FINANCIAL HIGHLIGHTS 1996
Years Ended December 31,
(Dollars in thousands, except per share data)
1996 1995 1994
-----------------------------------------
Net sales $294,404 $277,741 $208,970
Net (loss) income $ (2,991) $ 5,788 $ 49
(Loss) earnings per common share $ (0.33) $ 0.63 $ 0.00
Working capital $ 40,956 $ 58,148 $ 36,418
Total assets $205,352 $219,002 $199,714
Long-term debt $ 63,319 $ 74,681 $ 52,804
Total debt $ 98,310 $106,849 $106,716
Stockholders' equity $ 72,620 $ 75,611 $ 68,092
Capital expenditures $ 9,198 $ 13,517 $ 30,884
Debt/Equity ratio 1.4:1 1.4:1 1.6:1
Debt/Capital 57.5% 58.6% 61.0%
Weighted average shares
outstanding 9,147,666 9,070,000 8,990,946
A PERSONAL NOTE TO OUR STOCKHOLDERS 1996
1996 proved to be a very difficult and challenging year for your Company.
The damage inflicted upon the pecan industry as a result of the high costs
of the product and an oversupply of pecans negatively impacted our
operating results. The size of the 1996 pecan crop was initially estimated
by the USDA to be very small and was priced and purchased from the growers
at a corresponding high price. However, the estimate proved to be grossly
understated, and the resulting market selling price declined squeezing our
margins on pecans to little or no profit. Therefore, in the third quarter
with the new pecan crop approaching, our Company was required to record an
inventory write-down on the pecan inventory to reflect the lower of cost or
market.
On a more positive note, 1996 produced achievements that should continue to
benefit your Company in a positive manner and thereby ultimately enhance
stockholder value. We will continue to explore and evaluate all options to
improve the future operating results of your Company.
With the completion of the pecan shelling plant in Selma, TX, our
aggressive expansion program over the last five years is completed. We
believe we now have the finest facilities in the industry. Our capital
spending in the future will be modest.
1996 was the 25th consecutive year your Company enjoyed increased sales.
Net sales for 1996 totaled $294 million representing an increase of 6.0%
over 1995. The 1996 fourth quarter was very solid and finished strong.
Fourth quarter sales were $106 million, representing a slight increase over
1995 fourth quarter sales. Profits were encumbered by the last remnants of
the pecan situation. However, margins in the last half of the quarter were
at or exceeded 1995 levels.
As previously reported, your Company restructured its sales and marketing
functions to improve customer focus, service and category growth. Also,
several projects designed to enhance earnings and/or reduce costs were
undertaken and in the fourth quarter of 1996 have begun to deliver positive
results. These efforts represent an ongoing process in order to meet the
changing needs of the competitive environment in which we operate.
Fisher Nut, which was acquired in 1995, performed well in 1996 and we
believe is positioned for future growth. Your Company introduced Fisher
Nuts & Crunches Bayou Blend in a unique stand-up pouch. A major product
line introduction was Fisher Chef's Naturals Ingredient Nuts. Fisher Chef's
Naturals are solely intended for cooking/baking occasions. Also in 1996,
Fisher Nut products received the 1996-97 American Taste Award for
Excellence, as judged by a panel of Executive Chefs and Master Tasters
around the country. This is a good start for Fisher Nut's first year with
your Company.
Even though the future cannot be guaranteed, your senior management and I
are fully committed to enhancing stockholder value. We firmly believe that
your Company is sound, and the future is positive. We have the tools in
place to drive your Company. Our objectives are to deliver an increased
stockholder value, customer focus and category development. I believe 1997,
our 75th year, will be a positive step in accomplishing these objectives.
Sincerely,
/s/ Jasper B. Sanfilippo
- ------------------------
Jasper B. Sanfilippo
Chairman of the Board and Chief Executive Officer
John B. Sanfilippo & Son, Inc.
STRUCTURED FOR GROWTH
John B. Sanfilippo & Son, Inc. together with its wholly owned subsidiaries,
including Sunshine Nut Co., Inc., (the "Company" or "JBSS"), is one of the
largest companies in the world dedicated primarily to processing, marketing
and distributing edible nut meats of all kinds, including peanuts, pecans,
almonds, walnuts, cashews, filberts (hazelnuts), pistachios, macadamias and
Brazil nuts.
Vertically integrated from the grower to the consumer, the Company sells
its products under the Fisher, Evon's, Sunshine Country, Flavor Tree and
Texas Pride brand names, and more than 70 private label brands. The Company
also sells its products to industrial customers (e.g., bakeries, dairies,
food processors and candy manufacturers), and food service customers (e.g.,
airlines, sport stadiums and restaurants), and manufactures, processes and
packs the retail brands of several other snack food companies. To
complement its nut meat products, the Company also provides a diverse line
of other food and snack items, including peanut butter, candy, fruit and
nut mixes, extruded corn snacks (e.g., cheese curls), sesame sticks,
chocolate chips, and coconut products.
The Company's eight facilities are located in: Elk Grove Village, IL (2);
Arlington Heights, IL; Bainbridge, GA; Selma, TX; Walnut, CA; Gustine, CA;
and Garysburg, NC.
THE BEGINNING
The Company's origins date back to 1922 when the grandfather and father of
Jasper B. Sanfilippo, the Company's current Chairman of the Board and Chief
Executive Officer, began a small pecan shelling business in Chicago. Jasper
Sanfilippo and the Company's President, Mathias Valentine, have directed
the Company's development for the past 33 years. During that time, the
Company has achieved sales growth through diversifying and expanding its
product line and customer base, increasing its production capacity and
efficiency, designing custom processing and packaging equipment and
vertically integrating its operations. Over the last five fiscal years, net
sales have increased from approximately $161.1 million to approximately
$294.4 million, representing a 12.8% compound annual growth rate.
RETAIL GROWTH IS THE FOCUS
During 1996, the Company consolidated its separate sales and marketing
teams for each of Fisher, Evon's, Sunshine Country, and Private Label into
one sales and marketing team selling all of the Company's brands. This
consolidation allows for a single contact point and a combined effort in
working and partnering with customers to drive retail sales with the
Company's portfolio of brands. This consolidation should also result in
certain economies of scale and cost savings.
In 1996, the Company entered into a contract with Information Resources,
Inc., ("IRI"), to purchase syndicated scanner sales data for the snack nut
category for all retail channels and sixty-seven (67) markets nationwide.
This data will enable the Company's sales and marketing team to further its
fact-based selling strategies and category management initiatives in its
efforts to increase distribution and merchandising of Fisher at current and
new customers. During 1996, the Company increased distribution of Fisher at
many large grocery retailers and mass merchandisers nationwide. By
continuing to utilize IRI data in fact-based selling presentations, the
Company is targeting additional large retailers to stock Fisher
in 1997.
In 1996, the Company initiated and developed innovative marketing programs
with other consumer product companies. The Company participated in
two programs with EKCO Housewares, Inc. and The Pillsbury Company. The
Company teamed up with EKCO to promote Fisher Chef's Naturals Ingredient
Nuts ("FCNIN"), and offered consumers a free EKCO pan with the purchase of
FCNIN Pecans in 2 oz. or 6 oz. packages. The Company has also worked with
The Pillsbury Company to include Fisher nuts in recipes as part of the
Green Giant Pasta Accents Rush Hour Recipes cookbook. These programs were
designed to bring innovation and new users to the nut category by educating
consumers on new ways to use nuts in everyday eating.
The Company will continue partnering with key retailers to grow both the
snack and baking nut categories in terms of dollar and unit volume. We
believe this growth can be accomplished through our existing retail brand
portfolio that includes:
- - Fisher Chef's Naturals Ingredient Nuts (28 items). FCNIN was introduced
in late 1996 and offers a higher quality of nuts compared to the category
leader at a reduced price to consumers. FCNIN offers a complete line of
ingredient nuts including pecans, almonds, walnuts, nut topping, raw
peanuts, cashews, and pine nuts coupled with recipes on every package, and
a recipe book on how to use nuts in everyday eating experiences.
- - Fisher snack nuts (66 items), including Golden Roast Peanuts, Favorites,
Nuts & Fruits snack mixes, Nuts & Crunches snack mixes and
the recently introduced
Bayou Blend.
- - Evon's (442 items), including baking nuts, snack nuts, candy, extruded
snacks and peanut butter.
- - Sunshine Country (77 items) snack and baking nuts.
- - Texas Pride pecans (10 items).
- - Private label brands (700 items) for over 70 retailers across the U.S.
for the categories of snack nuts, baking nuts, peanut butter, candy and
extruded snacks.
During 1997, the Company's marketing and sales executives will continue
working with retailers and brokers to expand category management programs,
develop and execute integrated consumer marketing programs, and further
educate consumers on how to use nuts and identify the true health benefits
from eating nuts in everyday meals.
To accomplish this last objective, the Company has entered into a licensing
agreement with Oldways Preservation and Exchange Trust to utilize the
Mediterranean Diet Pyramid. This exclusive commercial license allows the
Company to use this pyramid on packaging in sales and marketing material
and in consumer marketing programs with the Fisher brand for the snack and
baking nut categories.
The Mediterranean Diet Pyramid groups nuts and legumes in its second tier,
along with fruits and vegetables and other foods from plant sources. The
pyramid suggests that the amount of daily consumption from this second tier
food group should be second only to foods included in the
base tier of the Pyramid (e.g., breads, pasta, rice, couscous, polenta,
bulgur, other grains and potatoes).
In 1996, the Company was awarded the "Best Tasting Nuts in America" for the
Fisher brand by the American Tasting Institute. Fisher was judged excellent
when compared to other regional and national brands on the basis of taste,
freshness and appearance for both snack and baking nuts. The Mediterranean
Diet Pyramid program and the success of Fisher nuts in taste tests will
help the Company to break down the consumers' negative perception of nuts
as an unhealthy product and position Fisher as their nut of choice.
We believe the Company is uniquely positioned to grow the snack and baking
nut categories through strategic partnership and innovative sales and
marketing programs. The Company's portfolio of brands is strong enough to
match any competitive offering in the marketplace.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following historical consolidated financial data as of and for the
years ended December 31, 1996, 1995, 1994, 1993 and 1992 were derived from
the Company's audited consolidated financial statements. The financial data
should be read in conjunction with the Company's audited consolidated
financial statements and notes thereto, which are included elsewhere herein,
and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The information below is not necessarily indicative
of the results of future operations. As used herein, unless the context
otherwise indicates, the terms "Company" and "JBSS" refer collectively to
John B. Sanfilippo & Son, Inc. and, for all periods commencing on or after
May 28, 1992, its wholly owned subsidiaries, including Sunshine Nut Co.,
Inc. ("Sunshine").
Year Ended December 31,
-----------------------
Statement of Income Data: 1996 1995 1994 1993 1992(1)(2)
-------------------------------------------------
($ in thousands, except per share data)
Net sales $294,404 $277,741 $208,970 $202,583 $191,373
Cost of sales 255,204 230,691 177,728 167,403 154,383
-------- -------- -------- -------- --------
Gross profit 39,200 47,050 31,242 35,180 36,990
Selling and
administrative expenses 35,410 30,338 25,857 21,762 22,249
-------- -------- -------- -------- --------
Income from operations 3,790 16,712 5,385 13,418 14,741
Interest expense 9,051 7,673 6,015 4,224 4,395
Other income 450 607 889 1,011 373
-------- -------- -------- -------- --------
(Loss) income before
income taxes (4,811) 9,646 259 10,205 10,719
Income tax benefit
(expense) 1,820 (3,858 (210) (4,082) (4,288)
-------- -------- -------- -------- --------
Net (loss) income $ (2,991) $ 5,788 $ 49 $ 6,123 $ 6,431
======== ======== ======== ======== ========
Net (loss) income per
common share $ (0.33) $ 0.63 $ 0.00 $ 0.74 $ 0.95
Dividends declared per
common share $ 0.00 $ 0.00 $ 0.00 $ 0.05 $ 0.05
As of December 31,
1996 1995 1994 1993 1992
--------------------------------------------------
Balance Sheet Data:
Working capital $ 40,956 $ 58,148 $ 36,418 $ 56,221 $ 27,500
Total assets 205,352 219,002 199,714 157,011 124,355
Long-term debt 63,319 74,681 52,804 46,409 34,442
Total debt 98,310 106,849 106,716 70,926 76,050
Stockholders' equity 72,620 75,611 68,092 69,247 32,417
_____________________________
(1) The Company acquired Sunshine effective May 28, 1992, for $4,200. The
acquisition was accounted for as a purchase and, accordingly, the
results of operations for the year ended December 31, 1992 include the
results of operations of Sunshine from May 28, 1992.
