c
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.WASHINGTON, DC 20549
FORM10-Q
FORM 10-Q
(Mark one)One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended DecemberMarch 28, 20172024
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File NumberNumber: 0-19681
JOHN B. SANFILIPPO & SON, INC.
(Exact Name of Registrant as Specified in Itsits Charter)
Delaware | 36-2419677 | |
(State or
| (I.R.S. Employer
| |
1703 North Randall Road Elgin, Illinois | 60123-7820 | |
(Address of | (Zip Code) |
(847)(847) 289-1800
(Registrant’s Telephone Number, Including Area Code)telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $.01 par value per share | JBSS | The NASDAQ Stock Market LLC (NASDAQ Global Select Market) |
Indicate by check mark whether the registrant:registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ Yes No ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒ Yes No ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” andfiler,” “smaller reporting company,” and “emerging growth company” inRule 12b-2 of the Exchange Act. (Check One)
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | |||||
Smaller reporting company | ☐ | |||||
Emerging growth company | ☐ |
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ Yes No ☒ No
As of JanuaryApril 25, 2018, 8,744,1972024, 9,006,038 shares of the Registrant’s Common Stock, $0.01 par value per share and 2,597,426 shares of the Registrant’s Class A Common Stock, $0.01 par value per share, were outstanding.
JOHN B. SANFILIPPO & SON, INC.
FORM10-Q
FOR THE QUARTER ENDED DECEMBERFor the Quarter Ended March 28, 20172024
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands, except share and per share amounts)
For the Quarter Ended | For the Twenty-six Weeks Ended |
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
| |||||||||||||||||||||||||
December 28, 2017 | December 29, 2016 | December 28, 2017 | December 29, 2016 |
| March 28, |
|
| March 30, |
|
| March 28, |
|
| March 30, |
| |||||||||||||||||
Net sales | $ | 259,118 | $ | 249,375 | $ | 473,909 | $ | 471,668 |
| $ | 271,884 |
|
| $ | 238,535 |
|
| $ | 797,211 |
|
| $ | 765,464 |
| ||||||||
Cost of sales | 221,238 | 205,986 | 401,189 | 391,804 |
|
| 222,707 |
|
|
| 188,767 |
|
|
| 633,073 |
|
|
| 608,551 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Gross profit | 37,880 | 43,389 | 72,720 | 79,864 |
|
| 49,177 |
|
|
| 49,768 |
|
|
| 164,138 |
|
|
| 156,913 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Selling expenses | 15,844 | 15,370 | 26,789 | 26,641 |
|
| 18,654 |
|
|
| 18,109 |
|
|
| 61,647 |
|
|
| 57,921 |
| ||||||||||||
Administrative expenses | 7,787 | 7,744 | 14,346 | 15,859 |
|
| 12,171 |
|
|
| 9,841 |
|
|
| 34,187 |
|
|
| 30,296 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Bargain purchase gain, net |
|
| — |
|
|
| — |
|
|
| (2,226 | ) |
|
| — |
| ||||||||||||||||
Total operating expenses | 23,631 | 23,114 | 41,135 | 42,500 |
|
| 30,825 |
|
|
| 27,950 |
|
|
| 93,608 |
|
|
| 88,217 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Income from operations | 14,249 | 20,275 | 31,585 | 37,364 |
|
| 18,352 |
|
|
| 21,818 |
|
|
| 70,530 |
|
|
| 68,696 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Interest expense including $245, $201, $439 and $391 to related parties | 805 | 608 | 1,586 | 1,230 | ||||||||||||||||||||||||||||
Interest expense including $171, $186, $524 and $568 to related parties |
|
| 785 |
|
|
| 552 |
|
|
| 2,067 |
|
|
| 1,828 |
| ||||||||||||||||
Rental and miscellaneous expense, net | 241 | 299 | 863 | 709 |
|
| 324 |
|
|
| 371 |
|
|
| 940 |
|
|
| 1,084 |
| ||||||||||||
Other expense | 493 | 533 | 985 | 1,066 | ||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Pension expense (excluding service costs) |
|
| 350 |
|
|
| 349 |
|
|
| 1,050 |
|
|
| 1,046 |
| ||||||||||||||||
Total other expense, net | 1,539 | 1,440 | 3,434 | 3,005 |
|
| 1,459 |
|
|
| 1,272 |
|
|
| 4,057 |
|
|
| 3,958 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Income before income taxes | 12,710 | 18,835 | 28,151 | 34,359 |
|
| 16,893 |
|
|
| 20,546 |
|
|
| 66,473 |
|
|
| 64,738 |
| ||||||||||||
Income tax expense | 4,954 | 5,950 | 9,963 | 11,294 |
|
| 3,416 |
|
|
| 4,814 |
|
|
| 16,237 |
|
|
| 16,554 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Net income | $ | 7,756 | $ | 12,885 | $ | 18,188 | $ | 23,065 |
| $ | 13,477 |
|
| $ | 15,732 |
|
| $ | 50,236 |
|
| $ | 48,184 |
| ||||||||
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Amortization of prior service cost and actuarial loss included in net periodic pension cost | 281 | 331 | 560 | 661 | ||||||||||||||||||||||||||||
Amortization of actuarial loss included in net |
|
| — |
|
|
| 7 |
|
|
| — |
|
|
| 21 |
| ||||||||||||||||
Income tax expense related to pension adjustments | (111 | ) | (126 | ) | (219 | ) | (251 | ) |
|
| — |
|
|
| (2 | ) |
|
| — |
|
|
| (5 | ) | ||||||||
|
|
|
| |||||||||||||||||||||||||||||
Other comprehensive income, net of tax | 170 | 205 | 341 | 410 |
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| 16 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Comprehensive income | $ | 7,926 | $ | 13,090 | $ | 18,529 | $ | 23,475 |
| $ | 13,477 |
|
| $ | 15,737 |
|
| $ | 50,236 |
|
| $ | 48,200 |
| ||||||||
|
|
|
| |||||||||||||||||||||||||||||
Net income per common share-basic | $ | 0.68 | $ | 1.14 | $ | 1.60 | $ | 2.04 |
| $ | 1.16 |
|
| $ | 1.36 |
|
| $ | 4.33 |
|
| $ | 4.16 |
| ||||||||
|
|
|
| |||||||||||||||||||||||||||||
Net income per common share-diluted | $ | 0.68 | $ | 1.13 | $ | 1.59 | $ | 2.03 |
| $ | 1.15 |
|
| $ | 1.35 |
|
| $ | 4.30 |
|
| $ | 4.14 |
| ||||||||
|
|
|
| |||||||||||||||||||||||||||||
Cash dividends declared per share | $ | — | $ | 2.50 | $ | 2.50 | $ | 5.00 | ||||||||||||||||||||||||
|
|
|
|
The accompanying unaudited notes are an integral part of these consolidated financial statements.
3
JOHN B. SANFILIPPO & SON, INC.
(Unaudited)
(Dollars in thousands, except share and per share amounts)
December 28, 2017 | June 29, 2017 | December 29, 2016 |
| March 28, |
|
| June 29, |
|
| March 30, |
| |||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
| |||||||||||||||
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Cash | $ | 3,052 | $ | 1,955 | $ | 2,031 | ||||||||||||||||||
Accounts receivable, less allowance for doubtful accounts of $273, $263 and $306 | 70,437 | 64,830 | 66,007 | |||||||||||||||||||||
Cash and cash equivalents |
| $ | 377 |
|
| $ | 1,948 |
|
| $ | 365 |
| ||||||||||||
Accounts receivable, less allowance for doubtful accounts of $367, $283 |
|
| 75,638 |
|
|
| 72,734 |
|
|
| 74,534 |
| ||||||||||||
Inventories | 168,852 | 182,420 | 182,653 |
|
| 210,672 |
|
|
| 172,936 |
|
|
| 190,351 |
| |||||||||
Prepaid expenses and other current assets | 13,457 | 4,172 | 6,841 |
|
| 9,636 |
|
|
| 6,812 |
|
|
| 9,325 |
| |||||||||
|
|
| ||||||||||||||||||||||
TOTAL CURRENT ASSETS | 255,798 | 253,377 | 257,532 |
|
| 296,323 |
|
|
| 254,430 |
|
|
| 274,575 |
| |||||||||
|
|
| ||||||||||||||||||||||
PROPERTY, PLANT AND EQUIPMENT: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Land | 9,285 | 9,285 | 9,285 |
|
| 13,365 |
|
|
| 9,150 |
|
|
| 9,150 |
| |||||||||
Buildings | 108,092 | 107,015 | 106,566 |
|
| 115,084 |
|
|
| 104,150 |
|
|
| 102,840 |
| |||||||||
Machinery and equipment | 196,715 | 194,099 | 193,859 |
|
| 287,363 |
|
|
| 261,706 |
|
|
| 259,289 |
| |||||||||
Furniture and leasehold improvements | 4,951 | 4,842 | 4,803 |
|
| 5,310 |
|
|
| 5,275 |
|
|
| 5,275 |
| |||||||||
Vehicles | 535 | 498 | 453 |
|
| 790 |
|
|
| 729 |
|
|
| 719 |
| |||||||||
Construction in progress | 2,652 | 1,075 | 1,483 |
|
| 8,271 |
|
|
| 7,123 |
|
|
| 8,210 |
| |||||||||
|
|
|
|
| 430,183 |
|
|
| 388,133 |
|
|
| 385,483 |
| ||||||||||
322,230 | 316,814 | 316,449 | ||||||||||||||||||||||
Less: Accumulated depreciation | 214,426 | 210,606 | 206,751 |
|
| 281,869 |
|
|
| 267,336 |
|
|
| 263,718 |
| |||||||||
|
|
|
|
| 148,314 |
|
|
| 120,797 |
|
|
| 121,765 |
| ||||||||||
107,804 | 106,208 | 109,698 | ||||||||||||||||||||||
Rental investment property, less accumulated depreciation of $10,035, $9,639 and $9,244 | 18,858 | 19,254 | 19,650 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Rental investment property, less accumulated depreciation of $15,044, |
|
| 14,079 |
|
|
| 14,684 |
|
|
| 14,885 |
| ||||||||||||
TOTAL PROPERTY, PLANT AND EQUIPMENT | 126,662 | 125,462 | 129,348 |
|
| 162,393 |
|
|
| 135,481 |
|
|
| 136,650 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash surrender value of officers’ life insurance and other assets | 9,057 | 10,125 | 10,091 | |||||||||||||||||||||
Intangible assets, net |
|
| 6,203 |
|
|
| 6,658 |
|
|
| 7,100 |
| ||||||||||||
Deferred income taxes | 5,979 | 9,095 | 8,109 |
|
| 651 |
|
|
| 3,592 |
|
|
| 2,374 |
| |||||||||
Goodwill | 9,638 | — | — |
|
| 11,750 |
|
|
| 11,750 |
|
|
| 11,750 |
| |||||||||
Intangible assets, net | 19,341 | — | 611 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Operating lease right-of-use assets |
|
| 7,409 |
|
|
| 6,427 |
|
|
| 6,582 |
| ||||||||||||
Other assets |
|
| 7,199 |
|
|
| 6,949 |
|
|
| 6,029 |
| ||||||||||||
TOTAL ASSETS | $ | 426,475 | $ | 398,059 | $ | 405,691 |
| $ | 491,928 |
|
| $ | 425,287 |
|
| $ | 445,060 |
| ||||||
|
|
|
The accompanying unaudited notes are an integral part of these consolidated financial statements.
4
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share amounts)
December 28, 2017 | June 29, 2017 | December 29, 2016 |
| March 28, |
|
| June 29, |
|
| March 30, |
| |||||||||||||
LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||
LIABILITIES & STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
| |||||||||||||||
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Revolving credit facility borrowings | $ | 30,000 | $ | 29,456 | $ | 12,427 |
| $ | 32,093 |
|
| $ | — |
|
| $ | 27,825 |
| ||||||
Current maturities of long-term debt, including related party debt of $4,324, $474 and $457 and net of unamortized debt issuance costs of $50, $55 and $60 | 7,274 | 3,418 | 3,397 | |||||||||||||||||||||
Accounts payable, including related party payables of $0, $178 and $32 | 84,834 | 50,047 | 90,787 | |||||||||||||||||||||
Current maturities of related party long-term debt, net |
|
| 721 |
|
|
| 672 |
|
|
| 657 |
| ||||||||||||
Accounts payable |
|
| 51,458 |
|
|
| 42,680 |
|
|
| 42,264 |
| ||||||||||||
Bank overdraft | 2,894 | 932 | 2,652 |
|
| 1,351 |
|
|
| 285 |
|
|
| 458 |
| |||||||||
Accrued payroll and related benefits | 6,333 | 15,958 | 10,609 |
|
| 21,712 |
|
|
| 27,572 |
|
|
| 17,061 |
| |||||||||
Other accrued expenses | 9,387 | 10,062 | 9,966 |
|
| 13,055 |
|
|
| 14,479 |
|
|
| 14,493 |
| |||||||||
|
|
| ||||||||||||||||||||||
TOTAL CURRENT LIABILITIES | 140,722 | 109,873 | 129,838 |
|
| 120,390 |
|
|
| 85,688 |
|
|
| 102,758 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
LONG-TERM LIABILITIES: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Long-term debt, less current maturities, including related party debt of $17,682, $10,584 and $10,825 and net of unamortized debt issuance costs of $100, $124 and $150 | 30,832 | 25,211 | 26,925 | |||||||||||||||||||||
Long-term related party debt, less current maturities, net |
|
| 6,555 |
|
|
| 7,102 |
|
|
| 7,276 |
| ||||||||||||
Retirement plan | 21,396 | 20,994 | 22,532 |
|
| 27,570 |
|
|
| 26,653 |
|
|
| 29,471 |
| |||||||||
Long-term operating lease liabilities, net of current portion |
|
| 5,553 |
|
|
| 4,771 |
|
|
| 4,905 |
| ||||||||||||
Long-term workers' compensation liabilities |
|
| 7,383 |
|
|
| 7,321 |
|
|
| 7,490 |
| ||||||||||||
Other | 7,084 | 6,513 | 6,695 |
|
| 2,665 |
|
|
| 1,545 |
|
|
| 842 |
| |||||||||
|
|
| ||||||||||||||||||||||
TOTAL LONG-TERM LIABILITIES | 59,312 | 52,718 | 56,152 |
|
| 49,726 |
|
|
| 47,392 |
|
|
| 49,984 |
| |||||||||
|
|
| ||||||||||||||||||||||
TOTAL LIABILITIES | 200,034 | 162,591 | 185,990 |
|
| 170,116 |
|
|
| 133,080 |
|
|
| 152,742 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||||||||||||||
Class A Common Stock, convertible to Common Stock on a per share basis, cumulative voting rights of ten votes per share, $.01 par value; 10,000,000 shares authorized, 2,597,426 shares issued and outstanding | 26 | 26 | 26 | |||||||||||||||||||||
Common Stock,non-cumulative voting rights of one vote per share, $.01 par value; 17,000,000 shares authorized, 8,859,097, 8,801,641 and 8,785,938 shares issued | 89 | 88 | 88 | |||||||||||||||||||||
STOCKHOLDERS' EQUITY: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Class A Common Stock, convertible to Common Stock on |
|
| 26 |
|
|
| 26 |
|
|
| 26 |
| ||||||||||||
Common Stock, non-cumulative voting rights of one vote |
|
| 91 |
|
|
| 91 |
|
|
| 91 |
| ||||||||||||
Capital in excess of par value | 118,585 | 117,772 | 116,676 |
|
| 134,530 |
|
|
| 131,986 |
|
|
| 131,649 |
| |||||||||
Retained earnings | 113,008 | 123,190 | 110,130 |
|
| 188,573 |
|
|
| 161,512 |
|
|
| 164,220 |
| |||||||||
Accumulated other comprehensive loss | (4,063 | ) | (4,404 | ) | (6,015 | ) |
|
| (204 | ) |
|
| (204 | ) |
|
| (2,464 | ) | ||||||
Treasury stock, at cost; 117,900 shares of Common Stock | (1,204 | ) | (1,204 | ) | (1,204 | ) |
|
| (1,204 | ) |
|
| (1,204 | ) |
|
| (1,204 | ) | ||||||
|
|
| ||||||||||||||||||||||
TOTAL STOCKHOLDERS’ EQUITY | 226,441 | 235,468 | 219,701 |
|
| 321,812 |
|
|
| 292,207 |
|
|
| 292,318 |
| |||||||||
|
|
| ||||||||||||||||||||||
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY | $ | 426,475 | $ | 398,059 | $ | 405,691 |
| $ | 491,928 |
|
| $ | 425,287 |
|
| $ | 445,060 |
| ||||||
|
|
|
The accompanying unaudited notes are an integral part of these consolidated financial statements.
