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Table of Contents
c
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
March 28,
2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number:
0-19681
JOHN B. SANFILIPPO & SON, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-2419677
( State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1703 North Randall Road 60123-7820
Elgin
,
Illinois
(Address of principal executive offices) (Zip Code)
(
847
)
289-1800
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Name of each exchange on which registered
Symbol(s)
Common Stock JBSS The NASDAQ Stock Market LLC
, $.01 par value per share (NASDAQ Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T ((s)232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, smaller reporting company, or an
emerging growth company. See the definitions of "large accelerated filer,"
"accelerated filer," "smaller reporting company," and "emerging growth
company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes
No
As of A
pril 25, 2024,
9,006,038
share
s 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.
-------------------------------------------------------------------------------
Table of Contents
JOHN B. SANFILIPPO & SON, INC.
FORM 10-Q
For the Quarter Ended March 28, 2024
IN
DEX
Page
Part I. Financial Information
Item 1. Financial Statements (Unaudited) 3
Consolidated Statements of Comprehensive Income for the Quarter and Thirty-Nine Weeks Ended March 28, 2024 and March 30, 2023 3
Consolidated Balance Sheets as of March 28, 2024, June 29, 2023 and March 30, 2023 4
Consolidated Statements of Stockholders' Equity for the Quarter 6
and Thirty-Nine Weeks Ended March 28, 2024
and March 30, 2023
Consolidated Statements of Cash Flows for the 7
Thirty-Nine Weeks Ended
March 28, 2024 and March 30, 2023
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 29
Item 4. Controls and Procedures 29
Part II. Other Information
Item 1. Legal Proceedings 29
Item 1A. Risk Factors 29
Item 5. Other Information 29
Item 6. Exhibits 29
Signature 32
-------------------------------------------------------------------------------
Table of Contents
PART I-FINANCIAL INFORMATION
Item 1. Fi
nancial Statements
JOHN B. SANFILIPPO & SON, INC.
CONSOLID
ATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands, except share and per share amounts)
For the Quarter Ended For the Thirty-Nine Weeks Ended
March 28, March 30, March 28, March 30,
2024 2023 2024 2023
Net sales $ 271,884 $ 238,535 $ 797,211 $ 765,464
Cost of sales 222,707 188,767 633,073 608,551
Gross profit 49,177 49,768 164,138 156,913
Operating expenses:
Selling expenses 18,654 18,109 61,647 57,921
Administrative expenses 12,171 9,841 34,187 30,296
Bargain purchase gain, net - - ( ) -
2,226
Total operating expenses 30,825 27,950 93,608 88,217
Income from operations 18,352 21,818 70,530 68,696
Other expense:
Interest expense including $ 785 552 2,067 1,828
171
, $
186
, $
524
and $
568
to related parties
Rental and miscellaneous expense, net 324 371 940 1,084
Pension expense (excluding service costs) 350 349 1,050 1,046
Total other expense, net 1,459 1,272 4,057 3,958
Income before income taxes 16,893 20,546 66,473 64,738
Income tax expense 3,416 4,814 16,237 16,554
Net income $ 13,477 $ 15,732 $ 50,236 $ 48,184
Other comprehensive income:
Amortization of actuarial loss included in net - 7 - 21
periodic pension cost
Income tax expense related to pension adjustments - ( ) - ( )
2 5
Other comprehensive income, net of tax - 5 - 16
Comprehensive income $ 13,477 $ 15,737 $ 50,236 $ 48,200
Net income per common share-basic $ 1.16 $ 1.36 $ 4.33 $ 4.16
Net income per common share-diluted $ 1.15 $ 1.35 $ 4.30 $ 4.14
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
3
-------------------------------------------------------------------------------
Table of Contents
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED
BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share amounts)
March 28, June 29, March 30,
2024 2023 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 377 $ 1,948 $ 365
Accounts receivable, less allowance for doubtful accounts of $ 75,638 72,734 74,534
367
, $
283
and $
305
Inventories 210,672 172,936 190,351
Prepaid expenses and other current assets 9,636 6,812 9,325
TOTAL CURRENT ASSETS 296,323 254,430 274,575
PROPERTY, PLANT AND EQUIPMENT:
Land 13,365 9,150 9,150
Buildings 115,084 104,150 102,840
Machinery and equipment 287,363 261,706 259,289
Furniture and leasehold improvements 5,310 5,275 5,275
Vehicles 790 729 719
Construction in progress 8,271 7,123 8,210
430,183 388,133 385,483
Less: Accumulated depreciation 281,869 267,336 263,718
148,314 120,797 121,765