(2) Certain amounts for the year ended December 31, 1992 have been
reclassified to conform to the 1996, 1995, 1994 and 1993
presentations. This reclassification resulted in an increase in cost
of sales and a decrease in administrative expenses of $1,465 from the
amounts previously reported for the year ended December 31, 1992.
Such reclassification had no effect on net income or retained earnings
as previously reported.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------
The statements contained in the following Management's Discussion and
Analysis of Financial Condition and Results of Operations which are not
historical are "forward looking statements". These forward looking
statements, which are generally followed (and therefore identified) by a
cross reference to "Factors That May Affect Future Results", represent the
Company's present expectations or beliefs concerning future events. The
Company cautions that such statements are qualified by important factors
that could cause actual results to differ materially from those in the
forward looking statements, including the factors described below under
"Factors That May Affect Future Results". Results actually achieved thus
may differ materially from expected results included in these statements.
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 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
first and fourth quarters of each year. Fluctuations in the market prices
of such nuts may affect the value of the Company's inventory and thus the
Company's profitability. Declines in the market prices for pecans and the
resulting reduction in the Company's selling price for pecans have
negatively affected the Company's gross profit and gross profit margin
generally for the year ended December 31, 1996 and required the Company to
record a $2.6 million charge in the third quarter of 1996 to write down the
carrying value of its pecan inventory to the lower of cost or market value
of such inventory as of September 26, 1996. See "Results of Operations --
1996 Compared to 1995 -- Gross Profit". The Company was also required to
write down the value of its peanut inventory during the third quarter of
1994 due to market conditions. See "Results of Operations -- 1995 Compared
to 1994 -- Gross Profit." There can be no assurance that future write-
downs of the Company's inventory may not be required from time-to-time
because of market price fluctuations, competitive pricing pressures, the
effects of various laws or regulations or other factors. See " Factors
That May Affect Future Results -- Availability of Raw Materials and Market
Price Fluctuations."
At December 31, 1996, the Company's inventories totalled approximately
$77.1 million compared to approximately $96.4 million and $89.0 million at
December 31, 1995 and 1994, respectively. Inventory levels at December 31,
1996 decreased when compared to December 31, 1995 due to (i) decreases in
the Company's total pounds of pecans, walnuts and almonds on hand, (ii) the
$2.6 million inventory write-down the Company recorded in the third quarter
of 1996 to reflect the significant declines in the market price for pecans,
and (iii) an abnormally high pecan inventory at December 31, 1995 as a
result of the Company's inability to process pecans during the fourth
quarter of 1995 due to the relocation of the pecan shelling facility. See
"Factors That May Affect Future Results -- Availability of Raw Materials
and Market Price Fluctuations."
The Company's net sales to industrial customers increased both in amount
and as a percentage of the Company's total net sales for the period from
1992 through 1996 due primarily to a combination of the continuing increase
over that period in Sunshine's net sales and the total percentage thereof
that represents sales to industrial customers as well as an overall
increase in unit volume sales to industrial customers. In addition, the
increase in the Company's processing and shelling capacity created by the
Garysburg, North Carolina facility, the Selma, Texas facility and the
Gustine, California facility has contributed to the increase in sales to
industrial customers both in amount and as a percentage of the Company's
total net sales and could result in further such increases. See "Factors
that May Affect Future Results -- Sales to Industrial Customers." See
"Results of Operations -- 1996 Compared to 1995 -- Net Sales".
In order to enhance consumer awareness of dietary issues associated with
the consumption of peanuts and other nut products, the Company has taken
steps to educate the consumer about the benefits of nut consumption. The
Company has no experience or data that indicates that the growth in the
number of health conscious consumers will cause a decline in nut
consumption. Also, recently there has been some publicity concerning
allergic reactions to peanuts and other nuts. However, the Company has no
experience or data that indicates the peanut and other nut related
allergies have affected or will affect the Company's business.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain items
to net sales for the periods indicated and the percentage increase or
decrease of such items from 1996 to 1995 and from 1995 to 1994:
Percentage of Net Sales Percentage Increase
Year Ended December 31, (Decrease)
----------------------- -------------------
1996 1995
vs vs
1996 1995 1994 1995 1994
-----------------------------------------------------
Net sales 100.0% 100.0% 100.0% 6.0% 32.9%
Gross profit 13.3 16.9 15.0 (16.7) 50.6
Selling expenses 8.1 7.3 8.2 18.2 18.1
Administrative
expenses 3.9 3.6 4.2 13.8 15.9
Income from
operations 1.3 6.0 2.6 (77.3) 210.3
1996 COMPARED TO 1995
NET SALES. Net sales increased from $277.7 million in 1995 to $294.4
million in 1996, an increase of $16.7 million, or 6.0%. The increase in net
sales was due primarily to increased unit volume sales to the Company's
retail, industrial and food service customers. The increase in net sales to
retail customers was due primarily to the additional unit volume sales
generated by the Company's Fisher Nut Division, which was acquired by the
Company in the fourth quarter of 1995. The increase in unit volume sales
to retail customers was partially offset by decreases in net sales to
certain retail customers such as Sam's Club. During the first quarter of
1996, the Company was outbid for Sam's Club business, which accounted for
approximately $23.4 million of the Company's net sales in 1995. See "--
Gross Profit" and "Factors That May Affect Future Results - Competitive
Environment". The increase in net sales to industrial customers was due
primarily to additional unit volume sales by Sunshine. Net sales to food
service customers increased due to higher sales to airlines. In 1996, net
sales to government customers declined, as the Company chose to bid on
fewer government contracts.
GROSS PROFIT. Gross profit in 1996 decreased 16.7% to $39.2 million from
$47.1 million in 1995. Gross profit margin decreased from 16.9% in 1995 to
13.3% in 1996. This decrease was due primarily to (i) declines in the
market price for processed pecan meats throughout 1996 relative to the cost
of the Company's pecan inventory, (ii) a $2.6 million write-down of the
Company's pecan inventory as of the end of the third quarter of 1996 to
reflect the lower of cost or market value of such inventory, and (iii)
increases in raw material costs which the Company was unable to offset with
increases in selling prices. The Company's gross profit and gross profit
margin were also adversely affected by the Company's relocation of its
pecan shelling operations from Des Plaines, Illinois to the Company's new
pecan shelling facility in Selma, Texas. Although the relocation occurred
during the fourth quarter of 1995, the new facility was not fully
operational until midway through the first quarter of 1996 and,
consequently, the Company was not able to fully absorb the overhead
expenses of that facility during the first quarter of 1996.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
as a percentage of net sales increased from 10.9% in 1995 to 12.0% in 1996.
Selling expenses as a percentage of net sales increased from 7.3% in 1995
to 8.1% in 1996. This increase was due primarily to increased promotional
expenses, staffing costs and commissions. Administrative expenses as a
percentage of net sales increased from 3.6% in 1995 to 3.9% in 1996. This
increase in administrative expenses as a percentage of net sales was due
primarily to (i) higher staffing costs, and (ii) amortization expense
related to acquisitions.
INCOME FROM OPERATIONS. Due to the factors discussed above, income from
operations decreased from $16.7 million in 1995 to $3.8 million in 1996, a
decrease of $12.9 million, or 77.3%. As a percentage of net sales,
operating income decreased from 6.0% in 1995 to 1.3% in 1996.
INTEREST EXPENSE. Interest expense increased from $7.7 million in 1995 to
$9.1 million in 1996, an increase of $1.4 million or 18.0%. This increase
was due primarily to a higher average level of borrowings due to working
capital requirements for the first three quarters of 1996, capital
expenditures and the impact of the net loss for 1996.
INCOME TAXES. The Company recorded an income tax benefit of approximately
$1.8 million, or 37.8% of the loss before income taxes. See Note 3 to the
Consolidated Financial Statements.
1995 COMPATED TO 1994
NET SALES. Net sales increased from $209.0 million in 1994 to $277.7
million in 1995, an increase of approximately $68.8 million, or 32.9%. The
increase in net sales was due primarily to increased unit volume sales to
the Company's retail, industrial, contract manufacturing and export
customers. Generally higher selling prices for certain of the Company's
products during the first two quarters of 1995 also contributed to the
increase in net sales. The increase in net sales to retail customers was
due primarily to (i) sales of approximately $29.3 million to Preferred
Products, Inc. ("PPI", a wholly owned subsidiary of Supervalu, Inc.), which
were generated primarily under the long-term supply contract entered into
between the Company and PPI in the first quarter of 1995 (the "PPI
Contract"), and (ii) an increase in net sales to Sam's Club from
approximately $11.7 million in 1994 to approximately $23.4 million in 1995.
In 1995, net sales to government customers declined, as the Company chose
to bid on fewer government contracts, and net sales to food service
customers remained relatively unchanged compared to 1994. The Company was
outbid for Sam's Club business during the first quarter of 1996.
GROSS PROFIT. Gross profit in 1995 increased 50.6% to $47.1 million from
$31.2 million in 1994. Gross profit margin increased from 15.0% in 1994 to
16.9% in 1995. Although these increases appear significant, the gross
profit and gross profit margin for 1994 were unusually low due primarily to
the 1994 third quarter write-down of the Company's peanut inventory by
approximately $2.0 million, the underutilization of manufacturing capacity
added through the acquisition and renovation of facilities in 1994 and
1993, and approximately $1.5 million in costs incurred by the Company to
comply with new Federal nutritional labeling requirements that became
effective in 1994. The primary factors contributing to the increase in
gross profit and gross profit margin were (i) the absence of any such
write-down or new labeling requirements in 1995, (ii) the Company's ability
to spread manufacturing costs over a larger revenue base, and (iii) the
effect of a change in the Company's customer mix, as sales to retail
customers (which are generally at higher margins) comprised a higher
percentage, and sales to industrial, food service and government customers
(which are generally at lower margins) comprised a lower percentage, of the
Company's total net sales for 1995 compared to 1994. Generally higher
selling prices for certain of the Company's products during the first two
quarters of 1995 also contributed to the increases in gross profit and
gross profit margin. See "Factors that May Affect Future Results -- Growth
Initiatives."
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
as a percentage of net sales decreased from 12.4% in 1994 to 10.9% in 1995.
Selling expenses as a percentage of net sales decreased from 8.2% in 1994
to 7.3% in 1995. Administrative expenses as a percentage of net sales
decreased from 4.2% in 1994 to 3.6% in 1995. These decreases were due
primarily to the higher sales volume in 1995 compared to 1994.
INCOME FROM OPERATIONS. Due to the factors discussed above, income from
operations increased from $5.4 million in 1994 to $16.7 million in 1995, an
increase of $11.3 million, or 210.3%. As a percentage of net sales,
operating income increased from 2.6% in 1994 to 6.0% in 1995.
INTEREST EXPENSE. Interest expense increased from $6.0 million in 1994 to
$7.7 million in 1995, an increase of $1.7 million, or 27.6%. The increase
in interest expense for 1995 was due primarily to a higher average level of
borrowings during 1995 compared to 1994, as the Company financed certain
additional capital expenditures and its investment in inventory related to
its increased production capacity. Increases in the floating interest rate
applicable to borrowings under the working capital revolving loan component
of the Company's Prior Bank Credit Facility (as defined below) also
contributed to the increase in interest expense. The floating rate
increased as a result of increases generally in market rates of interest
(such as LIBOR and the prime rate) on which such interest rate is based,
and an increase in the interest rate applicable to the working capital
revolving loan component of the Prior Bank Credit Facility resulting from
certain amendments to the Bank Credit Facility in September of 1994. See
"Liquidity and Capital Resources" and Note 7 to the Consolidated Financial
Statements.