5
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS’ EQUITY
(Unaudited)
(Dollars in thousands)thousands, except share and per share amounts)
For the Twenty-six Weeks Ended | ||||||||
December 28, 2017 | December 29, 2016 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 18,188 | $ | 23,065 | ||||
Depreciation and amortization | 7,064 | 7,973 | ||||||
Loss on disposition of assets, net | 319 | 53 | ||||||
Deferred income tax expense | 3,116 | 481 | ||||||
Stock-based compensation expense | 1,429 | 1,428 | ||||||
Change in assets and liabilities, net of business acquired: | ||||||||
Accounts receivable, net | (3,176 | ) | 12,067 | |||||
Inventories | 15,525 | (26,080 | ) | |||||
Prepaid expenses and other current assets | (5,111 | ) | (2,468 | ) | ||||
Accounts payable | 34,014 | 46,925 | ||||||
Accrued expenses | (9,124 | ) | (4,672 | ) | ||||
Income taxes payable | (5,422 | ) | 2,928 | |||||
Other long-term assets and liabilities | 694 | (115 | ) | |||||
Other, net | 915 | 845 | ||||||
|
|
|
| |||||
Net cash provided by operating activities | 58,431 | 62,430 | ||||||
|
|
|
| |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property, plant and equipment | (6,966 | ) | (6,672 | ) | ||||
Acquisition of Squirrel Brand L.P. | (21,909 | ) | — | |||||
Other | 72 | 48 | ||||||
|
|
|
| |||||
Net cash used in investing activities | (28,803 | ) | (6,624 | ) | ||||
|
|
|
| |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Borrowings under revolving credit facility | 226,985 | 166,816 | ||||||
Repayments of revolving credit borrowings | (226,441 | ) | (166,473 | ) | ||||
Principal payments on long-term debt | (2,052 | ) | (1,758 | ) | ||||
Increase in bank overdraft | 1,962 | 1,841 | ||||||
Dividends paid | (28,370 | ) | (56,464 | ) | ||||
Issuance of Common Stock under equity award plans | 16 | 43 | ||||||
Taxes paid related to net share settlement of equity awards | (631 | ) | — | |||||
|
|
|
| |||||
Net cash used in financing activities | (28,531 | ) | (55,995 | ) | ||||
|
|
|
| |||||
NET INCREASE (DECREASE) IN CASH | 1,097 | (189 | ) | |||||
Cash, beginning of period | 1,955 | 2,220 | ||||||
|
|
|
| |||||
Cash, end of period | $ | 3,052 | $ | 2,031 | ||||
|
|
|
| |||||
Supplemental disclosure ofnon-cash investing activities: | ||||||||
Acquisition of Squirrel Brand L.P. through note payable | $ | 11,500 | $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| ||||||||||
| Class A |
|
|
|
|
|
|
|
| Capital in |
|
|
|
|
| Other |
|
|
|
|
|
|
| ||||||||||||
| Common Stock |
|
| Common Stock |
|
| Excess of |
|
| Retained |
|
| Comprehensive |
|
| Treasury |
|
|
|
| |||||||||||||||
Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Par Value |
|
| Earnings |
|
| Loss |
|
| Stock |
|
| Total |
| ||||||||||
Balance, June 29, 2023 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,076,326 |
|
| $ | 91 |
|
| $ | 131,986 |
|
| $ | 161,512 |
|
| $ | (204 | ) |
| $ | (1,204 | ) |
| $ | 292,207 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 17,588 |
|
|
|
|
|
|
|
|
| 17,588 |
| |||||||
Cash dividends ($2.00 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (23,175 | ) |
|
|
|
|
|
|
|
| (23,175 | ) | |||||||
Equity award exercises |
|
|
|
|
|
|
| 14,605 |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| — |
| |||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
| 747 |
|
|
|
|
|
|
|
|
|
|
|
| 747 |
| |||||||
Balance, September 28, 2023 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,090,931 |
|
| $ | 91 |
|
| $ | 132,733 |
|
| $ | 155,925 |
|
| $ | (204 | ) |
| $ | (1,204 | ) |
| $ | 287,367 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19,171 |
|
|
|
|
|
|
|
|
| 19,171 |
| |||||||
Equity award exercises, net |
|
|
|
|
|
|
| 29,629 |
|
|
| — |
|
|
| (684 | ) |
|
|
|
|
|
|
|
|
|
|
| (684 | ) | |||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
| 1,383 |
|
|
|
|
|
|
|
|
|
|
|
| 1,383 |
| |||||||
Balance, December 28, 2023 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,120,560 |
|
| $ | 91 |
|
| $ | 133,432 |
|
| $ | 175,096 |
|
| $ | (204 | ) |
| $ | (1,204 | ) |
| $ | 307,237 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 13,477 |
|
|
|
|
|
|
|
|
| 13,477 |
| |||||||
Equity award exercises, net |
|
|
|
|
|
|
| 3,378 |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| — |
| |||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
| 1,098 |
|
|
|
|
|
|
|
|
|
|
|
| 1,098 |
| |||||||
Balance, March 28, 2024 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,123,938 |
|
| $ | 91 |
|
| $ | 134,530 |
|
| $ | 188,573 |
|
| $ | (204 | ) |
| $ | (1,204 | ) |
| $ | 321,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| ||||||||||
| Class A |
|
|
|
|
|
|
|
| Capital in |
|
|
|
|
| Other |
|
|
|
|
|
|
| ||||||||||||
| Common Stock |
|
| Common Stock |
|
| Excess of |
|
| Retained |
|
| Comprehensive |
|
| Treasury |
|
|
|
| |||||||||||||||
Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Par Value |
|
| Earnings |
|
| Loss |
|
| Stock |
|
| Total |
| ||||||||||
Balance, June 30, 2022 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,047,359 |
|
| $ | 90 |
|
| $ | 128,800 |
|
| $ | 153,589 |
|
| $ | (2,480 | ) |
| $ | (1,204 | ) |
| $ | 278,821 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15,545 |
|
|
|
|
|
|
|
|
| 15,545 |
| |||||||
Cash dividends ($2.25 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (25,981 | ) |
|
|
|
|
|
|
|
| (25,981 | ) | |||||||
Pension liability amortization, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6 |
|
|
|
|
|
| 6 |
| |||||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
| 772 |
|
|
|
|
|
|
|
|
|
|
|
| 772 |
| |||||||
Balance, September 29, 2022 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,047,359 |
|
| $ | 90 |
|
| $ | 129,572 |
|
| $ | 143,153 |
|
| $ | (2,474 | ) |
| $ | (1,204 | ) |
| $ | 269,163 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 16,907 |
|
|
|
|
|
|
|
|
| 16,907 |
| |||||||
Cash dividends ($1.00 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (11,572 | ) |
|
|
|
|
|
|
|
| (11,572 | ) | |||||||
Pension liability amortization, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5 |
|
|
|
|
|
| 5 |
| |||||||
Equity award exercises, net |
|
|
|
|
|
|
| 24,709 |
|
|
| 1 |
|
|
| (356 | ) |
|
|
|
|
|
|
|
|
|
|
| (355 | ) | |||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
| 1,515 |
|
|
|
|
|
|
|
|
|
|
|
| 1,515 |
| |||||||
Balance, December 29, 2022 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,072,068 |
|
| $ | 91 |
|
| $ | 130,731 |
|
| $ | 148,488 |
|
| $ | (2,469 | ) |
| $ | (1,204 | ) |
| $ | 275,663 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15,732 |
|
|
|
|
|
|
|
|
| 15,732 |
| |||||||
Pension liability amortization, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5 |
|
|
|
|
|
| 5 |
| |||||||
Equity award exercises, net |
|
|
|
|
|
|
| 4,258 |
|
|
| — |
|
|
| (23 | ) |
|
|
|
|
|
|
|
|
|
|
| (23 | ) | |||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
| 941 |
|
|
|
|
|
|
|
|
|
|
|
| 941 |
| |||||||
Balance, March 30, 2023 |
| 2,597,426 |
|
| $ | 26 |
|
|
| 9,076,326 |
|
| $ | 91 |
|
| $ | 131,649 |
|
| $ | 164,220 |
|
| $ | (2,464 | ) |
| $ | (1,204 | ) |
| $ | 292,318 |
|
The accompanying unaudited notes are an integral part of these consolidated financial statements.
6
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
| For the Thirty-Nine Weeks Ended |
| ||||||
| March 28, |
|
| March 30, |
| |||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net income |
| $ | 50,236 |
|
| $ | 48,184 |
|
Depreciation and amortization |
|
| 18,053 |
|
|
| 15,323 |
|
Loss on disposition of assets, net |
|
| 287 |
|
|
| 47 |
|
Deferred income tax expense |
|
| 2,191 |
|
|
| 862 |
|
Stock-based compensation expense |
|
| 3,228 |
|
|
| 3,228 |
|
Bargain purchase gain, net |
|
| (2,226 | ) |
|
| — |
|
Change in assets and liabilities, net of Acquisition: |
|
|
|
|
|
| ||
Accounts receivable, net |
|
| (2,829 | ) |
|
| (4,923 | ) |
Inventories |
|
| (2,236 | ) |
|
| 14,744 |
|
Prepaid expenses and other current assets |
|
| (1,125 | ) |
|
| 535 |
|
Accounts payable |
|
| 8,892 |
|
|
| (5,285 | ) |
Accrued expenses |
|
| (6,390 | ) |
|
| 1,312 |
|
Income taxes receivable |
|
| (2,593 | ) |
|
| (2,575 | ) |
Other long-term assets and liabilities |
|
| 268 |
|
|
| 335 |
|
Other, net |
|
| 682 |
|
|
| 602 |
|
Net cash provided by operating activities |
|
| 66,438 |
|
|
| 72,389 |
|
|
|
|
|
|
|
| ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
| ||
Purchases of property, plant and equipment |
|
| (17,468 | ) |
|
| (15,586 | ) |
Business acquisitions, net |
|
| (58,974 | ) |
|
| (3,500 | ) |
Other, net |
|
| (53 | ) |
|
| (56 | ) |
Net cash used in investing activities |
|
| (76,495 | ) |
|
| (19,142 | ) |
|
|
|
|
|
|
| ||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
| ||
Net short-term borrowings (repayments) |
|
| 32,093 |
|
|
| (12,614 | ) |
Debt issue costs |
|
| (316 | ) |
|
| — |
|
Principal payments on long-term debt |
|
| (498 | ) |
|
| (2,995 | ) |
Increase in bank overdraft |
|
| 1,066 |
|
|
| 244 |
|
Dividends paid |
|
| (23,175 | ) |
|
| (37,553 | ) |
Taxes paid related to net share settlement of equity awards |
|
| (684 | ) |
|
| (379 | ) |
Net cash provided by (used in) financing activities |
|
| 8,486 |
|
|
| (53,297 | ) |
|
|
|
|
|
|
| ||
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
| (1,571 | ) |
|
| (50 | ) |
Cash and cash equivalents, beginning of period |
|
| 1,948 |
|
|
| 415 |
|
Cash, end of period |
| $ | 377 |
|
| $ | 365 |
|
The accompanying unaudited notes are an integral part of these consolidated financial statements.
7
JOHN B. SANFILIPPO & SON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except where noted and per share data)
Note 1 – Basis of Presentation and Description of Business
As used herein, unless the context otherwise indicates, the terms “we”, “us”, “our” or “Company” collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiary, JBSS Ventures, LLC. Our fiscal year ends on the final Thursday of June each year, and typically consists offifty-two weeks (four thirteen-week quarters). Additional information on the comparability of the periods presented is as follows:
We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States. These nuts are sold under our Fisher, Orchard Valley Harvest, Squirrel Brand and Southern Style Nuts brand names and under a variety of private brands and under theFisher, Orchard Valley Harvest,Squirrel Brand, Southern Style Nuts,and Sunshine Countrybrand names.brands. We also market and distribute, and in most cases, manufacture or process, a diverse product line of food and snack products, including peanut butter, almond butter, cashew butter, candy and confections, snackssnack and trail mixes, nutrition bars, snack bars, snack bites, sunflower kernels, dried fruit, corn snacks, chickpea snacks, sesame sticks, and other sesame snack products and baked cheese snack products under our brand names, including Just the Cheese, and under private brands andbrands. Finally, with our recent acquisition of assets relating to the snack bars business from TreeHouse Foods, Inc., which was completed in the second quarter of fiscal 2024, we are able to offer our private brand names. customers a complete portfolio of snack bars.Our products are sold through three primary distribution channels, to significant buyers of nuts, including food retailers in the consumer channel, commercial ingredient users and contract packaging customers.
The accompanying unaudited financial statements fairly present the consolidated statements of comprehensive income, consolidated balance sheets, consolidated statements of stockholders’ equity and consolidated statements of cash flows, and reflect all adjustments, consisting only of normal recurring adjustments which are necessary for the fair statement of the results of the interim periods. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
The interim results of operations are not necessarily indicative of the results to be expected for a full year. The balance sheet data as of June 29, 20172023 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). Accordingly, these unaudited financial statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 20172023 Annual Report onForm 10-K for the fiscal year ended June 29, 2017.2023.
Note 2 – Inventories Lakeville Acquisition
Inventories consistOn September 29, 2023, we completed the acquisition of the following:
December 28, 2017 | June 29, 2017 | December 29, 2016 | ||||||||||
Raw material and supplies | $ | 80,867 | $ | 79,609 | $ | 107,735 | ||||||
Work-in-process and finished goods | 87,985 | 102,811 | 74,918 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 168,852 | $ | 182,420 | $ | 182,653 | ||||||
|
|
|
|
|
|
Note 3 – Acquisition of Squirrel Brand L.P.
On November 30, 2017, we acquired certain assets from TreeHouse Foods, Inc. (the “Seller”) relating to its snack bars business. The acquired assets include inventory, a manufacturing facility and assumedrelated equipment located in Lakeville, Minnesota, and product formulas (the “Lakeville Acquisition”). The initial purchase price was approximately $61,546 in cash, subject to certain liabilities (the “Acquisition”)post-closing adjustments. Following the closing, we received payments from the Seller of Squirrel Brand L.P. (“Squirrel Brand”)$2,572 for purchase price adjustments related to the actual inventory and fixed assets acquired, for a revised purchase price of $31,500, subject to a working capital adjustment. After giving effect to the initial working capital adjustment, the$58,974, net. The purchase price for the Lakeville Acquisition was $33,409, of which $21,909 was paid in cash and $11,500 was financedprimarily funded from borrowings under the Credit Facility as amended by the seller throughSecond Amendment (defined below).
The Lakeville Acquisition accelerates our strategy within the growing snack bar category and diversifies our product offerings. It also allows us to offer private brand customers a three-year unsecured promissory note (the “Promissory Note”).complete portfolio of snack bars, including fruit and grain, crunchy, protein, sweet and salty and chewy bars that complement internally developed nutrition bars. The final working capital adjustment, if any, will be completed in our upcoming third quarter of fiscal 2018. The cash portion of the acquisition price was funded from our credit facility. The Promissory Note bears interest at 5.5% per annum and is payable in equal monthly principal payments of $319, plus interest, beginning in January 2018. The Promissory Note can be prepaid without penalty.
