, 2001.
Note 6 -- Proposed Acquisition
------------------------------
On August 24, 2001 the Company announced that it signed a letter of intent to
acquire all of the outstanding shares of the Navarro Pecan Company, Inc., one
of the largest pecan shellers in the United States. The transaction is
contingent upon due diligence, negotiation and execution of a definitive
agreement, board approval and other conditions. The parties have been unable
to conclude a definitive agreement as of this date. Either party to the
letter of intent may terminate the letter if a definitive agreement has not
been executed and delivered by November 22, 2001.
Item 2
------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
General
-------
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 September 27,
2001, the Company's inventories totaled approximately $86.8 million compared
to approximately $98.6 million at June 28, 2001, and approximately $98.0
million at September 28, 2000. The decrease in inventories at September 27,
2001 when compared to September 28, 2000 is primarily due to decreased levels
of inshell pecans on hand. The decrease in inventories at September 27, 2001
as compared to June 28, 2001 is primarily responsible for the decrease in
notes payable at September 27, 2001 as compared to June 28, 2001. 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 2002" refers to the Company's
fiscal year ending June 27, 2002). The Company's fiscal year typically
consists of fifty-two weeks (four thirteen week quarters).
Results of Operations
---------------------
Net Sales. Net sales increased from approximately $84.5 million for the first
quarter of fiscal 2001 to approximately $84.8 million for the first quarter of
fiscal 2002, an increase of approximately $0.2 million, or 0.3%. The slight
increase was due primarily to higher unit volume sales to the Company's retail
customers, offset by lower unit volume sales to the Company's industrial
customers. The increase in sales to retail customers was due primarily to
increased sales of private label products. The decrease in sales to industrial
customers was due primarily to high sales of pecans in the first quarter of
fiscal 2001.
Gross Profit. Gross profit for the first quarter of fiscal 2002 decreased
approximately 4.6% to approximately $11.2 million from approximately $11.7
million for the first quarter of fiscal 2001. Gross profit margin decreased
from approximately 13.9% for the first quarter of fiscal 2001 to approximately
13.2% for the first quarter of fiscal 2002. The decrease in gross profit
margin for the first quarter of fiscal 2002 was due primarily to: (i) a
decrease in gross profit margin on sales to industrial customers, and (ii) an
increase in private label sales, which generally carry lower gross profit
margins than sales of branded products.
Selling and Administrative Expenses. Selling and administrative expenses as a
percentage of net sales increased from approximately 9.1% for the first
quarter of fiscal 2001 to approximately 9.3% for the first quarter of fiscal
2002. The increase in selling and administrative expenses as a percentage in
net sales is due primarily to increases in the Company's overall health
insurance costs.
Income from Operations. Due to the factors discussed above, income from
operations decreased from approximately $4.0 million, or 4.7% of net sales,
for the first quarter of fiscal 2001, to approximately $3.3 million, or 3.9%
of net sales, for the first quarter of fiscal 2002.
Interest Expense. Interest expense decreased from approximately $2.1 million
for the first quarter of fiscal 2001 to approximately $1.6 million for the
first quarter of fiscal 2002. The decrease in interest expense was due
primarily to lower average levels of borrowings due to the reduction in levels
of inventories and lower interest rates associated with the Bank Credit
Facility defined below.
Income Taxes. Income tax expense was approximately $0.7 million for the first
quarter of fiscal 2002 compared to approximately $0.8 million for the first
quarter of fiscal 2001, or 40.0% of income before income taxes, for both
quarters.
Liquidity and Capital Resources
-------------------------------
During the first quarter of fiscal 2002, the Company continued to finance its
activities through a bank credit facility (the "Bank Credit Facility"), a
long-term financing facility originally entered into by the Company in 1992
(the "Long-Term Financing Facility") and a long-term financing arrangement
entered into in 1995 (the "Additional Long-Term Financing").