INCOME TAXES. Income tax expense in 1995 was $3.9 million, or 40.0% of
income before income taxes. See Note 3 to the Consolidated Financial
Statements.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
During 1996, the Company continued to finance its activities through (a) an
unsecured bank credit facility (the "Bank Credit Facility") which was
entered into on March 27, 1996, (b) an unsecured bank credit facility (the
"Prior Bank Credit Facility") which was replaced by the Bank Credit
Facility on March 27, 1996, (c) $35.0 million (net of principal repayments
made in accordance with the amortization schedule described below) borrowed
under an unsecured long-term financing facility originally entered into in
1992 (the "Long-Term Financing Facility"), and (d) $25.0 million borrowed
under an unsecured long-term financing arrangement entered into in 1995
(the "Additional Long-Term Financing"). As is more fully discussed in "--
Financing Arrangements", on January 24, 1997, the Company granted perfected
security interests in, and liens on, substantially all of the Company's
assets to secure the Company's obligations under the Bank Credit Facility,
the Long-Term Financing Facility and the Additional Long-Term Financing.
Net cash provided by operating activities was $20.5 in 1996 compared to
$14.0 in 1995 and net cash used in operating activities of $3.0 million in
1994. The largest components of net cash provided by operating activities
in 1996 were a reduction of inventories of approximately $19.3 million and
depreciation and amortization of approximately $8.6 million. Net cash
used in financing activities was approximately $10.1 million in 1996, as
the Company repaid approximately $3.8 million of long-term debt in 1996
(compared to $3.6 million in 1995) and short-term borrowings decreased by
$6.3 million (compared to $21.7 million in 1995, due to repayments thereof
made with the net proceeds obtained under the Additional Long-Term
Financing).
FINANCING ARRANGEMENTS
The Bank Credit Facility is comprised of (i) a working capital revolving
loan which (as described below, depending on the time of year) provides for
working capital financing of up to approximately $51.7 million, in the
aggregate, and matures on March 27, 1998, and (ii) an $8.3 million letter
of credit (the "IDB Letter of Credit") to secure the industrial development
bonds described below which matures on June 1, 1997. Borrowings under the
working capital revolving loan accrue interest at a rate (the weighted
average of which was 6.85% at December 31, 1996) determined pursuant to a
formula based on the agent bank's quoted rate, the Federal Funds Rate and
the Eurodollar Interbank Rate. The aggregate amount outstanding under the
Bank Credit Facility, as amended, is limited to specified amounts which
vary, because of the seasonal nature of the Company's business, from $60.0
million during January through March, to $50.0 million during April through
May, to $40.0 million during June through September, and to $50.0 million
during October through December. Of the total $35.0 million of borrowings
under the Long-Term Financing Facility, $25.0 million matures on August 15,
2004, bears interest at 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 described in
more detail below, the interest rates for all borrowings under the Long-
Term Financing Facility reflect an increase of 0.85% effective January 1,
1997, due to the Company not meeting the required ratio of (a) net income
plus interest expense to (b) senior funded debt for the year ended December
31, 1996. As of December 31, 1996, there was approximately $29.5 million
outstanding under the Long-Term Financing Facility. 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, beginning on September 1, 1999, 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 described below, on January 24, 1997, the Company
granted (a) a first priority perfected security interest in, and lien on,
substantially all the Company's assets to secure the Company's obligations
under the Bank Credit Facility, the Long-Term Financing Facility and the
senior portion of the Additional Long-Term Financing and (b) a junior
security interest in the Company's assets to secure the obligations under
the subordinated portion of the Additional Long-Term Financing.
On January 24, 1997, the Bank Credit Facility, the Long-Term Financing
Facility and the Additional Long-Term Financing were each required to be
amended in order to secure waivers from the Company's lenders of violations
(described in more detail below) by The Company of certain covenants under
its financing arrangements. The Bank Credit Facility was amended to, among
other things; (i) convert the fixed charge coverage ratio covenant from a
most recent four quarter calculation to an individual quarter calculation,
beginning with the calendar quarter ended December 31, 1996 and continuing
for each of the next four calendar quarters; (ii) decrease the annual
capital expenditure limitation to $7.2 million from $10.0 million in 1997;
and (iii) increase the aggregate amount outstanding limitation under the
Bank Credit Facility's "clean down covenant" to $40.0 million from $25.0
million for the period from August 1, 1997 through September 30, 1997. The
Long-Term Financing Facility was amended to, among other things, modify
existing financial covenants to conform to those contained in the Bank
Credit Facility, as amended. The Additional Long-Term Financing was
amended, to among other things; (i) replace the fixed charge coverage ratio
covenant for the fiscal quarters ending December, 1996 through June, 1997
with specified minimum levels of consolidated operating income and maximum
levels of interest expense for each quarter; and (ii) reduce the required
fixed charge ratio for the quarter ending September 25, 1997.
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 amount of
the Company's capital expenditures in 1996 to $8.2 million (excluding
certain expenditures related to the Fisher Nut business), in 1997 to $7.2
million and $10.0 million thereafter, 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 Bank Credit Facility and the Long-Term
Financing Facility limit 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 and the Long-Term Financing Facility prohibit the
Company from spending more than $1.0 million to redeem shares of capital
stock.
In 1995, the Company was in violation of the capital expenditure limitation
covenant under the Prior Bank Credit Facility and the Long-Term Financing
Facility. In March 1996, the banks waived the noncompliance with this
covenant during 1995. In February 1996, the Long-Term Financing Facility
was amended to increase the capital expenditure limitation for 1995.
As of the end of the second quarter of 1996, the Company was not in
compliance with the fixed charge coverage ratio covenant under the Bank
Credit Facility and the Additional Long-Term Financing. In addition, on
August 1, 1996, the Company violated the "clean down covenant" under the
Bank Credit Facility, which required that the aggregate amount outstanding
under the Bank Credit Facility from August 1 through September 30 of each
year not to exceed $25.0 million. As of August 1, 1996, the Company's
aggregate borrowings under the Bank Credit Facility totalled approximately
$35.0 million. On September 9, 1996, the Company entered into Amendment
No. 1 and Waiver to Credit Agreement ("Amendment No. 1") under the Bank
Credit Facility. Amendment No. 1 waived the Company's failure to comply
with the fixed charge coverage ratio covenant for the quarter ended June
27, 1996. Amendment No. 1 also amended the Bank Credit Facility's "clean
down covenant" to increase the aggregate amount of indebtedness permitted
to be outstanding under the Bank Credit Facility from August 1, 1996
through September 30, 1996 from $25.0 million to $40.0 million. Amendment
No. 1 also, among other things, (a) reduced the capital expenditure
limitation (excluding expenditures related to the Fisher Nut business) to
$8.2 million from $10.0 million for 1996, and (b) increased the interest
rate under the Bank Credit Facility by 0.50%. The Company also received
from its lender under (i) the Additional Long-Term Financing, a waiver of
the above described fixed charge coverage ratio violation and any cross-
default under the Additional Long-Term Financing caused by the above
described violations under the Bank Credit Facility, and (ii) the Long-Term
Financing Facility, a waiver of the cross-default under that facility
caused by the above described violation under the Bank Credit Facility and
the Additional Long-Term Financing.
As of the end of the third quarter of 1996, the Company was not in
compliance with the fixed charge coverage ratio covenants under the Bank
Credit Facility, the Long-Term Financing Facility and the Additional Long-
Term Financing. On October 30, 1996, the Company entered into Amendment
No. 2 and Waiver to Credit Agreement ("Agreement No. 2") under the Bank
Credit Facility. Amendment No. 2 required the Company to amend the Bank
Credit Facility to, among other things: (i) convert the fixed charge
coverage ratio covenant from a most recent four quarter calculation to an
individual quarter calculation, beginning with the calendar quarter ended
December 31, 1996 and continuing for each of the next four calendar
quarters; (ii) decrease the annual capital expenditure limitation to $7.2
million from $10.0 million for 1997; (iii) increase the aggregate amount
outstanding limitation under the Bank Credit Facility's "clean down
covenant" to $40.0 million from $25.0 million for the period from August 1,
1997 through September 30, 1997; and (iv) grant security interests in and
liens on substantially all of the Company's assets to secure the
obligations under the Company's financing arrangements. On January 24,
1997, the Company entered into Amendment No. 3 to Credit Agreement
("Agreement No. 3") under the Bank Credit Facility. Amendment No. 3, among
other things, fulfilled the above described requirements of Amendment No.
2. The Company also received from the lender under (i) the Additional
Long-Term Financing, a waiver of the above described fixed charge coverage
ratio violation and any cross-default under the Additional Long-Term
Financing caused by violations under the Bank Credit Facility and the Long-
Term Financing Facility and (ii) the Long-Term Financing Facility, a waiver
of the above described fixed charge coverage ratio violation and any cross-
default under the Long-Term Financing Facility caused by violations under
the Bank Credit Facility and the Additional Long-Term Financing. The
Company is in compliance with all restrictive covenants under its financing
arrangements at December 31, 1996.
The Company has $8.0 million in aggregate principal amount of industrial
development bonds outstanding which was used to finance the acquisition,
construction and equipping of the Company's Bainbridge, Georgia facility.
The bonds bear interest payable semi-annually at 6% through May 1997 and at
a market rate to be determined thereafter. On June 1, 1997, and on each
subsequent interest reset date for the bonds, the Company is required to
redeem the bonds at face value plus any accrued and unpaid interest, unless
a bondholder elects to retain his or her bonds. Any bonds redeemed by the
Company at the demand of a bondholder on the reset date are required to be
re-marketed by the underwriter of the bonds on a "best efforts" basis.
Funds for the redemption of bonds on the demand of any bondholder are
required to be obtained from the following sources in the following order
of priority: (i) funds supplied by the Company for redemption; (ii)
proceeds from the remarketing of the bonds; (iii) proceeds from a drawing
under the IDB Letter of Credit; or (iv) in the event funds from the
foregoing sources are insufficient, a mandatory payment by the Company.
Drawings under the IDB Letter of Credit to redeem bonds on the demand of
any bondholder are payable in full by the Company upon demand of the
lenders under the Bank Credit Facility. In addition, the Company is
required to redeem the bonds in varying annual installments, ranging from
$170,000 to $780,000, beginning in 1998 and continuing through 2017. The
Company is also required to redeem the bonds in certain other
circumstances; for example, within 180 days after any determination that
interest on the bonds is taxable. The Company has the option, subject to
certain conditions, to redeem the bonds at face value plus accrued
interest, if any.
SIGNIFICANT ACQUISITIONS AND CAPITAL EXPENDITURES
The Company completed the first step of the acquisition of certain assets,
and the assumption of certain liabilities, of the Fisher Nut business from
The Procter & Gamble Company and its affiliates (the "Fisher Transaction")
on November 6, 1995 and the final step on January 10, 1996. The Fisher
Transaction was divided into several parts, with the Company acquiring: (i)
the Fisher trademarks, brand names, product formulas and other intellectual
and proprietary property for $5.0 million, paid at closing; (ii) certain
specified items of machinery and equipment for approximately $1.3 million,
payable pursuant to a promissory note dated January 10, 1996 (secured by
such machinery and equipment) bearing interest at an annual rate of 8.5%
and requiring eight equal quarterly installments of principal (plus accrued
interest) commencing in June 1996; (iii) certain of the raw material and
finished goods inventories of the Fisher Nut business for approximately
$15.8 million, payable monthly, in cash, in amounts based on the amount of
such inventories actually used by the Company during each month with a
final payment of the balance, if any, of the purchase price on March 31,
1996; and (iv) substantially all of the packaging materials of the Fisher
Nut business for approximately $1.1 million, payable monthly, in cash, in
amounts based on the amount of such materials actually used by the Company
during each month with a final payment of the balance, if any, of the
purchase price on November 6, 1996.