The Squirrel Brand business is one of the nation’s leading suppliers of indulgent and premium roasted nuts and snack mixes under itsSquirrel Brand andSouthern Style Nuts brands. Prior to the Acquisition, Squirrel Brand was a customer in our Contract Packaging sales channel for fourteen years. TheLakeville Acquisition has been accounted for as a business combination in accordance with ASC Topic 805, “Business Combinations”. As a result
8
The following table summarizes the Acquisition, we expanded our customer base and branded product portfolio, as well as increased our customer reach, especially into alternative distribution channels.
The total purchase price of $33,409 has beenpreliminary amounts allocated on a preliminary basis to the fair values of thecertain assets acquired at the acquisition date:
Inventories | $ | 35,500 |
|
Property, plant and equipment |
| 25,600 |
|
Identifiable intangible assets: |
|
| |
Product formulas |
| 850 |
|
Total assets acquired | $ | 61,950 |
|
Property, plant and liabilities assumedequipment represent a manufacturing facility and related equipment located in Lakeville, Minnesota. The fair value for the property was primarily determined using a market approach. The fair values for the machinery and equipment were determined using a combination of the direct and indirect cost approaches, along with the market approach. All assets will be depreciated on a straight-line basis over their estimated remaining useful lives as follows:determined in accordance with our accounting policies.
Accounts receivable | $ | 2,446 | ||
Inventories | 1,957 | |||
Other assets | 75 | |||
Identifiable intangible assets: | ||||
Customer relationships | 10,500 | |||
Brand names | 8,900 | |||
Non-compete agreement | 270 | |||
Goodwill | 9,638 | |||
Accounts payable and accrued expenses | (377 | ) | ||
|
| |||
Total Purchase Price | $ | 33,409 | ||
|
|
The customer relationship assets representproduct formulas asset represents the value of these formulas designed to replicate the long-term strategic relationship the Squirrel Brand business has with its significant customers, which we are amortizing over a weighted-average lifetaste, texture and appearance of 7.5 years.branded snack bars. The assets were valued using an income approach, specifically the “multi-period excess earnings” method, which identifies an estimated stream of revenues and expenses for a particular group of assets from which deductions of portions of the projected economic benefits, attributable to assets other than the subject asset (contributory assets), are deducted in order to isolate the prospective earnings of the subject asset. This value is considered a level 3 measurement under the GAAP fair value hierarchy.
The brand name assets represent the value of the establishedSquirrel Brand andSouthern Style Nuts names. We appliedproduct formulas was determined using the income approach through a relief from royalty method analysis to determineanalysis. We are amortizing formulas over a weighted average life of 5.4 years.
There were no recognized or unrecognized material contingencies associated with the preliminaryacquired business.
The $61,950 fair value of the brand name assets. We are amortizingidentifiable assets acquired exceeded the brand name assets overtotal purchase price of $58,974. Accordingly, this acquisition resulted in a weighted-average lifebargain purchase and we recognized a gain of 13.8 years.
Goodwill,$2,226, net of taxes, which is expectedreported in the caption “Bargain purchase gain, net” in our consolidated financial results for the thirty-nine weeks ended March 28, 2024. We believe the Lakeville Acquisition resulted in a bargain purchase gain because the Seller was motivated to be deductibledivest such snack bars business, as its performance no longer supported the Seller's long-term growth targets.
Net sales of $75,606 from the closing date of the Lakeville Acquisition on September 29, 2023 are included in our consolidated financial results for taxes, arises from intangible assets that do not qualifythe thirty-nine weeks ended March 28, 2024. The closing date of the Lakeville Acquisition was on the first day of our second fiscal quarter. The Company also incurred acquisition-related costs of $142 and $811 for separate recognitionthe quarter and expected synergies from combining the operations of Squirrel Brand with the Company. There were no material contingencies recognized or unrecognized associated with the acquired business.thirty-nine weeks ended March 28, 2024, respectively. These costs are included in Administrative expenses.
The purchase price allocation, especially amounts allocated to goodwill and intangible assets are based on preliminary valuations and are subject to final adjustments to reflect the final net working capital adjustment and valuations.
The following reflects the unaudited pro forma results of operations of the Company as if the Lakeville Acquisition had taken place at the beginning of fiscal 2017. 2023. This pro forma information does not purport to represent what the Company’s actual results would have been if the Lakeville Acquisition had occurred as of the date indicated or what such results would be for any future periods.
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
| |||||||||||
|
| March 28, |
|
| March 30, |
|
| March 28, |
|
| March 30, |
| ||||
Pro forma net sales |
| $ | 271,884 |
|
| $ | 279,339 |
|
| $ | 837,524 |
|
| $ | 888,092 |
|
Pro forma net income |
|
| 14,255 |
|
|
| 14,237 |
|
|
| 47,716 |
|
|
| 43,747 |
|
Pro forma diluted earnings per share |
| $ | 1.22 |
|
| $ | 1.22 |
|
| $ | 4.08 |
|
| $ | 3.76 |
|
Year-Ended June 29, 2017 | Twenty-six weeks ended December 28, 2017 | |||||||
Pro forma net sales | $ | 863,267 | $ | 479,054 | ||||
Pro forma net income | 36,723 | 18,762 | ||||||
Pro forma diluted earnings per share | $ | 3.22 | $ | 1.64 |
These unaudited pro forma results have been calculated after applying our accounting policies and adjusting the results of the Squirrel Brand businessLakeville Acquisition to reflect elimination of transaction costs and the bargain purchase gain and to record additional amortizationinterest expense and interest expensecost of sales that would have been charged,incurred, assuming the fair value adjustment to intangible assets sinceinventory had been applied from July 1, 2016,2022, net of related income taxes in respect of pro forma net income and diluted earnings per share performance. Transaction costsThe impact to the above pro forma information of $500, already recorded in Administrative expenses, areincremental depreciation and amortization expense is insignificant and therefore excluded from the calculation of pro forma net income for thetwenty-six weeks ended December 28, 2017 stated above.results.
Net sales of $3,976 resulting from the Acquisition are included in our consolidated financial results as of December 28, 2017 since the Acquisition closed on November 30, 2017.
Since the Lakeville Acquisition, we continue to operate in a single reportable operating segment that consists of selling various nut andnut-related products and snacks through three sales distribution channels. Revenues from the Lakeville Acquisition are primarily in our consumer distribution channel.
9
Note 3 – Revenue Recognition
We recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. For each customer contract, a five-step process is followed in which we identify the contract, identify performance obligations, determine the transaction price, allocate the contract transaction price to the performance obligations, and recognize the revenue when (or as) the performance obligation is transferred to the customer.
When Performance Obligations Are Satisfied
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations are primarily for the delivery of raw and processed recipe and snack nuts, nut butters and trail mixes.
Our customer contracts do not include more than one performance obligation. If a contract were to contain more than one performance obligation, we are required to allocate the contract’s transaction price to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by directly observable data.
Revenue recognition is generally completed at a point in time when product control is transferred to the customer. For virtually all of our revenues, control transfers to the customer when the product is shipped or delivered to the customer based upon applicable shipping terms. This allows the customer to then direct the use and obtain substantially all of the remaining benefits from the asset at that point in time. Therefore, the timing of our revenue recognition requires little judgment.
Variable Consideration
Some of our products are sold through specific incentive programs including, but not limited to, promotional allowances, volume and customer rebates, in-store display incentives and marketing allowances to consumer and some commercial ingredient customers. The ultimate cost of these programs is dependent on certain factors such as actual purchase volumes or customer activities. It is also dependent on significant management judgment when determining estimates. The Company accounts for these programs as variable consideration and recognizes a reduction in revenue (and a corresponding reduction in the transaction price) in the same period as the underlying program based upon the terms of the specific arrangements.
Trade promotions, consisting primarily of customer pricing allowances, merchandising funds and consumer coupons, are also offered through various programs to customers and consumers. A provision for estimated trade promotions is recorded as a reduction of revenue (and a reduction in the transaction price) in the same period when the sale is recognized.Revenues are also recorded net of expected customer deductions which are provided for based upon past experiences. Evaluating these estimates requires management judgment.
We generally use the most likely amount method to determine the variable consideration. We believe there will not be significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. The Company reviews and updates its estimates and related accruals of variable consideration and trade promotions at least quarterly based on the terms of the agreements and historical experience. Any uncertainties in the ultimate resolution of variable consideration due to factors outside of the Company’s influence are typically resolved within a short timeframe. Therefore, no additional constraint on the variable consideration is required.
Contract Balances
Contract assets or liabilities result from transactions with revenue recorded over time. If the measure of remaining rights exceeds the measure of the remaining performance obligations, the Company records a contract asset. Conversely, if the measure of the remaining performance obligations exceeds the measure of the remaining rights, the Company records a contract liability. There was no contract asset balance for any periods presented. The Company generally does not have material deferred revenue or contract liability balances arising from transactions with customers.
10
Disaggregation of Revenue
Revenue disaggregated by sales channel is as follows:
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
| |||||||||||
Distribution Channel |
| March 28, |
|
| March 30, |
|
| March 28, |
|
| March 30, |
| ||||
Consumer |
| $ | 225,994 |
|
| $ | 185,128 |
|
| $ | 651,690 |
|
| $ | 606,188 |
|
Commercial Ingredients |
|
| 26,955 |
|
|
| 30,901 |
|
|
| 82,802 |
|
|
| 90,827 |
|
Contract Packaging |
|
| 18,935 |
|
|
| 22,506 |
|
|
| 62,719 |
|
|
| 68,449 |
|
Total |
| $ | 271,884 |
|
| $ | 238,535 |
|
| $ | 797,211 |
|
| $ | 765,464 |
|
Note 4 – Leases
Description of Leases
We lease equipment used in the transportation of goods in our warehouses, as well as a limited number of automobiles and a small warehouse near our Bainbridge, Georgia facility. Our leases generally do not contain non-lease components and do not contain any explicit guarantees of residual value. Our leases for warehouse transportation equipment generally require the equipment to be returned to the lessor in good working order.
Through a review of our contracts, we determine if an arrangement is a lease at inception and analyze the lease to determine if it is operating or finance. Operating lease right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental collateralized borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Implicit rates are used when readily determinable. None of our leases currently contain options to extend the term. In the event of an option to extend the term of a lease, the lease term used in measuring the liability would include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the respective lease term.Our leases have remaining terms of up to 5.3 years.
It is our accounting policy not to apply lease recognition requirements to short term leases, defined as leases with an initial term of 12 months or less. As such, leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheets. We have also made the policy election to not separate lease and non-lease components for all leases.
The following table provides supplemental information related to operating lease right-of-use assets and liabilities:
March 28, |
|
| June 29, |
|
| March 30, |
|
| Affected Line Item in Consolidated Balance Sheets | ||||
Assets |
|
|
|
|
|
|
|
|
|
| |||
Operating lease right-of-use assets | $ | 7,409 |
|
| $ | 6,427 |
|
| $ | 6,582 |
|
| Operating lease right-of-use assets |
Total lease right-of-use assets | $ | 7,409 |
|
| $ | 6,427 |
|
| $ | 6,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Liabilities |
|
|
|
|
|
|
|
|
|
| |||
Current: |
|
|
|
|
|
|
|
|
|
| |||
Operating leases | $ | 1,872 |
|
| $ | 1,729 |
|
| $ | 1,752 |
|
| Other accrued expenses |
Noncurrent: |
|
|
|
|
|
|
|
|
|
| |||
Operating leases |
| 5,553 |
|
|
| 4,771 |
|
|
| 4,905 |
|
| Long-term operating lease liabilities |
Total lease liabilities | $ | 7,425 |
|
| $ | 6,500 |
|
| $ | 6,657 |
|
|
|
11
The following tables summarize the Company’s total lease costs and other information arising from operating lease transactions:
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
| |||||||||||
| March 28, |
|
| March 30, |
|
| March 28, |
|
| March 30, |
| |||||
Operating lease costs (a) |
| $ | 847 |
|
| $ | 529 |
|
| $ | 2,236 |
|
| $ | 1,544 |
|
Variable lease costs (b) |
|
| 34 |
|
|
| 74 |
|
|
| (107 | ) |
|
| 189 |
|
Total lease cost |
| $ | 881 |
|
| $ | 603 |
|
| $ | 2,129 |
|
| $ | 1,733 |
|
Supplemental cash flow and other information related to leases was as follows:
| For the Thirty-Nine Weeks Ended |
| ||||||
| March 28, |
|
| March 30, |
| |||
Operating cash flows information: |
|
|
|
|
|
| ||
Cash paid for amounts included in measurements for lease liabilities |
| $ | 1,827 |
|
| $ | 1,249 |
|
|
|
|
|
|
|
| ||
Non-cash activity: |
|
|
|
|
|
| ||
Right-of-use assets obtained in exchange for new operating lease obligations |
| $ | 2,350 |
|
| $ | 5,458 |
|
| March 28, |
|
| June 29, |
|
| March 30, |
| ||||
Weighted average remaining lease term (in years) |
|
| 4.2 |
|
|
| 4.4 |
|
|
| 4.6 |
|
Weighted average discount rate |
|
| 6.9 | % |
|
| 6.7 | % |
|
| 6.6 | % |
Maturities of operating lease liabilities as of March 28, 2024 are as follows:
Fiscal Year Ending |
|
|
| |
June 27, 2024 (excluding the thirty-nine weeks ended March 28, 2024) |
| $ | 640 |
|
June 26, 2025 |
|
| 2,199 |
|
June 25, 2026 |
|
| 1,988 |
|
June 24, 2027 |
|
| 1,695 |
|
June 29, 2028 |
|
| 1,512 |
|
June 28, 2029 |
|
| 496 |
|
Thereafter |
|
| — |
|
Total lease payment |
|
| 8,530 |
|
Less imputed interest |
|
| (1,105 | ) |
Present value of operating lease liabilities |
| $ | 7,425 |
|
At March 28, 2024, the Company has additional operating leases of approximately $19,576 that have not yet commenced and therefore are not reflected in the Consolidated Balance Sheet and tables above. The leases are scheduled to commence in the next two fiscal quarters with initial lease terms ranging from 5 to 7.5 years. On April 23, 2024, the Company entered into a 7.5 year lease for a warehouse of approximately 444,600 square feet. The warehouse is located in Huntley, IL near our largest facility in Elgin, IL. The warehouse will be utilized to store finished goods inventory and as a distribution center.
Lessor Accounting
We lease office space in our four-story office building located in Elgin, Illinois. As a lessor, we retain substantially all of the risks and benefits of ownership of the investment property and under Topic 842: Leases we continue to account for all of our leases as operating leases. Lease agreements may include options to renew. We accrue fixed lease income on a straight‑line basis over the terms of the leases. There is generally no variable lease consideration and an immaterial amount of non-lease components such as recurring utility and storage fees. Leases between related parties are immaterial.