Net cash provided by operating activities was approximately $20.3 million for
the first quarter of fiscal 2002 compared to approximately $16.1 million for
the first quarter of fiscal 2001. The increase in cash provided by operating
activities was due primarily to: (i) an increase in unit volume sales in
fiscal 2002 when compared to fiscal 2001 and (ii) slightly lower purchases of
inventories in fiscal 2002. During the first quarter of fiscal 2002, the
Company spent approximately $1.8 million in capital expenditures, compared to
approximately $2.7 million for the first quarter of fiscal 2001. This
decrease was due primarily to the addition of processing lines at the
Company's facilities during the first quarter of fiscal 2001. During the first
quarter of fiscal 2002, the Company repaid approximately $2.7 million of long-
term debt, the same as the amount repaid for the first quarter of fiscal 2001.
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 May 31, 2003, 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
4.73% at September 27, 2001) determined pursuant to a formula based on the
agent bank's quoted rate and the Eurodollar Interbank rate. As of September
27, 2001, the Company had approximately $36.9 million of available credit
under the Bank Credit Facility.
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 September 27, 2001, the total principal amount outstanding
under the Long-Term Financing Facility was approximately $12.5 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 September 27,
2001, the total principal amount outstanding under the Additional Long-Term
Financing was approximately $20.7 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 annual capital
expenditures; 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 September 27, 2001, the Company was in
compliance with all restrictive covenants under its financing facilities. The
Company believes that cash flow from operating activities and funds available
under the Bank Credit Facility will be sufficient to meet working capital
requirements and anticipated capital expenditures for the foreseeable future.
Recent Accounting Pronouncements
--------------------------------
The Company early adopted certain matters addressed in Emerging Issues Task
Force ("EITF") 00-14, "Accounting for Certain Sales Incentives," and EITF
00-25, "Vendor Income Statement Characterization of Consideration Paid to a
Reseller of the Vendor's Products". Certain costs, which were recorded as
selling and administrative expenses, are now recorded as a reduction in
revenue. Similar reclassifications have been made to prior period comparative
information. These reclassifications were not material and had no impact on the
Company's net income or financial position.
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
141, "Business Combinations", and SFAS 142, "Goodwill and Other Intangible
Assets". SFAS 141 requires that all business combinations initiated after June
30, 2001 be accounted for under the purchase method. With the adoption of SFAS
142, goodwill is no longer subject to amortization over its estimated useful
life. Instead, goodwill will be subject to at least an annual assessment for
impairment by applying a fair-value-based test. In addition, under the new
rules, acquired intangible assets will be separately recognized if the benefit
of the intangible asset is obtained through contractual or other legal rights,
or if the intangible asset can be sold, transferred, licensed, rented or
exchanged, regardless of the acquirer's intent to do so. The provisions of
SFAS 142 must be applied with fiscal years beginning after December 15, 2001.
The Company will adopt SFAS 142 beginning June 28, 2002. Management is
currently assessing the implementation guidance being provided by the FASB and
other regulatory bodies and has not yet determined the effect, if any, the new
rules will have on the Company's financial position or results of operations.
Any adjustments arising from the initial impairment assessment would be
reported as the cumulative effect of a change in accounting principle.
Forward Looking Statements
--------------------------
The statements contained in this filing which are not historical (including
statements concerning the Company's expectations regarding market risk) are
"forward looking statements". These forward looking statements, which are
generally identified by the use of forward looking words and phrases such as
"intends", "may", "believes" and "expects", represent the Company's present
expectations or beliefs concerning future events. The Company cautions that
such statements are qualified by important factors, including the factors
described below under "Factors That May Affect Future Results", that could
cause actual results to differ materially from those in the forward looking
statements, as well as the timing and occurrence (or nonoccurrence) of
transactions and events which may be subject to circumstances beyond the
Company's control. Consequently, results actually achieved may differ
materially from the expected results included in these statements.
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 and other nuts 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 (to the extent that cost increases cannot be
passed on to customers) could have an adverse impact on the Company's
profitability. Furthermore, fluctuations in the market prices of nuts may
affect the value of the Company's inventories and the Company's profitability.
The Company has significant inventories of nuts that would be adversely
affected by any decrease in the market price of such raw materials. See
"General" .