In addition, the Company spent a total of $58.7 million in capital
expenditures over the past four fiscal years in connection with the
following projects: (i) approximately $9.2 million ($1.3 million in 1994
and $7.9 million in 1993) as the total cost of constructing and equipping
its inshell peanut processing facility in Garysburg, North Carolina; (ii)
approximately $11.2 million ($8.0 million in 1994 and $3.2 million in 1993)
as the total cost of renovating, installing a new almond processing line
and moving Sunshine's operations to the Company's processing facility in
Selma Texas; (iii) approximately $11.9 million ($8.4 million in 1994 and
$3.5 million in 1993) as the total cost of acquiring the walnut shelling
processing and marketing operations and facilities of Crane Walnut Orchards
and constructing certain improvements at and renovations to the Crane
facility; (iv) approximately $2.8 million ($2.3 million in 1994 and $0.5
million in 1993) as the total cost to construct a 60,000 square foot
addition to the Company's Busse Road facility; (v) approximately $3.1
million in 1994 as the total cost to construct certain improvements at the
Company's peanut shelling facility in Bainbridge, Georgia; (vi)
approximately $9.4 million ($1.8 million in 1995 and $7.6 million in 1994)
as the total cost to acquire, renovate and equip the Company's processing
facility in Arlington Heights, Illinois; and (vii) approximately $11.1
million ($2.7 million in 1996, $4.5 million in 1995 and $3.9 million in
1994) as the total cost to move the Company's existing Des Plaines,
Illinois pecan processing operations to the Selma, Texas facility. In
addition to the above listed expenditures, the Company spent approximately
$3.4 million in 1996 for capital expenditures related to the Fisher Nut
business. With the exception of the purchase price for the Arlington
Heights facility (which was fully financed with the proceeds of a $2.5
million first mortgage loan) and approximately $1.3 million for the 1996
Fisher related expenditures (which was financed through a promissory note)
all of the foregoing capital expenditures were funded with proceeds
borrowed under a combination of the Bank Credit Facility, the Prior Bank
Credit Facility and the Long-Term Financing Facility. Because the Company
applied its borrowings under the Additional Long-Term Financing Facility in
September 1995 to the partial repayment of the amount of indebtedness then
outstanding under the Prior Bank Credit Facility, substantially all of the
foregoing capital expenditures were financed through long-term borrowings.
STOCK REPURCHASE
On February 25, 1994, the Company's Board of Directors authorized the
purchase from time to time of up to an aggregate of 500,000 shares of
Common Stock. Pursuant to such authorization, the Company repurchased
117,900 shares of Common Stock at an aggregate price of $1.2 million during
1994. Repurchased shares may be reissued to fulfill stock option exercises
under the Company's stock option plans or to finance future acquisitions.
The Company did not make any stock repurchases during 1996 and 1995.
CAPITAL RESOURCES
As of March 14, 1997, the Company had approximately $18.5 million of
available credit under the Bank Credit Facility. The Company currently
expects to spend up to a total of $7.2 million in 1997 to purchase certain
processing and other machinery and equipment. The Company believes that
cash flow from operations and funds available under the Bank Credit
Facility will be sufficient to meet working capital requirements and
anticipated capital expenditures for 1997. See "Factors That May Affect
Future Results -- Growth Initiatives".
FACTORS THAT MAY AFFECT FUTURE RESULTS
GROWTH INITIATIVES
Over the past four years, the Company has substantially increased its
shelling, processing and manufacturing capacity by a combination of
strategic acquisitions and improvements and expansions of its facilities.
The Company has increased its borrowings to finance these acquisitions,
improvements and expansions, as well as its increased costs of operations
and increased investments in inventory related to the resulting increased
production capacity. Underutilization of its increased production capacity
has had a negative impact on the Company's gross profit and gross profit
margin. Until such time as the Company is able to more fully utilize its
increased production capacity through further increases in its sales
volume, the Company's results of operations may continue to be adversely
affected. Furthermore, although the Company believes that cash flow from
operations and funds available under its credit facilities (assuming the
Company maintains compliance with its covenants under its financing
arrangements) will be sufficient to meet the Company's working capital
requirements and anticipated capital expenditures for 1997, there can be no
assurance that such cash flow and credit availability will be sufficient to
meet future capital requirements or that the Company will remain in
compliance with such covenants. The Company strives to update and improve
its management information systems to ensure their adequacy. Although the
Company believes that its management information systems currently provide
the Company with the information necessary to manage its businesses, there
can be no assurance that the Company's management information systems will
meet the Company's future requirements. See "Liquidity and Capital
Resources -- Financing Arrangements" and "Liquidity and Capital Resources -
- - Capital Resources."
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 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. For example, during the third quarter of
1996 the Company was required to record a $2.6 million charge against its
earnings to reflect the impact of a lower of cost or market adjustment of
its pecan inventory. The Company was also required to write down its
peanut inventory in the third quarter of 1994 to reflect declines in the
market price of peanuts. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition -- Results of Operations".
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."
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 JBSS, such as Planters
Lifesavers Company (a subsidiary of RJR Nabisco, Inc.). JBSS 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.
SALES TO INDUSTRIAL CUSTOMERS
The increase in the Company's processing and shelling capacity created by
its facility construction and expansion programs over the past four years
and increased sales by Sunshine may result in further increases in net
sales to industrial customers, both in amount and as a percentage of the
Company's total sales. Because sales to industrial customers are generally
made at lower margins than sales to other customers, increases in such
sales may adversely affect the Company's profit margins.
FIXED PRICE COMMITMENTS
From time to time, the Company enters into fixed price commitments with its
customers. However, such commitments typically represent 10% or less of
the Company's annual net sales and are normally only entered into after the
Company's cost to acquire the nut products necessary to satisfy the fixed
price commitment is substantially fixed. The Company will continue to
enter into fixed price commitments in 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, however, 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.
FEDERAL REGULATION OF PEANUT PRICES, QUOTAS AND POUNDAGE ALLOTMENTS
Approximately 50% of the total pounds of products processed by the Company
during 1996, 1995, and 1994 were peanuts, peanut butter and other products
containing peanuts. The Company purchases a majority of its peanut
requirements directly from growers and obtains its remaining requirements
from other shellers. The supply of peanuts is subject to federal
regulations which restrict peanut imports and the tonnage of peanuts
farmers may market domestically. These regulations create market
conditions which may not be indicative of conditions that would prevail if
the federal program were eliminated. The 1996 Farm Bill extended the
federal support and subsidy programs for peanuts for seven years. The
federal price support for peanuts is $610 per ton.
The North American Free Trade Agreement ("NAFTA"), effective January 1,
1994, committed the United States, Mexico and Canada to the elimination of
quantitative restrictions and tariffs on the cross-border movement of
industrial and agricultural products. Under NAFTA, United States import
restrictions on Mexican shelled and inshell peanuts are replaced by a
tariff rate quota, initially set at 3,377 tons, which will grow by a 3%
compound rate over a 15-year transition period. In-quota shipments enter
the U.S. duty-free, while above-quota imports from Mexico face tariff rates
equivalent to approximately 120% on shelled and 185% on inshell peanuts.
The tariff rates are being phased out at a rate of 15% per year in each of
the years 1994 through 1999, with the remaining tariff rate to be phased
out in equal installments over the years 2000 through 2008.
The Uruguay Round Agreement of the General Agreement on Trade and Tariffs
("GATT") took effect on July 1, 1995. Under GATT, the United States must
allow peanut imports to grow to 5% of domestic consumption within six
years. Import quotas on peanuts have been replaced by high ad valorem
tariffs, which must be reduced 15% annually. The United States may limit
imports of peanut butter, but must establish a tariff rate quota for peanut
butter imports based on 1993 import levels. Peanut butter imports above
the quota will be subject to an over-quota ad valorem tariff, which will be
reduced by 15% annually.
Although NAFTA and GATT do not directly affect the federal peanut program,
the federal government may, in future legislative initiatives, reconsider
the federal peanut program in light of these agreements. The Company does
not believe that NAFTA and GATT have had a material impact on the Company's
business or will have a material impact on the Company's business in the
near term.
Changes in the federal peanut program could significantly affect the supply
of, and price for, peanuts. While JBSS has successfully operated in a
market shaped by the federal peanut program for many years, JBSS believes
that it could adapt to a market without federal regulation. However, JBSS
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 JBSS'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.
REPORT OF MANAGEMENT
The management of John B. Sanfilippo & Son, Inc. has prepared and is
responsible for the integrity of the information presented in this Annual
Report, including the Company's financial statements. These statements have
been prepared in conformity with generally accepted accounting principles
and include, where necessary, informed estimates and judgments by
management.
The Company maintains systems of accounting and internal controls designed
to provide assurance that assets are properly accounted for, as well as to
ensure that the financial records are reliable for preparing financial
statements. The systems are augmented by qualified personnel and are
reviewed on a periodic basis.
Our independent auditors, Price Waterhouse LLP, conduct annual audits of our
financial statements in accordance with generally accepted auditing
standards which include the review of internal controls for the purpose of
establishing audit scope, and issue an opinion on the fairness of such
financial statements.
The Company has an Audit Committee that meets periodically with management
and the independent auditors to review the manner in which they are
performing their responsibilities and to discuss auditing, internal
accounting controls, and financial reporting matters. The independent
auditors periodically meet alone with the Audit Committee and have free
access to the Audit Committee at any time.
/s/ Gary P. Jensen
- ------------------
Gary P. Jensen
Executive Vice President, Finance
& Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
John B. Sanfilippo & Son, Inc.
In our opinion, the accompanying consolidated balance sheets, and the
related consolidated statements of operations, of stockholders' equity and
of cash flows present fairly, in all material respects, the financial
position of John B. Sanfilippo & Son, Inc. and its subsidiaries at
December 31, 1996 and 1995, and the results of their operations and their
cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Chicago, Illinois
February 13, 1997
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and December 31, 1995
(dollars in thousands)
1996 1995
-------- --------
ASSETS
CURRENT ASSETS:
Cash $ 602 $ 408
Accounts receivable, including affiliate
receivables of $170 and $237, respectively,
less allowance for doubtful accounts of
$676 and $434, respectively (Notes 6 and 10) 27,386 27,789
Inventories (Notes 1, 4 and 10) 77,105 96,360
Stockholder note receivable (Notes 6 and 10) -- 354
Deferred income taxes (Note 3) 1,056 762
Income taxes receivable (Note 3) 2,209 --
Prepaid expenses and other current assets 824 682
-------- --------
TOTAL CURRENT ASSETS 109,182 126,355
-------- --------
PROPERTIES (Notes 1, 8 and 10):
Buildings 55,259 47,831
Machinery and equipment 64,353 52,825
Furniture and leasehold improvements 4,940 4,813
Vehicles 4,057 3,494
Construction in progress -- 8,977
-------- --------
128,609 117,940
Less: Accumulated depreciation 50,000 42,854
-------- --------
78,609 75,086
Land 1,945 1,945
-------- --------
80,554 77,031
-------- --------
OTHER ASSETS:
Goodwill and other intangibles (Note 1) 9,128 9,450
Miscellaneous 6,488 6,166
-------- --------
15,616 15,616
-------- --------
$205,352 $219,002
======== ========
The accompanying notes are an integral part of these financial statements.