12
Leasing revenue is as follows:
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
| |||||||||||
| March 28, |
|
| March 30, |
|
| March 28, |
|
| March 30, |
| |||||
Lease income related to lease payments |
| $ | 490 |
|
| $ | 419 |
|
| $ | 1,467 |
|
| $ | 1,224 |
|
The future minimum, undiscounted fixed cash flows under non-cancelable tenant operating leases for each of the next five years and thereafter are as follows:
Fiscal Year Ending |
|
|
| |
June 27, 2024 (excluding the thirty-nine weeks ended March 28, 2024) |
| $ | 511 |
|
June 26, 2025 |
|
| 1,477 |
|
June 25, 2026 |
|
| 972 |
|
June 24, 2027 |
|
| 930 |
|
June 29, 2028 |
|
| 328 |
|
June 28, 2029 |
|
| 336 |
|
Thereafter |
|
| 1,478 |
|
| $ | 6,032 |
|
Note 5 – Inventories
Inventories consist of the following:
| March 28, |
|
| June 29, |
|
| March 30, |
| ||||
Raw material and supplies |
| $ | 100,067 |
|
| $ | 65,430 |
|
| $ | 90,110 |
|
Work-in-process and finished goods |
|
| 110,605 |
|
|
| 107,506 |
|
|
| 100,241 |
|
Total |
| $ | 210,672 |
|
| $ | 172,936 |
|
| $ | 190,351 |
|
Note 6 – Goodwill and Intangible Assets
Identifiable intangible assets that are subject to amortization which resulted entirely from the Acquisition, are based on our preliminary purchase price allocation and consist of the following at December 28, 2017:following:
December 28, 2017 | Weighted-average amortization period (years) |
| March 28, |
|
| June 29, |
|
| March 30, |
| ||||||||||
Customer relationships | $ | 10,500 | 7.5 |
| $ | 21,350 |
|
| $ | 21,350 |
|
| $ | 21,350 |
| |||||
Brand names | 8,900 | 13.8 |
|
| 17,070 |
|
|
| 17,070 |
|
|
| 17,070 |
| ||||||
Product formulas |
|
| 850 |
|
|
| - |
|
|
| - |
| ||||||||
Non-compete agreement | 270 | 5.0 |
|
| 300 |
|
|
| 300 |
|
|
| 300 |
| ||||||
|
| |||||||||||||||||||
19,670 | 11.3 |
|
| 39,570 |
|
|
| 38,720 |
|
|
| 38,720 |
| |||||||
Less accumulated amortization: |
|
|
|
|
|
|
|
|
| |||||||||||
Customer relationships | (267 | ) |
|
| (20,518 | ) |
|
| (19,834 | ) |
|
| (19,572 | ) | ||||||
Brand names | (58 | ) |
|
| (12,491 | ) |
|
| (11,955 | ) |
|
| (11,776 | ) | ||||||
Product formulas |
|
| (81 | ) |
|
| - |
|
|
| - |
| ||||||||
Non-compete agreement | (4 | ) |
|
| (277 | ) |
|
| (273 | ) |
|
| (272 | ) | ||||||
|
|
| (33,367 | ) |
|
| (32,062 | ) |
|
| (31,620 | ) | ||||||||
(329 | ) | |||||||||||||||||||
| ||||||||||||||||||||
Net intangible assets | $ | 19,341 |
| $ | 6,203 |
|
| $ | 6,658 |
|
| $ | 7,100 |
| ||||||
|
Gross intangible assets of $18,690 from previous acquisitions were fully amortized as of June 29, 2017.
Customer relationships are being amortized on an accelerated basis. The brand names remaining to be amortized consist of theSquirrel Brand, andSouthern Style Nuts and Just the Cheese brand names.
13
Total amortization expense related to intangible assets, which is a componentclassified in administrative expense in the Consolidated Statement of Administrative expense,Comprehensive Income, was $329$381 and $1,305 for the quarter andtwenty-six thirty-nine weeks ended DecemberMarch 28, 2017.2024, respectively. Amortization expense for the remainder of fiscal 2018, based on our preliminary purchase price allocation,2024 is expected to be approximately $1,685$381 and expected amortization expense the next five fiscal years is as follows:
Fiscal Year Ending |
|
|
| |
June 26, 2025 |
| $ | 1,374 |
|
June 25, 2026 |
|
| 1,038 |
|
June 24, 2027 |
|
| 863 |
|
June 29, 2028 |
|
| 685 |
|
June 28, 2029 |
|
| 496 |
|
Fiscal year ending June 27, 2019 June 25, 2020 June 24, 2021 June 30, 2022 June 29, 2023 $ 3,028 2,500 2,162 1,894 1,659
Our net goodwill at March 28, 2024 was comprised of $9,638 relates entirely to$9,650 from the Acquisition. Squirrel Brand acquisition completed in fiscal 2018 and $2,100 from the Just the Cheese brand acquisition completed in fiscal 2023. The changes in the carrying amount of goodwill during thetwenty-six weeks ended December 28, 2017since June 30, 2022 are as follows:
Net balance at June 29, 2017 | $ | — | ||
Goodwill acquired during the period | 9,638 | |||
|
| |||
Net balance at December 28, 2017 | $ | 9,638 | ||
|
|
Gross goodwill balance at June 30, 2022 |
| $ | 18,416 |
|
Accumulated impairment losses |
|
| (8,766 | ) |
Net goodwill balance at June 30, 2022 |
|
| 9,650 |
|
Goodwill acquired during fiscal 2023 |
|
| 2,100 |
|
Net balance at June 29, 2023 |
|
| 11,750 |
|
Goodwill acquired during fiscal 2024 |
|
| - |
|
Net balance at March 28, 2024 |
| $ | 11,750 |
|
The Company will perform a goodwill impairment test annually during the fourth quarter of its fiscal year and more frequently if events or circumstances indicate that impairment may have occurred. Such events or circumstances may, among others, include significant adverse changes in the general business climate.
Note 57 – Credit Facility
On July 7, 2017, we entered into the EighthOur Second Amendment to the Amended and Restated Credit Agreement (the “Second Amendment”) dated September 29, 2023 provides for a $150,000 senior secured revolving credit facility (the “Credit Facility”), which was increased from $117,500, to provide extra available capacity for our short-term working capital requirements due to the Lakeville Acquisition. The Second Amendment also extends the maturity of the Credit Facility which eliminated the quarterly restriction on cash dividends and distributionsto September 29, 2028 and allows the Company to without obtaining lender consent, makepay up to four cash$100,000 in dividends or distributions on our stock per fiscal year, or purchase, acquire, redeem or retire stock in any fiscal year, in an amount notsubject to exceed $60,000 in the aggregate per fiscal year, as long as no default or event of default exists and the excessmeeting availability under thetests. The Credit Facility remains over $30,000 immediately beforeis secured by substantially all our assets other than machinery and after giving effect to any such dividend, distribution, purchase or redemption.equipment, real property and fixtures.
On November 29, 2017, we entered into the Consent and Ninth Amendment to our Credit Agreement (the “Ninth Amendment”). The Ninth Amendment provides lender consent for us to incur unsecured debt (in particular, the Promissory Note) in connection with our acquisition of the Squirrel Brand business, and for: (i) the incurrence of unsecured debt in connection with the Acquisition and (ii) the Acquisition to constitute a “Permitted Acquisition” under the terms of the Credit Agreement. The Ninth Amendment also modified our collateral reporting requirements.
At DecemberMarch 28, 2017,2024, we had $83,825$114,114 of available credit under the Credit Facility which reflects borrowings of $30,000$32,093 and reduced availability as a result of $3,675$3,793 in outstanding letters of credit. As of DecemberMarch 28, 2017,2024, we were in compliance with all financial covenants under the Credit Facility and Mortgage Facility.
Note 6 8 – Earnings Per Common Share
The following table presents the reconciliation of the weighted average shares outstanding used in computing basic and diluted earnings per share:
For the Quarter Ended | For the Twenty-six Weeks Ended |
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
| |||||||||||||||||||||||||
December 28, 2017 | December 29, 2016 | December 28, 2017 | December 29, 2016 |
| March 28, |
|
| March 30, |
|
| March 28, |
|
| March 30, |
| |||||||||||||||||
Weighted average number of shares outstanding – basic | 11,375,512 | 11,304,617 | 11,363,409 | 11,285,417 |
|
| 11,626,886 |
|
|
| 11,592,362 |
|
|
| 11,614,388 |
|
|
| 11,570,954 |
| ||||||||||||
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Stock options and restricted stock units | 50,786 | 69,200 | 70,824 | 91,539 | ||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Restricted stock units |
|
| 71,645 |
|
|
| 63,832 |
|
|
| 69,191 |
|
|
| 61,702 |
| ||||||||||||||||
Weighted average number of shares outstanding – diluted | 11,426,298 | 11,373,817 | 11,434,233 | 11,376,956 |
|
| 11,698,531 |
|
|
| 11,656,194 |
|
|
| 11,683,579 |
|
|
| 11,632,656 |
| ||||||||||||
|
|
|
|
There were no anti-dilutive awards excluded from the computation of diluted earnings per share for the current quarter andtwenty-six weekany periods presented.
14
Note 79 – Stock-Based Compensation Plans
DuringAt our annual meeting of stockholders on November 2, 2023, our stockholders approved a new equity incentive plan (the “2023 Omnibus Plan”) under which awards of options and stock-based awards may be made to employees, officers or non-employee directors of our Company. A total of 747,065 shares of Common Stock are authorized for grants of awards thereunder, which may be in the second quarterform of fiscal 2018, there were 60,582options, restricted stock, restricted stock units (“RSUs”) awarded, stock appreciation rights (SARs”), performance shares, performance units, Common Stock or dividends and dividend equivalents.
The total number of shares of Common Stock with respect to employees andnon-employee memberswhich options or SARs may be granted in any calendar year to any participant may not exceed 500,000 shares (this limit applies separately with respect to each type of the Board of Directors. The vesting period is generally three yearsaward). Additionally, for awards of restricted stock, RSUs, performance shares or other stock-based awards that are intended to employeesqualify as performance-based compensation: (i) the total number of shares of Common Stock that may be granted in any calendar year to any participant may not exceed 250,000 shares (this limit applies separately to each type of award) and one year(ii) the maximum amount that may be paid to any participant for awards tonon-employee directors.
that are payable in cash or property other than Common Stock option activity was insignificant during the first half of fiscal 2018.in any calendar year is $5,000.
The following is a summary of RSU activity for the first halfthirty-nine weeks of fiscal 2018:2024:
Restricted Stock Units | Shares | Weighted Average Grant Date Fair Value | ||||||
Outstanding at June 29, 2017 | 201,858 | $ | 40.36 | |||||
Activity: | ||||||||
Granted | 60,582 | 54.41 | ||||||
Vested | (55,956 | ) | 38.24 | |||||
Forfeited | (11,038 | ) | 33.59 | |||||
|
|
|
| |||||
Outstanding at December 28, 2017 | 195,446 | $ | 45.70 | |||||
|
|
|
|
Restricted Stock Units |
| Shares |
|
| Weighted Average Grant Date Fair Value |
| ||
Outstanding at June 29, 2023 |
|
| 155,012 |
|
| $ | 67.87 |
|
Granted (a) |
|
| 56,168 |
|
| $ | 85.55 |
|
Vested (b) |
|
| (55,085 | ) |
| $ | 69.68 |
|
Forfeited |
|
| (621 | ) |
| $ | 72.58 |
|
Outstanding at March 28, 2024 |
|
| 155,474 |
|
| $ | 73.60 |
|
At DecemberMarch 28, 2017,2024, there are 60,490were 23,588 RSUs outstanding that arewere vested but deferred.
The following table summarizes compensation expense charged to earnings for all equity compensation plans for the periods presented:
For the Quarter Ended | For the Twenty-six Weeks Ended | |||||||||||||||
December 28, 2017 | December 29, 2016 | December 28, 2017 | December 29, 2016 | |||||||||||||
Stock-based compensation expense | $ | 891 | $ | 878 | $ | 1,429 | $ | 1,428 |
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
| |||||||||||
| March 28, |
|
| March 30, |
|
| March 28, |
|
| March 30, |
| |||||
Stock-based compensation expense |
| $ | 1,098 |
|
| $ | 941 |
|
| $ | 3,228 |
|
| $ | 3,228 |
|
As of DecemberMarch 28, 2017,2024, there was $4,875$5,665 of total unrecognized compensation expense related tonon-vested RSUs granted under our stock-based compensation plans. We expect to recognize that cost over a weighted average period of 1.9 1.5 years.
15
Note 8 10 – Dividends
On July 11, 2017, our Board of Directors, after considering the financial position of our Company and other factors, declared a special cash dividend of $2.00 per share and a regular annual cash dividend of $0.50 per share on all issued and outstanding shares of Common Stock and Class A Stock of the Company (the “July 2017 Dividends”). The July 2017 Dividends of approximately $28,370 were paid on August 15, 2017 to stockholders of record as of the close of business on August 2, 2017.
Note 9 – Retirement Plan
The Supplemental Employee Retirement Plan (“Retirement Plan”) is an unfunded,non-qualified deferred compensation plan that will provide eligible participants with monthly benefits upon retirement, disability or death, subject to certain conditions. The monthly benefit is based upon each participant’s earnings and his or her number of years of service. The components of net periodic benefit cost are as follows:
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
| |||||||||||
|
| March 28, |
|
| March 30, |
|
| March 28, |
|
| March 30, |
| ||||
Service cost |
| $ | 63 |
|
| $ | 200 |
|
| $ | 189 |
|
| $ | 601 |
|
Interest cost |
|
| 350 |
|
|
| 342 |
|
|
| 1,050 |
|
|
| 1,025 |
|
Amortization of loss |
|
| — |
|
|
| 7 |
|
|
| — |
|
|
| 21 |
|
Net periodic benefit cost |
| $ | 413 |
|
| $ | 549 |
|
| $ | 1,239 |
|
| $ | 1,647 |
|
For the Quarter Ended | For the Twenty-six Weeks Ended | |||||||||||||||
December 28, 2017 | December 29, 2016 | December 28, 2017 | December 29, 2016 | |||||||||||||
Service cost | $ | 152 | $ | 158 | $ | 304 | $ | 316 | ||||||||
Interest cost | 212 | 202 | 425 | 405 | ||||||||||||
Amortization of prior service cost | 240 | 240 | 479 | 479 | ||||||||||||
Amortization of loss | 41 | 91 | 81 | 182 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net periodic benefit cost | $ | 645 | $ | 691 | $ | 1,289 | $ | 1,382 | ||||||||
|
|
|
|
|
|
|
|
The components of net periodic benefit cost other than the service cost component are included in the line item “Other expense”“Pension expense (excluding service costs)” in the Consolidated Statements of Comprehensive Income.
Note 1011 – Accumulated Other Comprehensive Loss
The table below sets forth the changes to accumulated other comprehensive loss (“AOCL”) for thetwenty-six thirty-nine weeks ended DecemberMarch 28, 20172024 and December 29, 2016.March 30, 2023.These changes are all related to our defined benefit pension plan.
Changes to AOCL(a) | For the Twenty-six Weeks Ended | |||||||||||||||
| For the Thirty-Nine Weeks Ended |
| ||||||||||||||
Changes to AOCL(a) | December 28, 2017 | December 29, 2016 |
| March 28, |
|
| March 30, |
| ||||||||
$ | (4,404 | ) | $ | (6,425 | ) |
| $ | (204 | ) |
| $ | (2,480 | ) | |||
Other comprehensive income before reclassifications | — | — |
|
| — |
|
|
| — |
| ||||||
Amounts reclassified from accumulated other comprehensive loss | 560 | 661 |
|
| — |
|
|
| 21 |
| ||||||
Tax effect | (219 | ) | (251 | ) |
|
| — |
|
|
| (5 | ) | ||||
|
| |||||||||||||||
Net current-period other comprehensive income | 341 | 410 |
|
| — |
|
|
| 16 |
| ||||||
|
| |||||||||||||||
Balance at end of period | $ | (4,063 | ) | $ | (6,015 | ) |
| $ | (204 | ) |
| $ | (2,464 | ) | ||
|
|
The reclassifications out of AOCL for the quarter andtwenty-six thirty-nine weeks ended DecemberMarch 28, 20172024 and December 29, 2016March 30, 2023 were as follows:
For the Quarter Ended |
For the Twenty-six Weeks Ended | Affected line item in the Consolidated Statements of Comprehensive Income | ||||||||||||||||||
Reclassifications from AOCL to earnings(b) | December 28, 2017 | December 29, 2016 | December 28, 2017 | December 29, 2016 | ||||||||||||||||
Amortization of defined benefit pension items: | ||||||||||||||||||||
Unrecognized prior service cost | $ | (240 | ) | $ | (240 | ) | $ | (479 | ) | $ | (479 | ) | Other expense | |||||||
Unrecognized net loss | (41 | ) | (91 | ) | (81 | ) | (182 | ) | Other expense | |||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total before tax | (281 | ) | (331 | ) | (560 | ) | (661 | ) | ||||||||||||
Tax effect | 111 | 126 | 219 | 251 | Income tax expense | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Amortization of defined pension items, net of tax | $ | (170 | ) | $ | (205 | ) | $ | (341 | ) | $ | (410 | ) | ||||||||
|
|
|
|
|
|
|
|
For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
|
| Affected Line Item | |||||||||||
Reclassifications from AOCL to Earnings (b) | March 28, |
|
| March 30, |
|
| March 28, |
|
| March 30, |
|
| Consolidated Statements of | ||||
Amortization of defined benefit |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrecognized net loss | $ | — |
|
| $ | (7 | ) |
| $ | — |
|
| $ | (21 | ) |
| Pension expense (excluding service costs) |
Tax effect |
| — |
|
|
| 2 |
|
|
| — |
|
|
| 5 |
|
| Income tax expense |
Amortization of defined pension | $ | — |
|
| $ | (5 | ) |
| $ | — |
|
| $ | (16 | ) |
|
|
(b) Amounts in parenthesis indicate debits to expense. See |
Note 1110 – Income Taxes
Income tax expense as a percent ofpre-tax income (the “Effective Tax Rate”)“Retirement Plan” above for the quarter ended December 28, 2017 was 39.0% compared to an Effective Tax Rate of 31.6% for the quarter ended December 29, 2016. The Effective Tax Rate for thetwenty-six weeks ended December 28, 2017 was 35.4% compared to an Effective Tax Rate of 32.9% for thetwenty-six weeks ended December 29, 2016. The increase in the Effective Tax Rate for the quarter and six months ended December 28, 2017 was primarily related to the re-measurement of our net deferred tax assets incorporating the new federal income tax rate.