(b) Market and Import/Export Conditions and Uncertainties
---------------------------------------------------------
The terrorist attacks of September 11 and subsequent events have created
considerable economic and political uncertainties. Sales to the Company's
airline customers have been adversely impacted. For the fiscal year ended June
28, 2001, sales to airline customers represented approximately 3% of the
Company's total sales. Additionally, the terrorist attacks and subsequent
events may have material adverse effects on imports, shipping and
transportation, fuel costs, consumer buying behavior, general economic
conditions and other factors affecting the Company's business.
(c) 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 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.
(d) 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 expects to 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.
(e) 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 pounds 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 2001 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 2001 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. In
October 2001, the House of Representatives approved The Farm Security Act of
2001, which would terminate the federal peanut quota program beginning with
the 2002 crop year. Changes in or termination of the federal peanut program
could significantly affect the supply of, and price for, peanuts. Although
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, or termination of, 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.
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, such information
which is incorporated herein by reference.
Item 5 -- Other Information
---------------------------
On August 24, 2001 the Company announced that it signed a letter of intent to
acquire all of the outstanding shares of the Navarro Pecan Company, Inc., one
of the largest pecan shellers in the United States. The transaction is
contingent upon due diligence, negotiation and execution of a definitive
agreement, board approval and other conditions. The parties have been unable
to conclude a definitive agreement as of this date. Either party to the
letter of intent may terminate the letter if a definitive agreement has not
been executed and delivered by November 22, 2001.
Item 6 -- Exhibits and Reports on Form 8-K
------------------------------------------
(a) The exhibits filed herewith are listed in the exhibit index that
follows the signature page and immediately precedes the exhibits filed.
(b) Reports on Form 8-K: None filed during the quarter ended September
27, 2001.
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: November 7, 2001 By: /s/ Michael J. Valentine
------------------------
Michael J. Valentine
Executive Vice President
Finance, Chief Financial
Officer and Secretary
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 the 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 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
and 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)
10.8 Industrial Building Lease dated June 1, 1985 between the
Registrant and LNB, as Trustee under Trust Agreement dated
February 7, 1979 and known as Trust No. 100628(1)
10.9 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)
10.10 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)
10.11 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)
10.12 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)
10.13 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)
10.14 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)
10.15 Tax Indemnification Agreement between Registrant and certain
Stockholders of Registrant prior to its initial public offering(2)
10.16 Indemnification Agreement between Registrant and certain
Stockholders of Registrant prior to its initial public offering(2)
10.17 The Registrant's 1991 Stock Option Plan(1)
10.18 First Amendment to the Registrant's 1991 Stock Option Plan(4)
10.19 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)
10.20 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)
10.21 Outsource Agreement between the Registrant and Preferred
Products, Inc. dated January 19, 1995 [CONFIDENTIAL TREATMENT
REQUESTED](12)
10.22 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)
10.23 The Registrant's 1995 Equity Incentive Plan(13)
10.24 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)
10.25 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)
10.26 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)
10.27 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)
10.28 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)
10.29 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)
10.30 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)
10.31 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)
10.32 The Registrant's 1998 Equity Incentive Plan(22)
10.33 First Amendment to the Registrant's 1998 Equity Incentive Plan(26)
10.34 Second Amendment to Credit Agreement dated May 10, 2000 by and
among the Registrant, JBSI, USB as Agent, LNB and SunTrust Bank,
N.A. (replacing KNA)(25)
11 Not applicable
15 Not applicable
18 Not applicable
19 Not applicable
22-24 Not applicable
99 Not applicable
(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 Annual Report on Form 10-K
for the fiscal year ended June 29, 2000 (Commission file No. 0-19681).
(26) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the second quarter ended December 28, 2000 (Commission file No.
0-19681).
John B. Sanfilippo & Son, Inc. will furnish any of the above exhibits to its
stockholders upon written request addressed to the Secretary at the address
given on the cover page of this Form 10-Q. The charge for furnishing copies
of the exhibits is $.25 per page, plus postage.