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and December 31, 1995
(dollars in thousands, except per share amounts)
1996 1995
-------- --------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 7) $ 22,294 $ 28,582
Current maturities of long-term debt (Note 8) 12,697 3,586
Accounts payable, including affiliate
payables of $538 and $1,071 (Notes 6 and 10) 23,843 26,727
Accrued expenses 9,392 8,668
Income taxes payable (Note 3) -- 644
-------- --------
TOTAL CURRENT LIABILITIES 68,226 68,207
-------- --------
LONG-TERM LIABILITIES
Long-term debt (Note 8) 63,319 74,681
Deferred income taxes (Note 3) 1,187 503
-------- --------
64,506 75,184
-------- --------
STOCKHOLDERS' EQUITY (Notes 2 and 11):
Preferred Stock, $.01 par value; 500,000
shares authorized, none issued or
outstanding -- --
Class A Common Stock, cumulative voting
rights of ten votes per share, $.01 par
value; 10,000,000 shares authorized,
3,687,426 shares issued and outstanding 37 37
Common Stock, noncumulative voting rights
of one vote per share, $.01 par value;
10,000,000 shares authorized, 5,578,140
shares issued and outstanding 56 56
Capital in excess of par value 57,191 57,191
Retained earnings 16,540 19,531
Treasury stock, at cost (1,204) (1,204)
-------- --------
72,620 75,611
-------- --------
COMMITMENTS (Notes 7, 8, 9, and 12)
$205,352 $219,002
======== ========
The accompanying notes are an integral part of these financial statements.
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1996, 1995 and 1994
(dollars in thousands, except for earnings per share)
Year Ended December 31,
---------------------------------
1996 1995 1994
-------- -------- --------
Net sales $294,404 $277,741 $208,970
Cost of sales 255,204 230,691 177,728
-------- -------- --------
Gross profit 39,200 47,050 31,242
-------- -------- --------
Selling expenses 23,909 20,231 17,137
Administrative expenses 11,501 10,107 8,720
-------- -------- --------
35,410 30,338 25,857
-------- -------- --------
Income from operations 3,790 16,712 5,385
-------- -------- --------
Other income (expense):
Interest expense ($899, $936 and
$985 to affiliates)(Note 8) (9,051) (7,673) (6,015)
Interest income ($7, $135 and $579
from affiliates)(Notes 5, 6 and 10) 27 188 673
Gain (loss) on disposition of properties 12 26 (40)
Rental income (Notes 8 and 10) 411 393 256
-------- -------- --------
(8,601) (7,066) (5,126)
-------- -------- --------
(Loss) income before income taxes (4,811) 9,646 259
Income tax benefit (expense) (Note 3) 1,820 (3,858) (210)
-------- -------- --------
Net (loss) income $ (2,991) $ 5,788 $ 49
======== ======== ========
(Loss) earnings per common share $ (0.33) $ 0.63 $ 0.00
======== ======== ========
Weighted average shares outstanding 9,147,666 9,070,000 8,990,946
========= ========= =========
The accompanying notes are an integral part of these financial statements.
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1996, 1995 and 1994
(dollars in thousands, except per share amounts)
Class A Capital in
Common Common Excess of Retained Treasury
Stock Stock Par Value Earnings Stock Total
---------------------------------------------------
Balance, December 31, 1993
(Note 2) $ 37 $ 54 $ 55,462 $ 13,694 $ -- $69,247
Net income -- -- -- 49 -- 49
Repurchase of 117,900
shares of Common Stock
(Note 2) -- -- -- -- (1,204) (1,204)
------- ------ ---------- -------- -------- -------
Balance, December 31, 1994
(Note 2) 37 54 55,462 13,743 (1,204) 68,092
Net income -- -- -- 5,788 -- 5,788
Issuance of 185,990 shares
of Common Stock (Note 2) -- 2 1,729 -- -- 1,731
------- ------ ---------- -------- -------- -------
Balance, December 31, 1995
(Note 2) 37 56 57,191 19,531 (1,204) 75,611
Net loss -- -- -- (2,991) -- (2,991)
------- ------ ---------- -------- -------- -------
Balance, December 31, 1996
(Note 2) $ 37 $ 56 $ 57,191 $ 16,540 $(1,204) $72,620
======= ====== ========== ======== ======== =======
The accompanying notes are an integral part of these financial statements.
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996, 1995 and 1994
(dollars in thousands)
1996 1995 1994
-------- -------- --------
Cash flows from operating activities:
Net income $ (2,991) $ 5,788 $ 49
Adjustments:
Depreciation and amortization 8,629 7,551 6,006
(Gain)loss on disposition of
properties (8) (26) 40
Deferred income taxes 390 621 (160)
Change in current assets and
current liabilities:
Accounts receivable, net 403 (5,165) (2,939)
Inventories 19,255 (7,345) (14,308)
Prepaid expenses and other
current assets (142) 1,455 (231)
Accounts payable (2,884) 7,124 7,509
Accrued expenses 724 3,365 2,231
Income taxes receivable/payable (2,853) 644 (1,218)
-------- -------- --------
Net cash provided by (used in)
operating activities 20,523 14,012 (3,021)
Cash flows from investing activities:
Acquisition of properties (9,198) (13,517) (30,884)
Proceeds from disposition of properties 13 50 31
Stockholder note receivable 354 200 200
Purchase of Fisher Nut business -- (5,779) --
Note receivable from affiliate,
net of repayments -- 5,790 146
Other (1,437) (3,268) (682)
-------- -------- --------
Net cash used in investing activities (10,268) (16,524) (31,189)
-------- -------- --------
Cash flows from financing activities:
Borrowings on notes payable 76,739 87,359 108,358
Repayments on notes payable (83,028) (109,073) (81,257)
Principal payments on long-term debt (3,772) (3,591) (1,321)
Proceeds from issuance of long-term debt -- 27,500 10,010
Payments to acquire treasury stock -- -- (1,204)
Proceeds from issuance of Common Stock -- 210 --
Dividends paid -- -- (454)
-------- -------- --------
Net cash (used in) provided by
financing activities (10,061) 2,405 34,132
-------- -------- --------
Net increase (decrease) in cash 194 (107) (78)
Cash:
Beginning of year 408 515 593
-------- -------- --------
End of year $ 602 $ 408 $ 515
-------- -------- --------
Supplemental disclosures of cash
flow information:
Interest paid $ 8,785 $ 7,229 $ 5,747
Taxes paid 1,187 2,959 2,078
Supplemental schedule of noncash
investing and financing activities:
Note receivable issued on sale of
property -- -- 10
Capital lease obligation incurred 270 -- 8
Acquisition of Machine Design
Incorporated -- 1,520 --
Acquisition of Fisher Nut properties
payable pursuant to a promissory note 1,250 -- --
The accompanying notes are an integral part of these financial statements.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of John B.
Sanfilippo & Son, Inc. and its wholly owned subsidiaries, including
Sunshine Nut Co., Inc. (collectively, "JBSS" or the "Company").
Intercompany balances and transactions have been eliminated.
NATURE OF BUSINESS
The Company processes and sells shelled and inshell nuts and other snack
foods in both retail and wholesale markets. The Company has plants
located throughout the United States. Revenues are generated from sales
to a variety of customers, including several major retailers and the
U.S. government. Revenues are recognized as products are shipped to
customers. The related accounts receivable from sales are unsecured.
ACQUISITIONS
On November 6, 1995, the Company completed the first step in its
acquisition of certain assets, and the assumption of certain
liabilities, of the Fisher Nut business from The Procter & Gamble
Company and its affiliates (the "Fisher Transaction"). The Fisher
Transaction was divided into several parts, with the Company acquiring:
(i) the Fisher trademarks, brand names, product formulas and other
intellectual and proprietary property for $5,000, paid on November 6,
1995; (ii) certain specified items of machinery and equipment for
$1,250, payable pursuant to a promissory note dated January 10, 1996
(secured by such machinery and equipment), bearing interest at an annual
rate of 8.5% and requiring eight equal quarterly installments of
principal (plus accrued interest) commencing in June 1996; (iii) certain
of the raw material and finished goods inventories of the Fisher Nut
business for $15,789, payable monthly, in cash, in amounts based on the
amounts of such inventories actually used by the Company during each
month with a final payment of the balance, if any, of the purchase price
on March 31, 1996; and (iv) substantially all of the packaging materials
of the Fisher Nut business for $1,128, payable monthly, in cash, in
amounts based on the amount of such materials actually used by the
Company during each month with a final payment of the balance, if any,
of the purchase price on November 6, 1996. The acquisition was
accounted for in accordance with the purchase method of accounting with
the purchase price being allocated to the specific assets based upon
their estimated fair value. The intangible assets are being amortized
on a straight-line basis over 15 years. Amortization expense in 1996
and 1995 was $409 and $64, respectively.
The following represents the unaudited pro forma results of operations
as if the Fisher Transaction had occurred at the beginning of the
periods presented and reflect estimated purchase accounting and other
adjustments related to the acquisition.
(Unaudited)
1995 1994
-------- --------
Net sales $319,540 $263,818
======== ========
Net (loss) $ (7,960) $(12,495)
======== ========
(Loss) per common share $ (0.88) $ (1.39)
======== ========
The pro forma financial information is not necessarily indicative of the
results of operations that would have been obtained if the Fisher
Transaction had taken place at the beginning of the period presented or
of future results of operations.
On September 27, 1995, the Company purchased the Arlington Heights,
Illinois facility which it originally leased and renovated in connection
with its contract manufacturing arrangement with the Fisher Nut Company.
The purchase price for the Arlington Heights facility was approximately
$2,235 and was financed pursuant to a first mortgage loan of $2,500.
The remaining $265 was used to temporarily reduce the amount outstanding
under the Company's Prior Bank Credit Facility (as defined in Note 7).
On June 2, 1995, the Company acquired, for $150, the Flavor Tree
trademark and substantially all of the assets relating to the products
manufactured and sold under that trademark (including certain inventory)
from the Dolefam Corporation. The acquisition was accounted for in
accordance with the purchase method of accounting.
On May 31, 1995, The Company acquired 100% of the issued and outstanding
stock of Machine Design Incorporated ("Machine Design") from Machine
Design's then existing stockholders (the "Sellers") for shares of the
Company's Common Stock, $.01 par value per share (the "Common Stock"),
valued at approximately $1,520. The acquisition of Machine Design,
which owns several patents pertaining to nut cracking equipment, but is
otherwise not engaged in any active business, was structured as a merger
of a newly formed, wholly owned subsidiary of the Company into Machine
Design, with Machine Design continuing after the merger as the surviving
corporation. The Company issued, on May 31, 1995, 164,342 shares of
Common Stock, valued for purposes of the acquisition at $9.25 per share,
in payment of the $1,520 purchase price for Machine Design. Pursuant to
the Merger Agreement for the acquisition, the Company also issued an
additional 21,648 shares of Common Stock to the Sellers on June 13,
1995, valued for purposes of the acquisition at $9.70 per share, for
$210 in cash that was included in the assets of Machine Design as of the
closing date of the acquisition. The acquisition was accounted for in
accordance with the purchase method of accounting with the purchase
price being allocated to the specific assets based upon their estimated
fair value. The acquisition consisted of patents only, which are being
amortized on a straight-line basis over six years. Amortization expense
during 1996 and 1995 was $261 and $152, respectively.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market. The value of inventory may be impacted by market price
fluctuations.
PROPERTIES
Properties are stated at cost. Cost, less the estimated salvage value,
is depreciated using the straight-line method over the following
estimated useful lives: buildings -- 30 to 40 years, machinery and
equipment -- 5 to 10 years, furniture and leasehold improvements -- 5 to
10 years and vehicles -- 3 to 5 years.
The cost and accumulated depreciation of assets sold or retired are
removed from the respective accounts, and any gain or loss is recognized
currently. Maintenance and repairs are charged to operations as
incurred.
Certain lease transactions relating to the financing of buildings are
accounted for as capital leases, whereby the present value of future
rental payments, discounted at the interest rate implicit in the lease,
is recorded as a liability. A corresponding amount is capitalized as
the cost of the assets and amortized on a straight-line basis over the
estimated lives of the assets or over the lease terms which range from
20 to 30 years, whichever is lower. See also Note 8.
EARNINGS PER COMMON SHARE
Earnings per common share are calculated using the weighted average
number of shares of Common Stock and Class A Common Stock outstanding
during the period. Common stock equivalents (stock options) had an
immaterial effect on 1995 and 1994 earnings per share and, accordingly,
have not been included in the weighted average shares outstanding.