H.R.1, originally known as the Tax Cuts and Jobs Act of 2017, was enacted on December 22, 2017, and includes, among other items, a reduction in the federal corporate income tax rate from 35% to 21%, which will have a material favorable impact on our effective income tax rate and cash income taxes paid going forward. Because we have a June fiscalyear-end, the lower corporate income tax rate will be phased in during the 2018 calendar year, resulting in a U.S. statutory federal rate of approximately 28% for our fiscal year ending June 28, 2018, and 21% for subsequent fiscal years. Our net deferred tax asset balances are recorded at the tax rate expected to be in effect during the period in which the related temporary differences reverse. Therefore, this reduction in the corporate federal income tax rate required anon-cash reduction of our net deferred tax asset balances and a corresponding increase in income tax expense of $2,408 during the quarter andtwenty-six weeks ended December 28, 2017. We scheduled out the expected reversal of temporary differences, including anticipated changes in our pension accrual and fixed asset acquisitions for the next six months, which required the use of reasonable estimates. Actual results could differ from those estimates, and thus further adjustment of our deferred tax asset balances are possible.
Windfall tax benefits related to the excess tax deduction of share-based compensation of $332 and $446 for the quarter andtwenty-six weeks ended December 28, 2017 partially offset the impact of the reduction of the corporate tax rate.
Note 12 – Commitments and Contingent Liabilities
We are currently a party to various legal proceedings in the ordinary course of business. While management presently believes that the ultimate outcomes of these proceedings, individually and in the aggregate, will not materially affect our Company’s financial position, results of operations or cash flows, legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur. Unfavorable outcomes could include substantial monetary damages in excess of any appropriate accruals which management has established.applicable accruals. Were such unfavorable final outcomes to occur, there exists the possibility of a material adverse effect on our financial position, results of operations and cash flows.
16
We are subject to a class-action complaint for an employment related matter. Mediation for this matter occurred in fiscal 2017. In August 2017, we agreed in principle to a $1,200 settlement for which we were fully reserved at June 29, 2017. Thenon-monetary components
Note 13 – Fair Value of Financial Instruments
Authoritative guidance issued by theThe Financial Accounting Standards Board (“FASB”) defines fair value as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels:
Level 1 | – | Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities. | ||||
Level 2 | – | Observable inputs other than quoted prices in active markets. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. | ||||
Level 3 | – | Unobservable inputs for which there is little or no market data available. |
The carrying values of cash, trade accounts receivable and accounts payable approximate their fair values at each balance sheet date because of the short-term maturities and nature of these balances.
The carrying value of our revolving credit facility borrowings approximates fair value at each balance sheet date because interest rates on this instrument approximate current market rates (Level 2 criteria), and because of the short-term maturity and nature of this balance. In addition, there has been no significant change in our inherent credit risk.
The following table summarizes the carrying value and fair value estimate of our current and long-term debt, excluding unamortized debt issuance costs:
December 28, 2017 | June 29, 2017 | December 29, 2016 | ||||||||||
Carrying value of long-term debt: | $ | 38,256 | $ | 28,808 | $ | 30,532 | ||||||
Fair value of long-term debt: | 38,584 | 29,316 | 31,124 |
| March 28, |
|
| June 29, |
|
| March 30, |
| ||||
Carrying value of current and long-term debt: |
| $ | 7,276 |
|
| $ | 7,774 |
|
| $ | 7,933 |
|
Fair value of current and long-term debt: |
|
| 6,638 |
|
|
| 7,421 |
|
|
| 6,865 |
|
The estimated fair value of our long-term debt was determined using a market approach based upon Level 2 observable inputs, which estimates fair value based on interest rates currently offered on loans with similar terms to borrowers of similar credit quality or broker quotes. In addition, there have been no significant changes in the underlying assets securing our long-term debt.
Note 14 – Related Party Transaction
In connection with the Acquisition on November 30, 2017, we incurred $11,500 of unsecured debt to the principal owner and seller of the Squirrel Brand business, who was subsequently appointed as an executive officer of the Company. The interest rate on the Promissory Note is 5.5% per annum and the outstanding balance at December 28, 2017 was $11,181. Interest paid on the Promissory Note during the second quarter of fiscal 2018 was immaterial.
Note 15 – Recent Accounting Pronouncements
The followingThere were no recent accounting pronouncements have been adopted in the current fiscal year:year.
In March 2017, the FASB issued ASUNo. 2017-07 “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”. The amendments in this update require the service cost component of pension expense to be disaggregated from the other components of net periodic benefit cost and be presented in the same line items as other employee compensation costs. All other components of net periodic benefit cost (interest cost, amortization of prior service cost and amortization of unrecognized loss) must be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The amendments in this update also allow only the service cost component to be eligible for capitalization when applicable (for example, as a cost of internally manufactured inventory or a self-constructed asset). This update is effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted as long as it is early adopted in the first interim period of an annual year and financial statements have not been issued or made available for issuance prior to adoption. The amendments in this update should be applied using a retrospective transition method, however, a practical expedient is offered with regard to the prior comparative periods. The Company adopted ASU2017-07 in the first quarter of fiscal 2018. Service cost continues to be presented as a component of Administrative expense while the remaining components of net periodic benefit cost (interest cost, amortization of prior service cost and amortization of unrecognized loss)There are now presented below the caption Other expense on the Consolidated Statements of Comprehensive Income. Adoption of this update required a reclassification of $533 and $1,066 in the prior year second quarter andtwenty-six week period, respectively, from Administrative expense to Other expense.
In October 2016, the FASB issued ASUNo. 2016-17 “Consolidation (Topic 810): Interests Held Through Related Parties That Are Under Common Control”. This update amends ASU2015-02 and affects reporting entities that are required to evaluate whether they should consolidate a variable interest entity in certain situations involving entities under common control. ASU2016-17 is effective for the Company in fiscal 2018 and requires retrospective application. The adoption of ASU2016-17 did not have any impact to the Consolidated Financial Statements.
In July 2015, the FASB issued ASUNo. 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory”. This update applies to inventory measured usingfirst-in,first-out or average cost and requires inventory be measured at the lower of cost and net realizable value. Net realizable value is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. When evidence exists that the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. That loss may be required, for example, due to damage, physical deterioration, obsolescence, changes in price levels, or other causes. This update became effective for the Company beginning in fiscal year 2018 with prospective application required. The adoption of ASU2015-11 did not have any impact to the consolidated financial statements.
The followingno recent accounting pronouncements that have been issued and not yet been adopted:
In January 2017, the FASB issued ASC UpdateNo. 2017-04 “Intangibles—Goodwill and Other Topics (Topic 350): Simplifying the Test for Goodwill Impairment”. The purpose of this update is to reduce the cost and complexity of evaluating goodwill for impairment. It eliminates the need for entities to calculate the impaired fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as ifadopted that reporting unit had been acquired in a business combination, commonly referred to as “Step 2”. Under this amendment, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value. This update is effective beginning in fiscal 2021. We do not expect this updateare expected to have a material impact on our Consolidated Financial Statements.
Note 15 – Subsequent Event
In February 2016,On May 1, 2024, our Board of Directors declared a special cash dividend of $1.00 per share on all issued and outstanding shares of Common Stock and Class A Stock of the FASB issued ASUNo. 2016-02“Leases (Topic 842)”Company (the “May 2024 Dividends”). The primary goal of this update is to require the lessee to recognize all lease commitments, both operating and finance, by initially recording a lease asset and liability on the balance sheet at the lease commencement date. Additionally, enhanced qualitative and quantitative disclosuresMay 2024 Dividends will be required. ASUNo. 2016-02 is effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. This new guidance will be effective for the Company beginning in fiscal year 2020. This guidance must be adopted using a modified retrospective approach and early adoption is permitted. The Company expects this new guidancepaid on June 20, 2024 to have a significant impact on its total assets and total liabilities, and lead to increased financial statement disclosures.
In May 2014, the FASB issued ASUNo. 2014-09“Revenue from Contracts with Customers (Topic 606)” and created a new ASC Topic 606,Revenue from Contracts with Customers, and added ASC Subtopic340-40, Other Assets and Deferred Costs — Contracts with Customers. The guidance in this update supersedes the revenue recognition requirements in ASC Topic 605,Revenue Recognition, and most industry-specific guidance throughout the industry topicsstockholders of record as of the codification. Under the new guidance, an entity should recognize revenue to depict the transferclose of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Several other amendments have been subsequently released, eachbusiness on May 31, 2024.
17
Item 2. Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
The following discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and the Notes to Consolidated Financial Statements.
Our fiscal year ends on the final Thursday of June each year, and typically consists offifty-two weeks (four thirteen-week quarters). Additional information on the comparability of the periods presented is as follows:
As used herein, unless the context otherwise indicates, the terms “we”, “us”, “our” or “Company” collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiary, JBSS Ventures, LLC. Our Company’s Credit Facility and Mortgage Facility, as defined below, are sometimes collectively referred to as “our financing arrangements.”
We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States. These nuts are sold under our Fisher, Orchard Valley Harvest, Squirrel Brand and Southern Style Nuts brand names and under a variety of private brands and under theFisher, Orchard Valley Harvest,Squirrel Brand, Southern Style Nuts,and Sunshine Countrybrand names.brands. We also market and distribute, and in most cases, manufacture or process, a diverse product line of food and snack products, including peanut butter, almond butter, cashew butter, candy and confections, snackssnack and trail mixes, nutrition bars, snack bars, snack bites, sunflower kernels, dried fruit, corn snacks, chickpea snacks, sesame sticks, and other sesame snack products and baked cheese snack products under our brand names, including Just the Cheese, and under private brands and brand names.brands. We distribute our products in the consumer, commercial ingredients and contract packaging distribution channels.
The Company’s long-term objective to drive profitableOur Long-Range Plan defines our future growth priorities and focuses on growing our private brand business across key customers, as identified in our strategic plan (the “Strategic Plan”), includes growingwell as transforming Fisher,, Orchard Valley Harvest,and Squirrel Brandand Southern Style Nuts into leading nut brands while increasing distribution and diversifying our portfolio into high growth snacking segments. We will execute on our Long-Range Plan by focusingproviding private brand customer value-added solutions based on our extensive industry and consumer expertise with innovative products such as our newly developed product line of private brand nutrition bars which we introduced during fiscal 2023. We will grow our branded business by reaching new consumers demanding quality nuts in the snacking, recipevia product expansion and produce categories, providing integrated nut solutions to grownon-branded business at existing key customers in eachpackaging innovation, expanding distribution channelacross current and increasing our consumer reach efforts, including by expandingalternative channels, diversifying our product offerings into alternative distribution channels. We executedand focusing on new ways for consumers to buy our Strategicproducts, including sales via e-commerce platforms. Our Long-Range Plan inalso contemplates increasing our sales through product innovation and targeted, opportunistic acquisitions, such as the acquisition of the Just the Cheese brand completed during fiscal 2023 and the recent Lakeville Acquisition completed during the second quarter of fiscal 2018 by completing the strategic acquisition of Squirrel Brand, L.P. (“Squirrel Brand”), a former contract packaging customer. In addition, we managed2024, which expanded our ability to grow ourFisher recipe nut sales volume in the quarter by focusing on our promotional activity and expanding distribution, despite a majorFisher recipe nut customer transitioning to a private label program for certain package types during the quarter.
We face a number of challenges in the future which include, among others, volatile commodity costs for certain tree nuts, especially cashews, and intensified competition for market share from bothproduce private brand snack bars and nameallows us to provide our private brand products. We also face changing industry trends resulting in retail consolidation and Internet price competition for nut and nut related products, as well as significant risks associatedcustomers with increasing use of fixed price arrangements with certain of our customers. a complete snack bar portfolio.
We will continue to focus on seeking profitable business opportunities to further utilize our additional production capacity at our primary manufacturing, processing and distribution facility located in Elgin, Illinois (the “Elgin Site”). We expect to maintain our recent level of promotional and advertising activity forto invest in ourFisher brands to achieve growth. We intend to execute on an omnichannel approach to win in key categories including recipe nuts, snack nuts, trail mix andOrchard Valley Harvest brands. other snacking categories. We continue to see significant domestic sales and volumee-commerce growth in ourOrchard Valley Harvest brand and expect to continue to focus on this portion ofacross our branded business.portfolio and anticipate taking various actions with the goal of maintaining that growth across a variety of established and emerging e-commerce platforms. We will continue to face the ongoing challenges and/or regulations specific to our business, such as food safety and regulatory issues andmatters, the maintenance and growth of our customer base.base for branded and private brand products and consumer demand for nut and nut-related products in a challenging snack food environment. See the information referenced in Part II, Item 1A — “Risk Factors” of this report for additional information about our risks, challenges and uncertainties.
We face a number of challenges in the future, which include integrating the recent Lakeville Acquisition into our existing business, the impacts of ongoing inflation in food prices, elevated interest rates that negatively impact economic growth, consumers reducing their purchases in the snack and nut category, including branded nut products, potential for economic downturn in the markets in which we operate and continued supply chain challenges. We continue to experience a tight labor market which has led to elevated labor costs.
18
Inflation and Consumer Trends
We face changing industry trends as consumers' purchasing preferences evolve. Due to the continued inflationary environment, we have seen higher selling prices at retail. These higher prices across our categories and the broader food market, coupled with an actual or potential economic downturn and tightening of consumer finances due to inflation, reduced government support through programs such as SNAP or a variety of other reasons, are causing consumers to purchase fewer snack products. We have seen this through the decline in the recipe and snack nut categories since fiscal 2023 and during fiscal 2024, as consumers shift their preferences to private brands or lower priced nuts or purchase snack products outside the snack and nut and trail mix category. With the inflationary environment, we are also seeing signs of consumers shifting to more value-focused retailers, such as mass merchandising retailers, club stores and dollar stores, not all of which we distribute or sell to.
Supply Chain and Transportation
In recent quarters, we have faced supply chain challenges related to certain raw material shortages, extended lead-times, supplier capacity constraints and inflationary pressures. While we do not have direct exposure to suppliers in Russia, Ukraine or Israel, the conflicts in these regions could continue to result in volatile commodity markets, supply chain disruptions and increased costs. Global supply chain pressures have eased, but we continue to see negative impacts related to macro-economics, geo-political unrest, growing political instability and climate-related events. We experienced minimal disruption from the Baltimore bridge collapse that occurred in March 2024 as ships were diverted to alternative east coast ports. Overall packaging and ingredient inflation appears to be leveling off but is expected to remain above historical levels.