Fully diluted earnings per common share, which include the effect of
conversion of common stock equivalents and a convertible debenture, for
1995 and 1994 are not materially different from the earnings per share
presented. Common stock equivalents were not used in the 1996 earnings
per share calculation as they were anti-dilutive.
INCOME TAXES
The Company accounts for income taxes using an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been reported in the Company's financial statements or tax returns. In
estimating future tax consequences, the Company considers all expected
future events other than changes in tax law or rates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Based on borrowing rates presently available to the Company under
similar borrowing arrangements, the Company believes the recorded amount
of its long-term debt obligations approximates fair market value. The
carrying amount of the Company's other financial instruments
approximates their estimated fair value based on market prices for the
same or similar type of financial instruments.
COMPANY CUSTOMERS
The highly competitive nature of the Company's business provides an
environment for the loss of customers and the opportunity for new
customers.
Gross sales to one customer in 1996 and 1995 were $34,770, 11.7% and
$29,297, 10.4%, respectively, of total gross sales.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
GOODWILL AND OTHER LONG-LIVED ASSETS
During 1996, the Company adopted Statement of Financial Accounting
Standards No. 121. Under FAS 121, the Company reviews the carrying
value of goodwill and other long-lived assets for impairment when events
or changes in circumstances indicate that the carrying amount of the
asset may not be recoverable. This review is performed by comparing
estimated undiscounted future cash flows from use of the asset to the
recorded value of the asset.
NOTE 2 - COMMON STOCK
CAPITAL STOCK TRANSACTIONS
The Company's Class A Common Stock, $.01 par value (the "Class A
Stock"), has cumulative voting rights with respect to the election of
those directors which the holders of Class A Stock are entitled to
elect, and 10 votes per share on all other matters on which holders of
the Company's Class A Stock and Common Stock are entitled to vote. In
addition, each share of Class A Stock is convertible at the option of
the holder at any time into one share of common stock and automatically
converted into one share of common stock upon any sale or transfer other
than related individuals. Each share of the Company's Common Stock,
$.01 par value (the "Common Stock") has noncumulative voting rights of
one vote per share. The Class A Stock and the Common Stock are entitled
to share equally, on a share-for-share basis, in any cash dividends
declared by the Board of Directors and the holders of the Common Stock
are entitled to elect 25% of the members comprising the Board of
Directors.
On February 25, 1994, the Company's Board of Directors authorized the
purchase from time to time of up to an aggregate of 500,000 shares of
Common Stock. Pursuant to such authorization, the Company repurchased
117,900 shares of Common Stock at an aggregate price of $1,204 during
1994. The Company intends to reissue repurchased shares to fulfill
stock option exercises under its stock option plans or to finance future
acquisitions.
On May 31, 1995, the Company issued 164,342 shares of Common Stock in
payment of the purchase price for Machine Design of $1,520. For purposes
of the acquisition the Common Stock was valued at $9.25 per share. On
June 13, 1995, the Company issued an additional 21,648 shares of Common
Stock valued at $9.70 per share, in exchange for $210 in cash that was
included in the assets of Machine Design as of the closing.
NOTE 3 - INCOME TAXES
The (benefit) provisions for income taxes for the years ended December
31, 1996, 1995 and 1994 are as follows:
1996 1995 1994
------- ------- -------
Current:
Federal $(1,870) $ 2,496 $ 309
State (340) 741 61
Deferred 390 621 (160)
------- ------- -------
$(1,820) $ 3,858 $ 210
======= ======= =======
The differences between income taxes at the statutory federal income tax
rate of 34% and income taxes reported in the statements of income for
the years ended December 31, 1996, 1995 and 1994 are as follows:
1996 1995 1994
------- ------- -------
Federal statutory income tax rate 34.0% 34.0% 34.0%
State income and replacement taxes,
net of federal benefit 4.7 5.1 8.5
Adjustments to prior year liability -- -- 13.5
Nondeductible items, principally
goodwill (2.0) 0.8 24.7
Other 1.1 0.1 0.4
------- ------- -------
37.8% 40.0% 81.1%
======= ======= =======
The deferred tax assets and liabilities are comprised of the following:
December 31,
-------------------------------------------
1996 1995
Asset Liability Asset Liability
-------------------------------------------
Current:
Provision for doubtful accounts $ 270 $ -- $ 174 $ --
Employee compensation 363 -- 331 --
Inventory 75 -- 20 --
Other 348 -- 237 --
------ ------- ------ ---------
1,056 -- 762 --
------ ------- ------ ---------
Long-Term:
Depreciation -- 3,051 -- 2,028
Capitalized leases 1,312 -- 1,133 --
Other 552 -- 392 --
------ ------- ------ ---------
1,864 3,051 1,525 2,028
------ ------- ------ ---------
Total $2,920 $ 3,051 $2,287 $ 2,028
====== ======= ====== =========
NOTE 4 - INVENTORIES
Inventories consist of the following:
December 31,
------------
1996 1995
--------------------
Raw material and supplies $48,213 $70,465
Work-in-process and finished goods 28,892 25,895
------- -------
$77,105 $96,360
======= =======
NOTE 5 - NOTE RECEIVABLE FROM AFFILIATE
On September 29, 1992, the Company loaned $6,223 to a partnership,
certain partners of which are also directors, officers and/or
stockholders of the Company, which owns a building under capital
lease with the Company. The loan was secured by a first mortgage
on the building and by a secured promissory note which accrued
interest at the rate of 8.72% per annum and was payable in equal
monthly installments of principal and interest of $55 each over a
period of 20 years. The Company recognized $96 and $524 of
interest income in 1995 and 1994, respectively, relating to the
note receivable. On March 7, 1995, the partnership repaid the
secured promissory note in full and the Company released its
mortgage on the building.
NOTE 6 - INVESTMENT IN NAVARRO PECAN COMPANY, INC.
Effective August 31, 1991, the Company assigned all of its rights
in advances to Navarro Pecan Company, Inc. ("Navarro") to a
director, officer and stockholder of the Company for a purchase
price of $1,154, which represented the aggregate amount of
principal and interest outstanding under the advances. The
purchase price for the Navarro advances was payable pursuant to a
promissory note which bore interest at 8% per year and required
quarterly principal installments of $50, plus interest through
March 1996. During 1996, 1995 and 1994, the Company recognized
$7, $39 and $55, respectively, of interest income relating to this
note receivable. This promissory note was fully paid in 1996
under the terms and conditions set forth upon its origination.
The Company purchased inventory from Navarro during 1996, 1995 and
1994 aggregating $532, $1,205 and $148, respectively. Accounts
payable to Navarro aggregated $793 at December 31, 1995. The
Company sold inventory to Navarro aggregating $1,233, $1,209 and
$806 during 1996, 1995 and 1994, respectively. Accounts
receivable from Navarro aggregated $143 and $229 at December 31,
1996 and 1995 respectively.
NOTE 7 - NOTES PAYABLE
Notes payable consist of the following:
December 31,
------------
1996 1995
-----------------------
Revolving bank loan $22,294 $28,582
======= =======
Prior to March 27, 1996, the Company had an unsecured credit
facility with certain banks (the "Prior Bank Credit Facility"),
totalling $60,000. The Prior Bank Credit Facility included a
$51,740 revolving credit line which bore interest at a rate
determined pursuant to a formula based on the market rate for
bankers' acceptances, LIBOR and prime rate, and an $8,260 standby
letter of credit to secure the industrial development bonds
discussed in Note 8. The weighted average interest rate on
borrowings outstanding under the Prior Bank Credit Facility at
December 31, 1995 was 8.11%.
On March 27, 1996, the Company entered into a new unsecured credit
facility, with certain banks, totalling $60,000 (the "Bank Credit
Facility"). The Bank Credit Facility is comprised of (i) a
working capital revolving loan which (as described below,
depending on the time of year) provides for working capital
financing of up to approximately $51,740, in the aggregate, and
matures on March 27, 1998, and (ii) an $8,260 standby letter of
credit which matures on June 1, 1997. The Bank Credit Facility
replaced the Prior Bank Credit Facility which was in effect until
the Bank Credit Facility was entered into. Borrowings under the
working capital revolving loan accrue interest at a rate (the
weighted average of which was 6.85% at December 31, 1996)
determined pursuant to a formula based on the agent bank's quoted
rate, the Federal Funds Rate and the Eurodollar Interbank Rate.
The standby letter of credit replaced a prior letter of credit
securing certain industrial development bonds which financed the
original acquisition, construction, and equipping of the Company's
Bainbridge, Georgia facility. The aggregate amount outstanding
under the Bank Credit Facility, as amended, is limited to
specified amounts which vary, because of the seasonal nature of
the Company's business, from $60,000 during January through March,
to $50,000 during April through May, to $40,000 during June
through September, to $50,000 during October through December.
As of the end of the second quarter of 1996, the Company was not
in compliance with the fixed charge coverage ratio covenant under
the Bank Credit Facility. In addition, on August 1, 1996, the
Company violated the "clean down covenant" under the Bank Credit
Facility, which required that the aggregate amount outstanding
under the Bank Credit Facility from August 1 through September 30
of each year not exceed $25,000. As of August 1, 1996, the
Company's aggregate borrowings under the Bank Credit Facility
totalled approximately $35,000. On September 9, 1996, the Company
entered into an Amendment No. 1 and Waiver to Credit Agreement
("Amendment No. 1") under the Bank Credit Facility. Amendment
No. 1 waived the Company's failure to comply with the fixed charge
coverage ratio covenant for the quarter ended June 27, 1996.
Amendment No. 1 also amended the Bank Credit Facility's "clean
down covenant" to increase the aggregate amount of indebtedness
permitted to be outstanding from August 1, 1996 through September
30, 1996, from $25,000 to $40,000. Amendment No. 1 also, among
other things, (a) reduced the capital expenditure limitation
(excluding expenditures related to the Fisher Nut business) to
$8,200 from $10,000 for 1996, and (b) increased the interest rate
under the Bank Credit Facility by 0.50%.
As of the end of the third quarter of 1996, the Company was not in
compliance with the fixed charge coverage ratio covenant under the
Bank Credit Facility. The Company entered into an Amendment No. 2
and Waiver to Credit Agreement ("Amendment No 2") as of October
30, 1996 under the Bank Credit Facility. Amendment No. 2 waived
the Company's failure to comply with the fixed charge coverage
ratio covenant for the quarter ended September 26, 1996.
Amendment No. 2 also required the Company to amend the Bank Credit
Facility to, among other things: (i) convert the fixed charge
coverage ratio covenant from a most recent four quarter
calculation to an individual quarter calculation, beginning with
the quarter ending December 31, 1996 and continuing for each of
the next four quarters; (ii) decrease the annual capital
expenditure limitation to $7,200 from $10,000 for 1997; (iii)
increase the aggregate amount outstanding limitation under the
Bank Credit Facility's "clean down covenant" to $40,000 from
$25,000, for the period from August 1, 1997 through September 30,
1997; and (iv) grant, (a) a first priority perfected security
interest in, and liens on, substantially all of the Company's
assets to secure the Company's obligations under the Bank Credit
Facility and the senior portions of its long-term financing
arrangements, which are described in Note 8; and (b) a junior
security interest in the Company's assets to secure the
obligations under the subordinated portion of its long-term
financing arrangements.
On January 24, 1997, the Company granted the above-described
security-interests to secure the Company's obligations under the
Bank Credit Facility and the Company's long-term financing
arrangements and entered into an Amendment No. 3 to Credit
Agreement ("Amendment No. 3") under the Bank Credit Facility.
Amendment No. 3, among other things, modified the covenants under
the Bank Credit Facility to those stipulated in Amendment No. 2
(and described above).
The Bank Credit Facility, as amended, includes certain restrictive
covenants that, among other things; (i) require the Company to
maintain tangible net worth; (ii) comply with specified ratios;
(iii) limit 1996 and 1997 annual capital expenditures to $8,200
(excluding expenditures related to the Fisher Nut business) and
$7,200, respectively; (iv) restrict dividends to 25% of the
Company's cumulative net income from January 1, 1996; and (v)
require that certain officers and stockholders of the Company,
together with their respective family members and certain trusts
created for the benefits of their respective children, continue to
own shares representing the right to elect a majority of the
directors of the Company.
In 1995, the Company exceeded the capital expenditure covenant
under the Prior Bank Credit Facility. In March 1996, the banks
waived noncompliance with this covenant during 1995.
As part of the Bank Credit Facility, the Company is also required
to pay a quarterly fee of 0.25% of the average unused portion of
the Bank Credit Facility. The fees incurred in 1996 totalled $15.
As part of the Prior Bank Credit Facility, the Company was also
required to pay a quarterly fee of 0.25% of the average unused
portion of the Prior Bank Credit Facility. The fees incurred in
1995 and 1994 totalled $35 and $42, respectively.
NOTE 8 - LONG-TERM DEBT
Long-term debt consists of the following:
December 31,
-------------
1996 1995
----------------
Industrial development bonds, secured by building,
machinery and equipment with a cost aggregating $8,000 $ 8,000 $ 8,000
Bank loan, secured by land and building with a cost of
$2,050 guaranteed by certain stockholders of JBSS,
principal and interest at 11.25%, payable in monthly
installments of $18 through May 1999 1,636 1,666
Capitalized lease obligations 8,032 8,277
Series A note payable, interest payable quarterly at
8.72%, principal payable in semi-annual installments of
$200 beginning February 1995 3,200 3,600
Series B note payable, interest payable quarterly at
9.07%, principal payable in semi-annual installments of
$300 beginning February 1995 4,800 5,400
Series C note payable, interest payable quarterly at
9.07%, principal payable in semi-annual installments of
$200 beginning February 1995 3,200 3,600
Series D note payable, interest payable quarterly at
9.18%, principal payable in semi-annual installments of
$150 beginning May 1995 2,400 2,700
Series E note payable, interest payable quarterly at
7.34%, principal payable in semi-annual installments of
$400 beginning May 1995 6,400 7,200
Series F notes payable, interest payable quarterly at
9.16%, principal payable in semi-annual installments ranging
from $550 to $475 beginning November 1996 9,450 10,000
Note payable, interest payable semi-annually at 8.3%,
principal payable in annual installments of approximately
$1,429 beginning September 1, 1999 10,000 10,000
Note payable, Subordinated interest payable semi-annually
at 9.38%, principal payable in three annual installments
of $5,000 beginning on September 1, 2003 15,000 15,000
Arlington Heights facility, first mortgage, principal
and interest payable at 8.875%, in monthly installments
of $22 beginning November 1, 1995 through
October 1, 2018 2,440 2,489
Note payable, secured by machinery and equipment with a
cost aggregating $1,250, principal and interest at
8.50%, payable in quarterly installments of $194
beginning June 1996 1,082 --
Other 376 335
------- -------
76,016 78,267
Less: Current maturities 12,697 3,586
------- -------
$63,319 $74,681
======= =======
JBSS financed the construction of a peanut shelling plant with
industrial development bonds in 1987. Through May 31, 1992, the
bonds bore interest payable semi-annually at 7%. On June 1, 1992,
the Company remarketed the bonds, resetting the interest rate at
6% through May 1997 and at a market rate to be determined
thereafter. On June 1, 1997, and on each subsequent interest
reset date for the bonds, the Company is required to redeem the
bonds at face value plus any accrued and unpaid interest, unless a
bond holder elects to retain his or her bonds. Any bonds redeemed
by the Company at the demand of a bondholder on the reset date are
required to be remarketed by the underwriter of the bonds on a
"best efforts" basis. The agreement requires the Company to
redeem the bonds in varying annual installments, ranging from $170
to $780, beginning in 1998 through 2017. The Company is also
required to redeem the bonds in certain other circumstances; for
example, within 180 days after any determination that interest on
the bonds is taxable. The Company has the option at any time,
however, subject to certain conditions, to redeem the bonds at
face value plus accrued interest, if any.
On September 29, 1992, the Company entered into a long-term
financing facility with a major insurance company (the "Long-Term
Financing Facility") which provided financing to the Company
evidenced by promissory notes in the aggregate principal amount of
$14,000 (the "Initial Financing"). The Initial Financing was
comprised of (i) a $4,000 7.87% Senior Secured Term Note due 2004
(the "Series A Note"), (ii) a $6,000 8.22% Senior Secured Term
Note due 2004 (the "Series B Note"), and (iii) a $4,000 8.22%
Senior Secured Term Note due 2004 (the "Series C Note"). In
addition, the Long-Term Financing Facility included a shelf
facility providing for the issuance by the Company of additional
promissory notes with an aggregate original principal amount of
up to $11,000 (the "Shelf Facility"). On January 15, 1993, the
Company borrowed $3,000 under the Shelf Facility evidenced by an
8.33% Senior Secured Term Note due 2004 (the "Series D Note"). On
September 15, 1993, the Company borrowed the remaining $8,000
available under the Shelf Facility evidenced by a 6.49% Senior
Secured Term Note due 2004 (the "Series E Note").
On October 19, 1993, the Long-Term Financing Facility was amended
to provide for an additional shelf facility providing for the
issuance by the Company of additional promissory notes with an
aggregate original principal amount of $10,000 and to terminate
and release all liens and security interests in Company
properties. On June 23, 1994, the Company borrowed $10,000 under
the additional shelf facility evidenced by an $8,000 8.31% Series
F Senior Note due May 15, 2006 (the "Series F-1 Note") and a
$2,000 8.31% Series F Senior Note due May 15, 2006 (the "Series F-
2 Note").
Effective January 1, 1997, the interest rates on each promissory
note comprising the Long-Term Financing Facility were increased by
0.85%, due to the Company not meeting the required ratio of (a)
net income plus interest expense to (b) senior funded debt for the
year ending December 31, 1996.
In 1995, the Company exceeded the capital expenditure covenant
and, in February 1996 the Long-Term Financing Facility was amended
to increase the annual capital expenditure limitation to $10,600
(excluding certain expenditures) in 1995. As of the end of the
second quarter of 1996, the Company was not in compliance with the
fixed charge coverage ratio covenants under the Bank Credit
Facility and the Additional Long-Term Financing (as defined
below). The Company received from its lender under the Long-Term
Financing Facility a waiver of any cross-default under that
facility caused by the above-described violations under the Bank
Credit Facility and the Additional Long-Term Financing. As of the
end of the third quarter of 1996, the Company was not in
compliance with the fixed charge coverage ratio covenants under
the Bank Credit Facility, the Long-Term Financing Facility and the
Additional Long-Term Financing. The Company received from its
lender under the Long-Term Financing Facility a waiver of the
above-described fixed charge coverage ratio violation and any
cross-default under the Long-Term Financing Facility caused by
violations under the Bank Credit Facility and the Additional Long-
Term Financing.
On January 24, 1997, the Company granted (a) a first priority
perfected security interest in, and liens on, substantially all of
the Company's assets to secure the Company's obligations under the
Bank Credit Facility, the Long-Term Financing Facility and the
senior portion of the Additional Long-Term Financing, and (b) a
junior security interest in the Company's assets to secure the
obligations under the subordinated portion of the Additional Long-
Term Financing. Also, on January 24, 1997 the Company entered
into the Second Amended and Restated Note Agreement under the
Long-Term Financing Facility. The Long-Term Financing Facility
was amended to contain the same restrictive covenants as contained
in the Bank Credit Facility, as discussed in Note 7.
On September 12, 1995, the Company borrowed an additional $25,000
under an unsecured long-term financing arrangement (the
"Additional Long-Term Financing"). The Additional Long-Term
Financing has a maturity date of September 1, 2005 and (i) as to
$10,000 of the principal amount thereof, bears interest at an
annual rate of 8.3% and, beginning on September 1, 1999, requires
annual principal payments of approximately $1,429 each through
maturity, and (ii) as to the other $15,000 of the principal amount
thereof (which is subordinated to the Company's other debt
facilities), bears interest at an annual rate of 9.38% and
requires annual principal payments of $5,000 beginning on
September 1, 2003 through maturity.
The Additional Long-Term Financing includes certain restrictive
covenants that, among other things, (i) require the Company to
maintain specified financial ratios, (ii) require the Company to
maintain a minimum tangible net worth, and (iii) limit cumulative
dividends to the sum of (a) 50% of the Company's cumulative net
income (or minus 100% of a 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)
$5,000.
As of the end of the second quarter of 1996, the Company was not
in compliance with the fixed charge coverage ratio covenants under
the Bank Credit Facility and the Additional Long-Term Financing.
The Company received from its lender under the Additional Long-
Term Financing a waiver of the above-described fixed charge
coverage ratio violation and any cross-default under the
Additional Long-Term Financing caused by violations under the Bank
Credit Facility. As of the end of the third quarter of 1996, the
Company was not in compliance with the fixed charge coverage ratio
covenants under the Bank Credit Facility, the Long-Term Financing
Facility and the Additional Long-Term Financing. The Company
received from its lender under the Additional Long-Term Financing
a waiver of the above-described fixed charge coverage ratio
violation and any cross-default under the Additional Long-Term
Financing caused by violations under the Bank Credit Facility and
the Long-Term Financing Facility.
As described above, on January 24, 1997, the Company granted
security interest in, and liens on, substantially all of the
Company's assets to secure the Company's obligations under its
financing arrangements. On January 24, 1997, the Company entered
into Amendment No. 2 to Note Purchase Agreement. This amendment,
among other things, requires the Company to achieve specified
levels of consolidated operating income and to not exceed
specified levels of interest expense for those fiscal quarters
ending December, 1996 through June, 1997. This amendment also
requires a reduced minimum fixed charge coverage ratio for the
quarter ending in September, 1997, after which time the terms of
the original Additional Long-Term Financing again becomes
effective.
On September 27, 1995, the Company purchased the Arlington
Heights, Illinois facility which it previously leased. The
purchase was financed pursuant to a $2,500 first mortgage loan on
the facility.
As part of the Fisher Transaction, the Company acquired specified
items of machinery and equipment for $1,250, payable pursuant to a
promissory note dated January 10, 1996 (secured by such machinery
and equipment), bearing interest at an annual rate of 8.5% and
requiring eight equal quarterly installments of principal and
interest beginning in June, 1996.
Aggregate maturities of long-term debt, excluding capitalized
lease obligations, are as follows for the year ending December 31:
1997 $ 12,421
1998 4,096
1999 6,672
2000 5,070
2001 5,091
Subsequent years 34,634
--------
$ 67,984
========
The accompanying financial statements include the following
amounts related to assets under capital leases:
December 31,
-----------
1996 1995
-------------------
Buildings $9,520 $9,520
Less: Accumulated amortization 4,768 4,357
------ ------
$4,752 $5,163
====== ======
Amortization expense aggregated $411 for the year ended December
31, 1996, $412 for the year ended December 31, 1995 and $455 for
the year ended December 31, 1994.
Buildings under capital leases are rented from entities that are
owned by certain directors, officers, and stockholders of JBSS.
Future minimum payments under the leases, together with the
related present value, are summarized as follows for the year
ending December 31:
1997 $ 1,144
1998 1,144
1999 1,144
2000 1,144
2001 1,144
Subsequent years 9,693
-------
Total minimum lease payments 15,413
Less: Amount representing interest 7,381
-------
Present value of minimum lease payments,
including amounts due to affiliates of $8,032 $ 8,032
=======
JBSS also leases buildings and certain equipment pursuant to
agreements accounted for as operating leases. Rent expense under
these operating leases aggregated $777, $805 and $684 for 1996,
1995 and 1994, respectively. Aggregate noncancelable lease
commitments under these operating leases are as follows for the
year ending December 31:
1997 $ 643
1998 473
1999 229
2000 87
2001 22
------
$1,454
======
NOTE 9 - EMPLOYEE BENEFIT PLANS
JBSS maintains a contributory profit sharing plan established
pursuant to the provisions of section 401(k) of the Internal
Revenue Code. The plan provides retirement benefits for all
nonunion employees meeting minimum age and service requirements.