While we have seen stabilization in truckload capacity and volume at U.S. ports and improvements with driver hiring, there are still warehouse and dock staff shortages and fuel and energy concerns due to continued unrest abroad coupled with persistent inflation. We have seen continued trucking company bankruptcies which may cause instability in the transportation industry, however, we expect to be able to hold freight rates flat for the remainder of fiscal 2024. While there are indicators of transportation cost improvement, and despite our mitigation of some of the transportation shortages, we may continue to face an unpredictable transportation environment. There is no guarantee that our mitigation strategies will continue to be effective, that any transportation capacity easing will continue or that transportation prices will return to more normalized levels.
We have remained agile by proactively identifying risks, modifying inventory plans and diversifying our supplier base to mitigate risk of customer order shortages and maintain our supply chain. We continue to proactively manage our business in response to the evolving global economic environment and related uncertainty and intend to take steps to mitigate impacts to our supply chain. If these supply chain pressures continue, or we cannot obtain the transportation and labor services needed to fulfill customer orders, such shortages and supply chain issues could have an unfavorable impact on net sales and our operations in the remaining quarter of fiscal 2024. Furthermore, the cocoa market has seen a significant increase in price fueled by speculation of a short crop and shortages may begin in the marketplace in the near term. Additionally, as costs increase due to these issues or due to overall inflationary pressures, there is an additional risk of not being able to pass (in part or in full) such potential cost increases onto our customers or in a timely manner. If we cannot align costs with prices for our products, our operating performance could be adversely impacted.
19
QUARTERLY HIGHLIGHTS
Our net sales of $259.1$271.9 million for the secondthird quarter of fiscal 20182024 increased 3.9%$33.3 million, or 14.0%, from our net sales of $249.4$238.5 million for the secondthird quarter of fiscal 2017.2023. Net sales for the firsttwenty-six thirty-nine weeks of fiscal 20182024 increased by $2.2$31.7 million, or 0.5%4.1%, to $473.9$797.2 million from net sales of $471.7 million forcompared to the firsttwenty-six thirty-nine weeks of fiscal 2017.2023.
Sales volume, measured as pounds sold to customers, increased 0.7 million pounds, or 0.9% in22.6% compared to the secondthird quarter of fiscal 2018, compared to the second quarter of fiscal 2017.2023. Sales volume for the firsttwenty-six thirty-nine weeks of fiscal 2018 was relatively unchanged2024 increased 8.8% compared to the firsttwenty-six thirty-nine weeks of fiscal 2017.2023.
Gross profit decreased by $5.5$0.6 million, and our gross profit margin, as a percentage of net sales, decreased to 14.6%18.1% for the secondthird quarter of fiscal 20182024 compared to 17.4%20.9% for the secondthird quarter of fiscal 2017.2023. Gross profit decreased by $7.1increased $7.2 million, and our gross profit margin decreasedincreased to 15.3%20.6% from 16.9%20.5% for the firsttwenty-six thirty-nine weeks of fiscal 20182024 compared to the firsttwenty-six thirty-nine weeks of fiscal 2017.2023.
Total operating expenses for the secondthird quarter of fiscal 20182024 increased by $0.5$2.9 million, or 2.2%10.3%, compared to the secondthird quarter of fiscal 2017.2023. As a percentage of net sales, total operating expenses in the secondthird quarter of fiscal 20182024 decreased to 9.1%11.3% from 9.3%11.7% for the secondthird quarter of fiscal 2017. For2023. Total operating expenses for the first halfthirty-nine weeks of fiscal 2018,2024 increased by $5.4 million, or 6.1%, compared to the first thirty-nine weeks of fiscal 2023. As a percentage of net sales, total operating expenses decreased by $1.4 million, to 8.7% of net sales compared to 9.0% for the first halfthirty-nine weeks of fiscal 2017.2024 increased to 11.7% from 11.5% for the first thirty-nine weeks of fiscal 2023.
The total value of inventories on hand at the end of the secondthird quarter of fiscal 2018 decreased by $13.82024 increased $20.3 million, or 7.6%10.7%, in comparison to the total value of inventories on hand at the end of the secondthird quarter of fiscal 2017.2023.
On November 30, 2017 we completed the acquisition of the Squirrel Brand business for a purchase price of $33.4 million (the “Acquisition”). Squirrel Brand is one of the nation’s leading suppliers of indulgent and premium roasted nuts and snack mixes under itsSquirrel Brand andSouthern Style Nuts brands. Prior to the Acquisition, Squirrel Brand was a customer in our Contract Packaging sales channel for fourteen years. Through this Acquisition, we increased our customer base and branded portfolio as part of our goal of expanding into alternative distribution channels.
We have seen acquisition costs for all major tree nuts, other than walnuts, remain flat or decrease, and we have seen acquisition costs for peanuts and cashews increase modestly in the 20172023 crop year (which falls into our current 20182024 fiscal year). We completed procurement of inshell walnuts during the first half of fiscal 2018. During the third quarter, we will determine2024 and the final total payments due to our walnut growers were determined in the current quarter. The final prices paid, and remaining to be paid to the walnut growers, were based upon current market prices and other factors, such as crop size and export demand. A large majority of payments to walnut growers were completed in the third quarter of fiscal 2024. Remaining amounts to be paid to walnut growers as of March 28, 2024 are final and are not subject to revision. We have estimated the liability todecreased our walnut growers and our walnut inventory costs using currently available information. Any difference between our estimatedgrower liability and the actual final liability will be determinedby approximately $0.3 million during the third quarter of fiscal 20182024, as the final payments due to walnut growers are slightly less than the amounts estimated at the end of the second quarter. This decrease is insignificant compared to our total inshell walnut procurement costs for the year, and will be recognized inthe portion of the adjustment to cost of sales was immaterial to our financial results at that time.of operations.
20
RESULTS OF OPERATIONS
Net Sales
OurIn the third quarter of fiscal 2024, our net sales increased 3.9%14.0% to $259.1$271.9 million in the second quarter of fiscal 2018 compared to net sales of $249.4$238.5 million for the secondthird quarter of fiscal 2017. The increase in net sales was2023, primarily due to the Lakeville Acquisition, which closed on the first day of our second quarter and increased quarterly net sales of snack and trail mix products in our consumer distribution channel combined with a 2.9% increase in the weighted average sales price per pound.by approximately $46.9 million. Sales volume, which is defined as pounds sold to customers, increased approximately 0.9%22.6%, also due to the Lakeville Acquisition. The Lakeville Acquisition increased our quarterly sales volume by 18.1 million pounds, or 24.1%, over the third quarter of fiscal 2023. Sales volume for the third quarter, excluding the impact of the Lakeville Acquisition, decreased 1.4%, from softness in consumer demand, and the quarterly comparison.weighted average sales price per pound decreased 4.3% primarily from lower commodity acquisition costs for all major nut types except walnuts and peanuts.
For the firsttwenty-six thirty-nine weeks of fiscal 20182024 our net sales were $473.9$797.2 million, an increase of $2.2$31.7 million, or 0.5%4.1%, compared to the same period of fiscal 2017. The increase2023. Excluding the impact of the Lakeville Acquisition, net sales decreased 5.7% to $721.6 million, which was primarily attributable to a 3.8% decline in sales volume. In addition to the decline in sales volume, a 2.0% decrease in weighted average selling price per pound also contributed to the decline in net sales was primarily due to a slight increase in sales volume.sales.
The following table summarizes sales by product type as a percentage of total gross sales. The information is based upon gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product type.
For the Quarter Ended | For the Twenty-six Weeks Ended |
| For the Quarter Ended |
|
| For the Thirty-Nine Weeks Ended |
| |||||||||||||||||||||||||
Product Type | December 28, 2017 | December 29, 2016 | December 28, 2017 | December 29, 2016 |
| March 28, |
|
| March 30, |
|
| March 28, |
|
| March 30, |
| ||||||||||||||||
Peanuts | 13.0 | % | 13.9 | % | 14.3 | % | 14.2 | % | ||||||||||||||||||||||||
Peanuts & Peanut Butter |
|
| 18.0 | % |
|
| 20.1 | % |
|
| 18.0 | % |
|
| 18.5 | % | ||||||||||||||||
Pecans | 20.5 | 22.5 | 17.4 | 19.0 |
|
| 6.2 |
|
|
| 8.0 |
|
|
| 10.1 |
|
|
| 12.2 |
| ||||||||||||
Cashews & Mixed Nuts | 26.0 | 23.1 | 25.4 | 23.3 |
|
| 17.3 |
|
|
| 22.0 |
|
|
| 18.5 |
|
|
| 20.9 |
| ||||||||||||
Walnuts | 9.8 | 9.6 | 9.2 | 9.2 |
|
| 3.7 |
|
|
| 4.8 |
|
|
| 4.6 |
|
|
| 5.8 |
| ||||||||||||
Almonds | 12.5 | 14.1 | 13.8 | 16.4 |
|
| 7.7 |
|
|
| 9.3 |
|
|
| 8.0 |
|
|
| 8.9 |
| ||||||||||||
Trail & Snack Mixes | 12.9 | 12.2 | 14.6 | 13.0 |
|
| 23.5 |
|
|
| 28.2 |
|
|
| 24.8 |
|
|
| 27.0 |
| ||||||||||||
Snack Bars |
|
| 17.6 |
|
|
| 0.2 |
|
|
| 9.7 |
|
|
| 0.1 |
| ||||||||||||||||
Other | 5.3 | 4.6 | 5.3 | 4.9 |
|
| 6.0 |
|
|
| 7.4 |
|
|
| 6.3 |
|
|
| 6.6 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % | ||||||||
|
|
|
|
The following table shows a comparison of net sales by distribution channel (dollars in thousands):
For the Quarter Ended |
| For the Quarter Ended |
| |||||||||||||||||||||||||||||||||||||
Distribution Channel | December 28, 2017 | December 29, 2016 | Change | Percent Change |
| March 28, |
|
| Percentage |
|
| March 30, |
|
| Percentage |
|
| $ |
|
| % |
| ||||||||||||||||||
Consumer(1) | $ | 181,533 | $ | 168,778 | $ | 12,755 | 7.6 | % |
| $ | 225,994 |
|
|
| 83.1 | % |
| $ | 185,128 |
|
|
| 77.6 | % |
| $ | 40,866 |
|
|
| 22.1 | % | ||||||||
Commercial Ingredients | 35,578 | 40,325 | (4,747 | ) | (11.8 | ) |
|
| 26,955 |
|
|
| 9.9 |
|
|
| 30,901 |
|
|
| 13.0 |
|
|
| (3,946 | ) |
|
| (12.8 | ) | ||||||||||
Contract Packaging | 42,007 | 40,272 | 1,735 | 4.3 |
|
| 18,935 |
|
|
| 7.0 |
|
|
| 22,506 |
|
|
| 9.4 |
|
|
| (3,571 | ) |
|
| (15.9 | ) | ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | $ | 259,118 | $ | 249,375 | $ | 9,743 | 3.9 | % |
| $ | 271,884 |
|
|
| 100.0 | % |
| $ | 238,535 |
|
|
| 100.0 | % |
| $ | 33,349 |
|
|
| 14.0 | % | ||||||||
|
|
|
|
21
The following table shows a comparison of net sales by distribution channel (dollars in thousands):
For the Twenty-six Weeks Ended |
| For the Thirty-Nine Weeks Ended |
| |||||||||||||||||||||||||||||||||||||
Distribution Channel | December 28, 2017 | December 29, 2016 | Change | Percent Change |
| March 28, |
|
| Percentage |
|
| March 30, |
|
| Percentage |
|
| $ |
|
| % |
| ||||||||||||||||||
Consumer(1) | $ | 317,501 | $ | 303,945 | $ | 13,556 | 4.5 | % |
| $ | 651,690 |
|
|
| 81.7 | % |
| $ | 606,188 |
|
|
| 79.2 | % |
| $ | 45,502 |
|
|
| 7.5 | % | ||||||||
Commercial Ingredients | 71,987 | 91,045 | (19,058 | ) | (20.9 | ) |
|
| 82,802 |
|
|
| 10.4 |
|
|
| 90,827 |
|
|
| 11.9 |
|
|
| (8,025 | ) |
|
| (8.8 | ) | ||||||||||
Contract Packaging | 84,421 | 76,678 | 7,743 | 10.1 |
|
| 62,719 |
|
|
| 7.9 |
|
|
| 68,449 |
|
|
| 8.9 |
|
|
| (5,730 | ) |
|
| (8.4 | ) | ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | $ | 473,909 | $ | 471,668 | $ | 2,241 | 0.5 | % |
| $ | 797,211 |
|
|
| 100.0 | % |
| $ | 765,464 |
|
|
| 100.0 | % |
| $ | 31,747 |
|
|
| 4.1 | % | ||||||||
|
|
|
|
Net sales in the consumer distribution channel increased by 7.6% in dollars$40.9 million, or 22.1%, and 6.6% in sales volume increased 33.1% in the secondthird quarter of fiscal 20182024 compared to the secondthird quarter of fiscal 2017. The2023 due to the Lakeville Acquisition. Excluding the Lakeville Acquisition, net sales in the consumer distribution channel decreased $6.0 million, or 3.2%, and sales volume increase wasincreased 0.3%. Private brand sales volume increased 38.6% driven by increasedthe Lakeville Acquisition, whose sales ofvolume is almost exclusively private brand andOrchard Valley Harvest trail mixes.bars. Excluding the Lakeville Acquisition, private brand sales volume increased approximately 0.5%. Sales volume forof Fisher recipe nuts increased 3.4% due to distribution gains with new and existing customers, increased promotional activity, and a product line extension for raw peanuts. A 55.6% increase in sales volume ofOrchard Valley Harvest produce products was driven by new item introductions and distribution gains at new and existing customers. Sales volume forFisher snack nuts decreased 2.8% mainly from lower promotional activity.15.8% due to lost distribution as a mass merchandising retailer and decreased sales volume at several grocery store retailers which was partially offset by an increase in e-commerce sales volume.
In the firsttwenty-six thirty-nine weeks of fiscal 2018,2024, net sales in the consumer distribution channel increased by 4.5% in dollars$45.5 million, or 7.5%, and increased 4.4% in sales volume increased 13.9% compared to the same period of fiscal 2017. The2023 due to the Lakeville Acquisition. Excluding the Lakeville Acquisition, net sales in the consumer distribution channel decreased $29.5 million, or 4.9%, and sales volume increase wasdecreased 2.8%. Private brand sales volume increased 17.7% driven by increased sales ofthe Lakeville Acquisition. Excluding the Lakeville Acquisition, private brand sales volume decreased 2.3% due to softness in consumer spending at two mass merchandising retailers. These sales volume decreases were partially offset by increased distribution of seasonal items at a grocery store retailer. Sales volume of Fisher recipe nuts decreased 9.5% due to soft customer demand across mass merchandising and grocery store retailers and less merchandising activity at several grocery store retailers. Sales volume of Fisher snack nuts decreased 16.4% for the reasons already cited in the quarterly comparison. Sales volume of Southern Style Nuts decreased 27.5% due to reduced distribution and fewer promotional programs at a club store customer. The above decreases in sales volume were partially offset by a 4.3% increase in sales volume for Orchard Valley Harvest trail mixes. primarily due to increased distribution at a major customer in the non-food sector.
Net sales in the commercial ingredients distribution channel decreased by 11.8% in dollars$3.9 million, or 12.8%, and 14.5% in sales volume decreased 2.4% in the secondthird quarter of fiscal 20182024 compared to the secondthird quarter of fiscal 2017. 2023. The sales volume decrease was due to competitive pricing pressure coupled with non-recurring peanut butter sales at a foodservice distributor that occurred in fiscal 2023. This decrease was partially offset by new peanut butter business at two other food service distributors and new sales volume of loose granola associated with the Lakeville Acquisition. Excluding the Lakeville Acquisition, sales volume decreased 3.0%.