Through December 31, 1996, the Company contributed 50% of the
amount contributed by each employee up to certain maximums
specified in the plan. Additional contributions are determined at
the discretion of the Board of Directors. No additional
contributions were made for 1996 or 1994. For 1995, the
additional contribution was $383, which was paid in 1996.
JBSS contributed approximately $86, $73 and $79 to multi-employer
union-sponsored pension plans in 1996, 1995 and 1994,
respectively. JBSS is presently unable to determine its
respective share of either accumulated plan benefits or net assets
available for benefits under the union plans.
NOTE 10 - TRANSACTIONS WITH AFFILIATES
In addition to the related party transactions described in Notes
5, 6 and 8, JBSS also entered into transactions with the following
affiliates:
EQUIPMENT PURCHASES
During 1996, 1995 and 1994 JBSS purchased $442, $681 and $1,209,
respectively, of customized manufacturing equipment and
engineering services from an entity owned by stockholders, both of
whom are related to the Company's Chairman of the Board and Chief
Executive Officer and one of whom is an executive officer of the
Company. In addition to the foregoing, JBSS leased office and
warehouse space to the entity. Rent collected from the entity
aggregated $62 for 1996 and $12 for 1995 and 1994. Accounts
receivable aggregated $9 at December 31, 1996 and $6 at December
31, 1995. Accounts payable aggregated $13 at December 31, 1996.
MATERIAL PURCHASES
JBSS purchases materials from a company which is owned 50% by the
Company's Chairman of the Board and Chief Executive Officer.
Material purchases aggregated $5,049, $3,255 and $2,221 during
1996, 1995 and 1994, respectively. Accounts payable included
amounts due to the related entity for materials of $525 at
December 31, 1996 and $278 at December 31, 1995.
BROKERAGE COMMISSIONS
During 1996, 1995 and 1994, JBSS paid brokerage commissions of
$90, $43 and $52, respectively, to a food brokerage company. In
addition, JBSS paid brokerage commissions to a trading company
aggregating $89 and $166 during 1995 and 1994, respectively. The
President of the food brokerage company and the trading company is
related to the Company's President.
PRODUCT PURCHASES AND SALES
JBSS also purchased products aggregating $137, $458 and $902
during 1996, 1995 and 1994, respectively, from the trading company
referred to in the preceding paragraph. JBSS sold products to the
same company aggregating $6, $12 and $28 during 1996, 1995 and
1994, respectively.
Additionally, during 1996, 1995 and 1994, JBSS made sales
aggregating $1,014, $276 and $154, respectively, to a company
which is indirectly owned, in part, by a member of the JBSS Board
of Directors who is not an employee of the Company.
JBSS purchased services from a company in which the owner is an
employee of the Company. Purchases were $105, $74 and $68 in
1996, 1995 and 1994, respectively.
BUILDING SPACE RENTAL
During 1996 and 1995, the Company rented office and warehouse
space to a company whose president is related to the Company's
Chairman of the Board and Chief Executive Officer. Rental income
for 1996 and 1995 were $66 and $10, respectively.
NOTE 11 - STOCK OPTION PLANS
As permitted, the Company applies Accounting Principles Board
Opinion No. 25 and related Interpretations in accounting for its
stock-based compensation plans. Had compensation cost for the
Company's stock-based compensation plans been determined based on
the fair value at the grant dates for awards under the plans with
the alternative method of Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation, the
effect of the Company's net income (loss) for the period ended
December 31, 1996 and 1995 would not have been significant.
In October 1991, JBSS adopted a stock option plan (the "1991 Stock
Option Plan") which became effective on December 10, 1991 and was
terminated early by the Board of Directors on February 28, 1995.
Pursuant to the terms of the 1991 Stock Option Plan, up to 350,000
shares of Common Stock can be awarded to certain executives and
key employees of JBSS and its subsidiaries. The exercise price of
the options will be determined as set forth in the 1991 Stock
Option Plan by the Board of Directors. The exercise price for the
stock options will be at least fair market value with the
exception of nonqualified stock options which will have an
exercise price equal to at least 33% of the fair market value of
the Common Stock on the date of grant. Except as set forth in the
1991 Stock Option Plan, options expire upon termination of
employment. All of the options granted were intended to qualify
as incentive stock options within the meaning of Section 422 of
the Internal Revenue Code (the "Code"). Although the majority of
the options granted have an exercise price equal to the market
price on the date of grant, in 1995, 3,650 options, were granted
to individuals who own directly (or by attribution under Section
424(d) of the Code) shares possessing more than 10% of the total
combined voting power of all classes of JBSS and thus, in order to
qualify as incentive stock options, have an exercise price equal
to 110% of the market price on the date of grant .
Effective February 28, 1995, the Board terminated early the 1991
Stock Option Plan. The termination of the 1991 Stock Option Plan
did not, however, affect options granted under the 1991 Stock
Option Plan which remained outstanding as of the effective date of
such termination. Accordingly, the unexercised options
outstanding under the 1991 Stock Option Plan at December 31, 1995
will continue to be governed by the terms of the 1991 Stock Option
Plan.
The following is a summary of activity under the 1991 Stock Option
Plan:
Number of Weighted-Average
shares Exercise Price
--------- ----------------
Outstanding at December 31, 1993 324,450 $13.11
Granted 2,000 $12.00
Cancelled (17,000) $13.21
---------
Outstanding at December 31, 1994 309,450 $13.10
Granted 38,800 $ 6.06
Cancelled (4,100) $ 9.78
---------
Outstanding at December 31, 1995 344,150 $12.35
Cancelled (77,450) $12.04
---------
Outstanding at December 31, 1996 266,700 $12.43
=========
Options exercisable at
December 31, 1996 229,263 $12.98
=========
Exercise prices for options outstanding as of December 31, 1996
ranged from $6.00 to $16.50. The weighted-average remaining
contractual life of those options is 5 years. The options
outstanding at December 31, 1996 may be segregated into two
ranges, as is shown in the following:
Option Price Per Option Price Per
Share Range Share Range
$6.00-$6.60 $12.00-$16.50
---------------- -----------------
Number of options 30,650 236,050
Weighted-average exercise price $6.07 $13.26
Weighted-average remaining life (years) 7.4 4.7
Number of options exercisable 7,663 221,600
Weighted average exercise price for
exercisable options $6.07 $13.26
At the Company's annual meeting of stockholders on May 2, 1995,
the Company's stockholders approved, and the Company adopted,
effective as of March 1, 1995, a new stock option plan (the "1995
Equity Incentive Plan") to replace the 1991 Stock Option Plan.
Pursuant to the terms of the 1995 Equity Incentive Plan, up to
200,000 shares of Common Stock can be awarded to certain key
employees and "outside directors" (i.e. directors who are not
employees of the Company or any of its subsidiaries). The
exercise price of the options will be determined as set forth in
the 1995 Equity Incentive Plan by the Board of Directors. The
exercise price for the stock options will be at least the fair
market value of the Common Stock on the date of grant, with the
exception of nonqualified stock options which will have an
exercise price equal to at least 50% of the fair market value of
the Common Stock on the date of grant. Except as set forth in
the 1995 Equity Incentive Plan options expire upon termination of
employment of directorship. The options granted under the 1995
Equity Incentive Plan, are exercisable 25% annually commencing on
the first anniversary date of grant and become fully exercisable
on the fourth anniversary date of grant. All of the options
granted were intended to qualify as incentive stock options
within the meaning of Section 422 of the Code. Although the
majority of the options granted have an exercise price equal to
the fair market value of the Common Stock on the date of grant,
7,100 options were granted in 1995 to individuals who own
directly (or by attribution under Section 424(d) of the Code)
shares possessing more than 10% of the total combined voting
power of all classes of stock of JBSS, and thus, in order to
qualify as incentive stock options, have an exercise price equal
to 110% of the fair market value on the date of grant. The
options granted under the 1995 Equity Incentive Plan are
exercisable 25% annually commencing on the first anniversary date
of grant and become fully exercisable on the fourth anniversary
of the date of grant.
The following is a summary of activity under the 1995 Equity
Incentive Plan:
Weighted-Average
Number of Shares Exercise Price
---------------- ----------------
Outstanding at December 31, 1994 -- --
Granted 92,300 $9.47
------
Outstanding at December 31, 1995 92,300 $9.47
Granted 7,000 $7.02
Cancelled (10,800) $9.38
------
Outstanding at December 31, 1996 88,500 $9.28
======
Options exercisable at December 31, 1996 20,375 $9.48
======
Exercise prices for options outstanding as of December 31, 1996
ranged from $5.25 to $10.50. The weighted-average remaining
contractual life of those options is 8.4 years. The options
outstanding at December 31, 1996 may be segregated into two
ranges, as is shown in the following:
Option Price Per Option Price Per
Share Range Share Range
$5.25-$6.75 $8.25-$10.50
---------------- ----------------
Number of options 5,000 83,500
Weighted-average exercise price $6.38 $9.46
Weighted-average remaining life (years) 9.4 8.3
Number of options exercisable -- 20,375
Weighted average exercise price
for exercisable options -- $9.48
NOTE 12 - LEGAL MATTERS
The Company is party to various lawsuits, proceedings and other
matters arising out of the conduct of its business. It is
management's opinion that the ultimate resolution of these
matters will not have a material adverse effect upon the
business, financial condition or results of operations of the
Company.
MARKETS FOR THE COMPANY'S SECURITIES AND RELATED MATTERS
The Company has two classes of stock: Class A Common Stock ("Class
A Stock") and Common Stock. The holders of Common Stock are
entitled to elect 25% of the members of the Board of Directors and
the holders of Class A Stock are entitled to elect the remaining
directors. With respect to matters other than the election of
directors or any matters for which class voting is required by
law, the holders of Common Stock are entitled to one vote per
share while the holders of Class A Stock are entitled to 10 votes
per share. The Company's Class A Stock is not registered under
the Securities Act of 1933 and there is no established public
trading market for the Class A Stock. However, each share of
Class A Stock is convertible at the option of the holder at any
time and from time to time (and, upon the occurrence of certain
events specified in the Company's Restated Certificate of
Incorporation, automatically converts) into one share of Common
Stock.
The Common Stock of the Company is quoted on the Nasdaq National
Market and its trading symbol is "JBSS". The following table sets
forth, for the quarters indicated, the high and low reported last
sales prices for the Common Stock as reported on the Nasdaq
National Market.
Price Range of
Quarter Ended: Common Stock
--------------
High Low
------ ------
March 27, 1997 (through March 14, 1997) $ 6.25 $ 4.63
December 31, 1996 7.00 4.88
September 26, 1996 7.25 4.75
June 27, 1996 7.50 6.13
March 28, 1996 9.75 7.00
December 31, 1995 10.75 8.75
September 28, 1995 10.50 8.25
June 29, 1995 10.50 6.75
March 30, 1995 9.25 5.38
As of March 14, 1997, there were approximately 260 and 15 holders
of record of the Company's Common Stock and Class A Stock,
respectively.
Under the Company's Restated Certificate of Incorporation, the
Class A Stock and the Common Stock are entitled to share equally
on a share for share basis in any dividends declared by the Board
of Directors on the Company's common equity.
Since its initial public offering in December 1991, the Company
has declared and paid two dividends. On September 21, 1992, the
Company declared a dividend of $0.05 per share payable on January
4, 1993 to all holders of record on November 6, 1992 of the Common
Stock and Class A Stock. On November 9, 1993, the Company
declared a dividend of $0.05 per share payable on January 5, 1994
to all holders of record on November 26, 1993 of the Common Stock
and Class A Stock. No dividends were declared in 1996, 1995 or
1994. The declaration and payment of future dividends will be at
the sole discretion of the Board of Directors and will depend on
the Company's profitability, financial condition, cash
requirements, future prospects and other factors deemed relevant
by the Board of Directors. The Company's current loan agreements
restrict the payment of annual dividends to amounts specified in
the loan agreements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation -- Liquidity and
Capital Resources."