In the firsttwenty-six thirty-nine weeks of fiscal 2018,2024, net sales in the commercial ingredients distribution channel decreased by 20.9% in dollars$8.0 million, or 8.8%, and 15.8% in sales volume decreased 0.7% compared to the same period of fiscal 2017. The2023. Excluding the Lakeville Acquisition, sales volume decrease for both the quarterly andtwenty-six week period was primarilydecreased 2.1% due to the loss of a bulk almond butter customer that occurredreason cited in the latter partquarterly comparison and an 11.4% decrease in sales volume of the fiscal 2017 second quarter.peanut crushing stock to peanut oil processors due to reduced peanut shelling.
Net sales in the contract packaging distribution channel increased by 4.3%decreased $3.6 million, or 15.9%, and sales volume decreased 11.3% in dollars and declined 1.9%the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023. The decrease in sales volume in the second quarter of fiscal 2018 compared to the second quarter of fiscal 2017. The sales volume decrease was mainly due to our acquisition of the Squirrel Brand business at the end of November 2017. Squirrel Brand sales volume for December in the current quarter was included in thedecreased cashew and mixed nuts distribution by a major customer due to soft consumer and commercial ingredients channels, while Squirrel Brand sales volume for December in the fiscal 2017 second quarter was included in the contract packaging distribution channel because Squirrel Brand was a contract packaging customer during the second quarter of fiscal 2017.demand.
In the firsttwenty-six thirty-nine weeks of fiscal 2018,2024, net sales in the contract packaging distribution channel increased by 10.1% in dollarsdecreased $5.7 million, or 8.4%, and 5.7% in sales volume decreased 13.4% compared to the firsttwenty-six weekssame period of fiscal 2017. Increased2023. The sales volume decrease was attributable to an existing customer from new item introductions during the firsttwenty-six weeksreason cited in the quarterly comparison.
22
Gross Profit
Gross profit decreased by $5.5$0.6 million, or 12.7%1.2%, to $37.9$49.2 million for the secondthird quarter of fiscal 20182024 compared to $49.8 million for the secondthird quarter of fiscal 2017.2023. Excluding the Lakeville Acquisition, gross profit decreased approximately 7.2%, or $3.6 million. The decrease in gross profit was due to higher commodity acquisition costs for peanuts and walnuts, reduced production volume and increased expenditures relating to facility repairs and maintenance, noncompliant inventory and incentive compensation. Our gross profit margin, as a percentage of net sales, decreased to 14.6%18.1% for the secondthird quarter of fiscal 20182024 compared to 17.4%20.9% for the secondthird quarter of fiscal 2017. The decreases in gross profit and gross profit margin were2023 mainly related to the higher sales base due to increased commodity acquisition costs for walnuts and pecans. We could not raise walnut and pecan selling prices to cover these acquisition cost increases due to prior holiday promotional pricing commitments that we made primarily to support newFisher recipe nut distribution.
Gross profit decreased by $7.1 million, or 8.9%, to $72.7was $164.1 million for the firsttwenty-six thirty-nine weeks of fiscal 20182024 compared to $156.9 million for the firsttwenty-six thirty-nine weeks of fiscal 2017.2023. Our gross profit margin, decreasedas a percentage of net sales, increased slightly to 15.3%20.6% for the firsttwenty-six thirty-nine weeks of fiscal 20182024 compared to 16.9%20.5% for the firsttwenty-six thirty-nine weeks of fiscal 2017. The decreases in gross profit and gross profit margin in the year to date comparison occurred primarily for the same reasons cited in the quarterly comparison.2023.
Operating Expenses
Total operating expenses for the secondthird quarter of fiscal 20182024 increased by $0.5$2.9 million, or 2.2%10.3%, to $23.6$30.8 million. Operating expenses for the second quarter of fiscal 2018 decreased to 9.1% of net sales from 9.3%11.3% of net sales for the secondthird quarter of fiscal 2017.2024 compared to 11.7% of net sales for the third quarter of fiscal 2023.
Selling expenses for the secondthird quarter of fiscal 20182024 were $15.8$18.7 million, an increase of $0.5 million, or 3.1%3.0%, from the third quarter of fiscal 2023. The increase was driven by a $0.8 million increase in incentive compensation expense, a $0.6 million increase in outside distribution expense, primarily related to the Lakeville Acquisition. These increases were partially offset by a $0.6 million decrease in advertising and consumer insight research expense.
Administrative expenses for the third quarter of fiscal 2024 increased $2.3 million, or 23.7%, to $12.2 million compared to $9.8 million for the third quarter of fiscal 2023. The increase was due to a $2.3 million increase in compensation-related expenses.
Total operating expenses for the first thirty-nine weeks of fiscal 2024 increased by $5.4 million, or 6.1%, to $93.6 million. Operating expenses increased to 11.7% of net sales for the first thirty-nine weeks of fiscal 2024 compared to 11.5% of net sales for the first thirty-nine weeks of fiscal 2023. The increase is net of the $2.2 million net gain on bargain purchase that occurred in the second quarter of fiscal 2017.2024 due to the Lakeville Acquisition.
Selling expenses for the first thirty-nine weeks of fiscal 2024 were $61.6 million, an increase of $3.7 million, or 6.4%, from the first thirty-nine weeks of fiscal 2023. The increase was driven primarily by a $0.5$2.8 million increase in compensation related expensesadvertising and consumer insight research expense, a $0.4$1.2 million increase in freight expense. These expenses were partially offset by a $0.7 million decrease in incentive compensation expense in the current quarter.
Administrative expenses for the second quarter of fiscal 2018 were $7.8 million compared to $7.7 million for the second quarter of fiscal 2017. A $1.5 million decrease in compensation-related expenses, primarily incentive compensation expense, was offset by a $0.6$1.1 million increase of transaction and legal expenses,in outside distribution expense, which was primarily due to the Lakeville Acquisition, , and an increase in consulting expenses of $0.4 million. These increases were offset by a $1.6 million of personnel expense. The current quarter also included $0.3 million of amortizationdecrease in freight expense associated with the Acquisition.due to lower freight rates and fewer delivered sales pounds.
Total operating expenses for the firsttwenty-six weeks of fiscal 2018 decreased by $1.4 million, or 3.2%, to $41.1 million. Operating expenses decreased to 8.7% of net sales for the first half of fiscal 2018 compared to 9.0% of net sales for the first half of fiscal 2017.
Selling expenses for the firsttwenty-six weeks of fiscal 2018 were $26.8 million, an increase of $0.1 million, or 0.6%, from the amount recorded for the firsttwenty-six weeks of fiscal 2017.
Administrative expenses for the firsttwenty-six thirty-nine weeks of fiscal 2018 were $14.3 million, a decrease of $1.52024 increased $3.9 million, or 9.5%12.8%, to $34.2 million compared to the same periodfirst thirty-nine weeks of fiscal 2017.2023. The decrease in administrative expensesincrease was due to a $2.1 million decrease in incentive compensation expense, partially offset by a $0.5$3.1 million increase in compensation-related expenses and an increase in charitable food donations of transaction expenses related to the Acquisition. The currentyear-to-date expenses also include $0.3 million of amortization expense associated with the Acquisition.$0.8 million.
Income from Operations
Due to the factors discussed above, income from operations was $14.2$18.4 million, or 5.5%6.7% of net sales, for the secondthird quarter of fiscal 20182024 compared to $20.3$21.8 million, or 8.1%9.1% of net sales, for the secondthird quarter of fiscal 2017.2023.
Due to the factors discussed above, income from operations was $31.6$70.5 million, or 6.7%8.8% of net sales, for the firsttwenty-six thirty-nine weeks of fiscal 20182024 compared to $37.4$68.7 million, or 7.9%9.0% of net sales, for the firsttwenty-six thirty-nine weeks of fiscal 2017.2023.
Interest Expense
Interest expense was $0.8 million for the secondthird quarter of fiscal 20182024 compared to $0.6 million infor the secondthird quarter of fiscal 2017.2023. Interest expense for the first two quarters of fiscal 2018 was $1.6 million compared to $1.2$2.1 million for the first two quartersthirty-nine weeks of fiscal 2017.2024 and $1.8 million for the first thirty-nine weeks of fiscal 2023. The increase in interest expense for both the quarterly andtwenty-six week comparisonperiods was due primarily to higher average debt levels, which were mainly driven byprimarily due to the Lakeville Acquisition.
23
Rental and Miscellaneous Expense, Net
Net rental and miscellaneous expense was $0.2 million for the second quarter of fiscal 2018 compared to $0.3 million for the secondthird quarter of fiscal 2017. 2024 and $0.4 million for the third quarter of fiscal 2023.
Net rental and miscellaneous expense was $0.9 million for the firsttwenty-six thirty-nine weeks of fiscal 2018 compared to $0.7 million for the firsttwenty-six weeks of fiscal 2017.
Other Expense
Other expense consists of pension related expenses other than the service cost component and was $0.5 million for the second quarter of both fiscal 2018 and fiscal 2017. Other expense was $1.0 million2024 and $1.1 million for the firsttwenty-six thirty-nine weeks of fiscal 20182023.
Pension Expense (Excluding Service Costs)
Pension expense (excluding service costs) was $0.4 million for the third quarter of fiscal 2024 compared to $0.3 million for the third quarter of fiscal 2023.
Pension expense (excluding service costs) was $1.1 million for the first thirty-nine weeks of fiscal 2024 and 2017, respectively.$1.0 million for the first thirty-nine weeks of fiscal 2023.
Income Tax Expense
Income tax expense was $5.0$3.4 million, or 39.0%20.2% of income before income taxes (the “Effective Tax Rate”("effective tax rate"), for the secondthird quarter of fiscal 20182024 compared to $6.0$4.8 million, or 31.6%23.4% of income before income taxes, for the secondthird quarter of fiscal 2017. For2023. The effective tax rate decreased in the firsttwenty-six weeks of fiscal 2018, incomecurrent third quarter primarily due to an increase in our estimated research and development tax credit.
Income tax expense was $10.0$16.2 million, or 35.4% of income before income taxes, compared to $11.3 million, or 32.9%24.4% of income before income taxes, for the comparable period last year. The net increase in the Effective Tax Ratefirst thirty-nine weeks of fiscal 2024 compared to $16.6 million, or 25.6% of income before income taxes, for the quarterly andtwenty-six week comparison was due to a $2.4 millionnon-cash charge to income tax expense to reduce our deferred tax assets due to the Tax Cuts and Jobs Actfirst thirty-nine weeks of 2017, which lowered the corporate income tax rate to twenty one percent, effective January 1, 2018.fiscal 2023.
Net Income
Net income was $7.8$13.5 million, or $0.68$1.16 per common share basic and diluted, for the second quarter of fiscal 2018, compared to $12.9 million, or $1.14 per common share basic and $1.13$1.15 per common share diluted, for the secondthird quarter of fiscal 2017.
Net income was $18.22024, compared to $15.7 million, or $1.60$1.36 per common share basic and $1.59$1.35 per common share diluted, for the firsttwenty-six weeksthird quarter of fiscal 2018, compared to net2023.
Net income of $23.1was $50.2 million, or $2.04$4.33 per common share basic and $2.03$4.30 per common share diluted, for the firsttwenty-six thirty-nine weeks of fiscal 2017.2024, compared to $48.2 million, or $4.16 per common share basic and $4.14 per common share diluted, for the first thirty-nine weeks of fiscal 2023.
LIQUIDITY AND CAPITAL RESOURCES
General
The primary uses of cash are to fund our current operations, fulfill contractual obligations, pursue our StrategicLong-Range Plan through growing our branded and private label nutbrand programs, consummate and integrate business acquisitions, return cash to our stockholders through dividends, repay indebtedness.indebtedness and pay amounts owed under the Retirement Plan. Also, various uncertainties, including cost uncertainties, could result in additional uses of cash. The primary sources of cash are results of operations and availability under our Credit Agreement, dated February 7, 2008 and subsequently amended most recently in November 2017 (as amended, the “Credit Facility”), that provides a revolving loan commitment and letter of credit subfacility.Facility. We anticipate that expected net cash flow generated from operations and amounts available pursuant to the Credit Facility will be sufficient to fund our operations for the next twelve months. Our available credit under our Credit Facility has allowed us to devote more funds to promote our products, (especially ourFisherincrease consumer insight capabilities andOrchard Valley Harvest brands), consummate strategic business acquisitions such as the recent acquisition of Squirrel Brand, promotional efforts, reinvest in the Company through capital expenditures, develop new products, pay a special cash dividenddividends, consummate strategic investments and business acquisitions, such as the past six yearsrecent Lakeville Acquisition and the acquisition of the Just the Cheese brand in fiscal 2023, and explore other growth strategies outlined in our StrategicLong-Range Plan.
Cash flows from operating activities have historically been driven by net income but are also significantly influenced by inventory requirements, which can change based upon fluctuations in both quantities and market prices of the various nuts and nut products we buy and sell. Current market trends in nut prices and crop estimates also impact nut procurement.
24
The following table sets forth certain cash flow information for the first half of fiscal 20182024 and 2017,2023, respectively (dollars in thousands):
December 28, 2017 | December 29, 2016 | $ Change |
| March 28, |
|
| March 30, |
|
| $ |
| |||||||||||||
Operating activities | $ | 58,431 | $ | 62,430 | $ | (3,999 | ) |
| $ | 66,438 |
|
| $ | 72,389 |
|
| $ | (5,951 | ) | |||||
Investing activities | (28,803 | ) | (6,624 | ) | (22,179 | ) |
|
| (76,495 | ) |
|
| (19,142 | ) |
|
| (57,353 | ) | ||||||
Financing activities | (28,531 | ) | (55,995 | ) | 27,464 |
|
| 8,486 |
|
|
| (53,297 | ) |
|
| 61,783 |
| |||||||
|
|
| ||||||||||||||||||||||
Net increase (decrease) in cash | $ | 1,097 | $ | (189 | ) | $ | 1,286 | |||||||||||||||||
|
|
| ||||||||||||||||||||||
Total change in cash |
| $ | (1,571 | ) |
| $ | (50 | ) |
| $ | (1,521 | ) |
Operating ActivitiesNet cash provided by operating activities was $58.4$66.4 million for the firsttwenty-six thirty-nine weeks of fiscal 20182024 compared to $62.4net cash provided by operating activities of $72.4 million for the comparative period of fiscal 2017.2023. The net decrease in operating cash flow was primarily due to a $4.9 million reductionchanges in net income.working capital.
Total inventories were $168.9$210.7 million at DecemberMarch 28, 2017, a decrease2024, an increase of $13.6$37.7 million, or 7.4%21.8%, from the inventory balance at June 29, 2017,2023, and a decreasean increase of $13.8$20.3 million, or 7.6%10.7%, from the inventory balance at December 29, 2016.March 30, 2023. The decreaseincrease in inventories at DecemberMarch 28, 20172024 compared to June 29, 2017March 30, 2023 was primarily due to the Lakeville Acquisition and higher quantities of pecans and walnuts on hand, higher commodity acquisition costs for walnuts, partially offset by lower quantities of pecans on hand at a lower acquisition cost, partially offset by higher quantities of walnuts on hand at a higher acquisition cost. The decrease in inventories at December 28, 2017 compared to December 29, 2016 was primarily due to lower quantities of pecans on hand combined with lower pecan acquisition costs, partially offset by higher quantities of almondswork-in-process and finished goods inventory on hand.
Raw nut and dried fruit input stocks, some of which are classified as work in process, decreasedwork-in-process, increased by 11.313.9 million pounds, or 16.6%22.4%, at DecemberMarch 28, 20172024 compared to December 29, 2016.March 30, 2023 due to higher quantities of walnuts and pecans on hand due to increased procurement from a larger crop combined with softness in demand. The weighted average cost per pound of raw nut input stocks on hand at the end of the secondthird quarter of fiscal 20182024 decreased 3.4%11.7% compared to the end of the secondthird quarter of fiscal 20172023 primarily due to lowerhigher quantities of pecans at lower acquisition costs than the prior year.peanuts, inshell walnuts and pecans.
Investing ActivitiesCash used in investing activities was $28.8$76.5 million during the firsttwenty-six thirty-nine weeks of fiscal 20182024 compared to $6.6$19.1 million for the same period last year. The $22.2 million increase in cash used in investing activities was primarily due to payment of the cash portion of the$59.0 million net purchase price for the Squirrel BrandLakeville Acquisition. This was partially offset by the $3.5 million purchase price for the acquisition which was $21.9 million. Cash spent for capital expendituresof the Just the Cheese brand in the second quarter of fiscal 2023. Capital asset purchases were $17.5 million during the firsttwenty-six thirty-nine weeks of fiscal 2018 was $0.32024 compared to $15.6 million more thanfor the same period last year.first thirty-nine weeks of fiscal 2023. We expect total capital expenditures for new equipment, facility upgrades, and food safety enhancements, including for fiscal 2018our newly acquired bar business in Lakeville, Minnesota, to be approximately $14.0 million.$28.0 million for fiscal 2024. Absent any additional material acquisitions or other significant investments, we believe that cash on hand, combined with cash provided by operations and borrowings available under the Credit Facility, will be sufficient to meet the cash requirements for planned capital expenditures.
Financing ActivitiesCash usedprovided by financing activities was $28.5$8.5 million during the firsttwenty-six thirty-nine weeks of fiscal 20182024 compared to $56.0cash used of $53.3 million for the same period last year. WeNet borrowings under our Credit Facility were $32.1 million during the first thirty-nine weeks of fiscal 2024 compared to net repayments of $12.6 million for the first thirty-nine weeks of fiscal 2023. The increase in credit facility borrowings was primarily due to funding the Lakeville Acquisition in the second quarter of fiscal 2024. Dividends paid $28.4 million of dividends in the first halfthree quarters of fiscal 2018 compared to $56.52024 were approximately $14.4 million duringlower than dividends paid in the same period last year. Long-term debt payments in the first three quarters of fiscal 2024 were approximately $2.5 million lower than payments in the same period last year due to the mortgage that was repaid in full in the third quarter of the fiscal 2023.
Real Estate Matters
In August 2008, we completed the consolidation of our Chicago-based facilities into theour Elgin Site.headquarters (“Elgin Site”). The Elgin Site includes both an office building and a warehouse. We are currently attempting to find additional tenants for the available space in the office building at the Elgin Site. Until additional tenant(s) are found, we will not receive the benefit of rental income associated with such space. Approximately 62%65% of the rentable area in the office building is currently vacant,vacant. Approximately 29% of which approximately 29%the rentable area has not beenbuilt-out. There can be no assurance that we will be able to lease the unoccupied space and further capital expenditures maywill likely be necessary to lease the remaining space.
On April 23, 2024, the Company entered into a 7.5 year lease for a warehouse of approximately 444,600 square feet. The warehouse is located in Huntley, IL near the Elgin Site and will be utilized to store finished goods inventory and as a distribution center. We leased the warehouse in Huntley, IL as a result of our current and expanded operations occupying existing warehouse and finished goods space at our Elgin Site.
25
Financing Arrangements
On February 7, 2008, we entered into the Former Credit FacilityAgreement (as defined below) with a bank group (the “Bank Lenders”) providing a $117.5 million revolving loan commitment and letter of credit subfacility. Also on February 7, 2008,
On March 5, 2020, we entered into a Loanan Amended and Restated Credit Agreement with an insurance company (the “Mortgage Lender”“Amended and Restated Credit Agreement”) providing us with two term loans, one in the amount of $36.0 million (“Tranche A”)which amended and the other in the amount of $9.0 million (“Tranche B”), for an aggregate amount of $45.0 million (the “Mortgage Facility”).
On November 29, 2017, we entered into the Consent and Ninth Amendment torestated our Credit Agreement which(the “Former Credit Agreement”). The Amended and Restated Credit Agreement provided lender consent to incur unsecured debt in connectionfor a $117.5 million senior secured revolving credit facility with our acquisitionthe same borrowing capacity, interest rates and applicable margin as the Former Credit Agreement and extended the term of the assets of the Squirrel Brand business,Former Credit Agreement from July 7, 2021 to March 5, 2025.
The Amended and for the acquisition of the Squirrel Brand business to constitute a “Permitted Acquisition” under the terms of theRestated Credit Facility. The Ninth Amendment also modified our collateral reporting requirements.
The Credit Facility as most recently amended in November 2017, is secured by substantially all of our assets other than machinery and equipment, real property.
On May 8, 2023, we entered into the First Amendment to our Amended and fixturesRestated Credit Facility (the “First Amendment”) which replaced the London interbank offered rate (LIBOR) interest rate option with the Secured Overnight Financing Rate (“SOFR”). The First Amendment updated the accrued interest rate to a rate based on SOFR plus an applicable margin based upon the borrowing base calculation, ranging from 1.35% to 1.85%.
On September 29, 2023, we entered into the Second Amendment to our Amended and matures on July 7, 2021. The MortgageRestated Credit Facility, is secured by mortgages on essentially all of our owned real property locatedwhich (among other things) increased the amount available to borrow under the Credit Facility to $150.0 million, increased from $117.5 million, extended the maturity date to September 29, 2028 (from March 5, 2025) and allows the Company to pay up to $100 million in Elgin, Illinois, Gustine, California and Garysburg, North Carolina (the “Encumbered Properties”).dividends per year, subject to meeting availability tests.
Credit Facility
At our election, borrowings under the Credit Facility currently accrue interest at either (i) a rate determined pursuant to the administrative agent’s prime rate plus an applicable margin determined by reference to the amount of loans which may be advanced under the borrowing base calculation, ranging from 0.25% to 0.75% or (ii) a rate based upon the London interbank offered rate (“LIBOR”)on SOFR plus an applicable margin based upon the borrowing base calculation, ranging from 1.25% to 1.75%.as noted above.
At DecemberMarch 28, 2017,2024, the weighted average interest rate for the Credit Facility was 3.00%8.1%. The terms of the Credit Facility contain covenants that, among other things, require us to restrict investments, indebtedness, acquisitions and certain sales of assets and limit annual cash dividends or distributions, transactions with affiliates, redemptions of capital stock and prepayment of indebtedness (if such prepayment, among other things, is of a subordinate debt). If loan availability under the borrowing base calculation falls below $25.0 million, we will be required to maintain a specified fixed charge coverage ratio, tested on a monthly basis, until loan availability equals or exceeds $25.0 million for three consecutive months. All cash received from customers is required to be applied against the Credit Facility. The Bank Lenders have the option to accelerate and demand immediate repayment of our obligations under the Credit Facility in the event of default on the payments required under the Credit Facility, a change in control in the ownership of the Company,non-compliance with the financial covenant or upon the occurrence of other defaults by us under the Credit Facility (including a default under the Mortgage Facility).Facility. As of DecemberMarch 28, 2017,2024, we were in compliance with all covenants under the Credit Facility and we currently expect to be in compliance with the financial covenant in the Credit Facility for the foreseeable future. At DecemberMarch 28, 2017,2024, we had $83.8$114.1 million of available credit under the Credit Facility. If this entire amount were borrowed at DecemberMarch 28, 2017,2024, we would still be in compliance with all restrictive covenants under the Credit Facility.
Mortgage Facility
The Mortgage Facility matures on March 1, 2023. Tranche A under the Mortgage Facility currently accrues interest at a fixed interest rate of 7.63% per annum, payable monthly. Monthly principal payments in the amount of $0.2 million commenced on June 1, 2008. Tranche B under the Mortgage Facility currently accrues interest, as reset on March 1, 2016, at a floating rate of the greater of (i) one month LIBOR plus 3.50% per annum or (ii) 4.25%, payable monthly (the “Floating Rate”). Monthly principal payments in the amount of $0.1 million commenced on June 1, 2008.
In January 2018 we locked the interest rates for both Tranche A and Tranche B at 4.25% beginning March 1, 2018 through March 1, 2023.
The terms of the Mortgage Facility contain covenants that require us to maintain a specified net worth of $110.0 million and maintain the Encumbered Properties. The Mortgage Lender is entitled to require immediate repayment of our obligations under the Mortgage Facility in the event we default in the payments required under the Mortgage Facility,non-compliance with the covenants or upon the occurrence of certain other defaults by us under the Mortgage Facility. As of December 28, 2017, we were in compliance with all covenants under the Mortgage Facility.
Selma Property
In September 2006, we sold our Selma, Texas properties (the “Selma Properties”) to two related party partnerships for $14.3 million and are leasing them back. The selling price was determined by an independent appraiser to be the fair market value which also approximated our carrying value. The lease for the Selma Properties has aten-year term at a fair market value rent with threefive-year renewal options. In September 2015, we exercised two of the five-year renewal options which extended the lease term to September 2026. The lease extension also reduced the monthly lease payment on the Selma Properties, beginning in September 2016, to reflect then current market conditions. At the end of each five-year renewal option, the base monthly lease amounts are reassessed, and the monthly payments increased to $114 beginning in September 2021. One five-year renewal option remains. Also, we have an option to purchase the Selma Properties from the owner at 95% (100% in certain circumstances) of the then fair market value, but not less than the original $14.3 million purchase price. The provisions of the arrangement are not eligible for sale-leaseback accounting and the $14.3 million was recorded as a debt obligation. No gain or loss was recorded on the Selma Properties transaction. As of DecemberMarch 28, 2017, $10.82024, $7.3 million of the debt obligation was outstanding.
Squirrel Brand Seller-Financed Note26
In November 2017 we completed the Squirrel Brand acquisition. The acquisition was financed by a combination
Critical Accounting Policies and Estimates
For information regarding our Critical Accounting Policies and Estimates, see the “Critical Accounting Policies and Estimates” section of “Item 7 – Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations” in ourForm 10-K for the fiscal year ended June 29, 2017.2023.
Recent Accounting Pronouncements
Refer to Note 1514 – “Recent Accounting Pronouncements” of the Notes to Consolidated Financial Statements, contained in Part I, Item 1 of this form10-Q, for a discussion of recently issued and adopted accounting pronouncements.
27
FORWARD LOOKING STATEMENTS
Some of the statements in this reportrelease are forward-looking (including statements concerning our expectations regarding market risk and the impact of the purchasing decisions of major customers).forward-looking. These forward-looking statements may be generally identified by the use of forward-looking words and phrases such as “will”, “intends”, “may”, “believes”, “anticipates”, “should” and “expects” and are based on the Company’s current expectations or beliefs concerning future events and involve risks and uncertainties. Consequently, the Company’s actual results could differ materially. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors that affect the subject of these statements, except where expressly required to do so by law. Among the factors that could cause results to differ materially from current expectations are: (i) the risks associated with our vertically integrated model with respect to pecans, peanuts and walnuts; (ii) sales activity for the Company’s products, such as a decline in sales (of branded products, private label products or otherwise) to one or more key customers, or to customers or in the nut category generally, in some or all channels, a change in product mix to lower price products, a decline in sales of private brand products or changing consumer preferences, including a shift from higher margin products to lower margin products; (iii)(ii) changes in the availability and costs of raw materials and ingredients and the impact of fixed price commitments with customers; (iv)(iii) the ability to pass on price increases to customers if commodity costs rise and the potential for a negative impact on demand for, and sales of, our products from price increases; (v)(iv) the ability to measure and estimate bulk inventory, fluctuations in the value and quantity of the Company’s nut inventories due to fluctuations in the market prices of nuts and bulk inventory estimation adjustments, respectively; (vi)(v) the Company’s ability to appropriately respond to, or lessen the negative impact of, competitive and pricing pressures; (vii)(vi) losses associated with product recalls, product contamination, food labeling or other food safety issues, or the potential for lost sales or product liability if customers lose confidence in the safety of the Company’s products or in nuts or nut products in general, or are harmed as a result of using the Company’s products; (viii)(vii) the ability of the Company to control expenses,costs (including inflationary costs) and manage shortages in areas such as compensation, medicalinputs, transportation and administrative expense; (ix) the potential negative impact of government regulations and laws and regulations pertaining to food safety, such as the Food Safety Modernization Act; (x)labor; (viii) uncertainty in economic conditions, including the potential for inflation or economic downturn; (xi)downturn leading to decreased consumer demand; (ix) the timing and occurrence (or nonoccurrence) of other transactions and events which may be subject to circumstances beyond the Company’s control; (xii)(x) the adverse effect of labor unrest or disputes, litigation and/or legal settlements, including potential unfavorable outcomes exceeding any amounts accrued; (xiii)(xi) losses due to significant disruptions at any of our production or processing facilities; (xiv)facilities or employee unavailability due to labor shortages; (xii) the inabilityability to implement our StrategicLong-Range Plan, including growing our branded and private brand product sales, diversifying our product offerings (including by the launch of new products) and expanding into alternative sales channels; (xv)(xiii) technology disruptions or failures; (xvi)failures or the occurrence of cybersecurity incidents or breaches; (xiv) the inability to protect the Company’s brand value, intellectual property or avoid intellectual property disputes; (xvii) the Company’s(xv) our ability to manage successfully the price gap between its private brand productsimpacts of changing weather patterns on raw material availability due to climate change; and those(xvi) our ability to operate and integrate the acquired snack bar related assets of its branded competitors;TreeHouse and (xiii) potential increased industry-specific regulation pending the U.S. Foodrealize efficiencies and Drug Administration assessmentsynergies from such acquisition.
28
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in our assessment of our sensitivity to market risk since our presentation set forth in Part I –- Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form10-K for the fiscal year ended June 29, 2017.2023.
Item 4. Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule13a-15(e)) as of DecemberMarch 28, 2017.2024. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of DecemberMarch 28, 2017,2024, the Company’s disclosure controls and procedures were effective.
In connection with the evaluation by our management, including our Chief Executive Officer and Chief Financial Officer, there were no changes in our internal control over financial reporting (as defined in Exchange Act Rule13a-15(f)) during the quarter ended DecemberMarch 28, 20172024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
For a discussion of legal proceedings, see Note 12 – “Commitments and Contingent Liabilities” in Part I, Item 1 of thisForm 10-Q.
In addition to the other information set forth in this report on Form10-Q, you should also consider the factors, risks and uncertainties which could materially affect our Company’s business, financial condition or future results as discussed in Part I, Item 1A – “Risk Factors” of our Annual Report on Form10-K for the fiscal year ended June 29, 2017.2023. There were no significant changes to the risk factors identified on the Form10-K for the fiscal year ended June 29, 20172023 during the secondthird quarter of fiscal 2018.2024.
See Part I, Item 2 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in this Form10-Q, and see Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in the Company’s Annual Report on Form10-K for the fiscal year ended June 29, 2017.
Item 5. Other Information
Rule 10b5-1 Trading Arrangement
The following table shows our directors and officers that adopted a trading plan intended to satisfy the conditions under Rule 10b5-1(c) of the Exchange Act:
Name & Position | Adoption Date | Shares of the Company's Common Stock | Expiration Date(1) | |||||
Frank S. Pellegrino, Chief Financial Officer | March 5, 2024 | 2,000 | December 2, 2024 |
During the quarter ended March 28, 2024, other than noted above, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).
Item 6. Exhibits
The exhibits filed herewith are listed in the exhibit index below.
29
EXHIBIT INDEX
(Pursuant to Item 601 of RegulationS-K)
30
|
| |
31.2 | ||
| ||
32.1 | ||
| ||
32.2 | ||
| ||
| Inline eXtensible Business Reporting Language (XBRL) Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema | |
With Embedded Link Base Documents | ||
| ||
| ||
Cover Page Interactive Data File (embedded within the Inline XBL document) | ||
| ||
|
* Indicates a management contract or compensatory plan or arrangement.
31
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on February 5, 2018.May 1, 2024.
JOHN B. SANFILIPPO & SON, INC. | ||
By | ||
/s/ Frank S. Pellegrino | ||
Frank S. Pellegrino | ||
Chief Financial Officer, Vice President, Finance and |
32
35