Rental investment property, less accumulated depreciation of $ 14,079 14,684 14,885
15,044
,
$
14,439
and $
14,238
TOTAL PROPERTY, PLANT AND EQUIPMENT 162,393 135,481 136,650
Intangible assets, net 6,203 6,658 7,100
Deferred income taxes 651 3,592 2,374
Goodwill 11,750 11,750 11,750
Operating lease right-of-use assets 7,409 6,427 6,582
Other assets 7,199 6,949 6,029
TOTAL ASSETS $ 491,928 $ 425,287 $ 445,060
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
4
-------------------------------------------------------------------------------
Table of Contents
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share amounts)
March 28, June 29, March 30,
2024 2023 2023
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit facility borrowings $ 32,093 $ - $ 27,825
Current maturities of related party long-term debt, net 721 672 657
Accounts payable 51,458 42,680 42,264
Bank overdraft 1,351 285 458
Accrued payroll and related benefits 21,712 27,572 17,061
Other accrued expenses 13,055 14,479 14,493
TOTAL CURRENT LIABILITIES 120,390 85,688 102,758
LONG-TERM LIABILITIES:
Long-term related party debt, less current maturities, net 6,555 7,102 7,276
Retirement plan 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 2,665 1,545 842
TOTAL LONG-TERM LIABILITIES 49,726 47,392 49,984
TOTAL LIABILITIES 170,116 133,080 152,742
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A Common Stock, convertible to Common Stock on 26 26 26
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
Common Stock, non-cumulative voting rights of one vote 91 91 91
per share, $
.01
par value;
17,000,000
shares authorized,
9,123,938
,
9,076,326
and
9,076,326
shares issued
Capital in excess of par value 134,530 131,986 131,649
Retained earnings 188,573 161,512 164,220
Accumulated other comprehensive loss ( ) ( ) ( )
204 204 2,464
Treasury stock, at cost; ( ) ( ) ( )
117,900 1,204 1,204 1,204
shares of Common Stock
TOTAL STOCKHOLDERS' EQUITY 321,812 292,207 292,318
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 491,928 $ 425,287 $ 445,060
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
5
-------------------------------------------------------------------------------
Table of Contents
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF S
TOCKHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands, except share and per share amounts)
Accumulated
Class Capital Other
A in
Common Common Excess Retained Comprehensive Treasury
Stock Stock of
Shares Amount Shares Amount Par Earnings Loss Stock Total
Value
Balance, 2,597,426 $ 26 9,076,326 $ 91 $ 131,986 $ 161,512 $ ( ) $ ( ) $ 292,207
June 204 1,204
29,
2023
Net 17,588 17,588
income
Cash ( ) ( )
dividends 23,175 23,175
($
2.00
per
share)
Equity 14,605 - - -
award
exercises
Stock-based 747 747
compensation
expense
Balance, 2,597,426 $ 26 9,090,931 $ 91 $ 132,733 $ 155,925 $ ( ) $ ( ) $ 287,367
September 204 1,204
28,
2023
Net 19,171 19,171
income
Equity 29,629 - ( ) ( )
award 684 684
exercises,
net
of shares
withheld
for
employee
taxes
Stock-based 1,383 1,383
compensation
expense
Balance, 2,597,426 $ 26 9,120,560 $ 91 $ 133,432 $ 175,096 $ ( ) $ ( ) $ 307,237
December 204 1,204
28,
2023
Net 13,477 13,477
income
Equity 3,378 - - -
award
exercises,
net
of shares
withheld
for
employee
taxes
Stock-based 1,098 1,098
compensation
expense
Balance, 2,597,426 $ 26 9,123,938 $ 91 $ 134,530 $ 188,573 $ ( ) $ ( ) $ 321,812
March 204 1,204
28,
2024
Accumulated
Class Capital Other
A in
Common Common Excess Retained Comprehensive Treasury
Stock Stock of
Shares Amount Shares Amount Par Earnings Loss Stock Total
Value
Balance, 2,597,426 $ 26 9,047,359 $ 90 $ 128,800 $ 153,589 $ ( ) $ ( ) $ 278,821
June 2,480 1,204
30,
2022
Net 15,545 15,545
income
Cash ( ) ( )
dividends 25,981 25,981
($
2.25
per
share)
Pension 6 6
liability
amortization,
net
of income
tax
expense
of $
1
Stock-based 772 772
compensation
expense
Balance, 2,597,426 $ 26 9,047,359 $ 90 $ 129,572 $ 143,153 $ ( ) $ ( ) $ 269,163
September 2,474 1,204
29,
2022
Net 16,907 16,907
income
Cash ( ) ( )
dividends 11,572 11,572
($
1.00
per
share)
Pension 5 5
liability
amortization,
net
of income
tax
expense
of $
2
Equity 24,709 1 ( ) ( )
award 356 355
exercises,
net
of shares
withheld
for
employee
taxes
Stock-based 1,515 1,515
compensation
expense
Balance, 2,597,426 $ 26 9,072,068 $ 91 $ 130,731 $ 148,488 $ ( ) $ ( ) $ 275,663
December 2,469 1,204
29,
2022
Net 15,732 15,732
income
Pension 5 5
liability
amortization,
net
of income
tax
expense
of $
2
Equity 4,258 - ( ) ( )
award 23 23
exercises,
net
of shares
withheld
for
employee
taxes
Stock-based 941 941
compensation
expense
Balance, 2,597,426 $ 26 9,076,326 $ 91 $ 131,649 $ 164,220 $ ( ) $ ( ) $ 292,318
March 2,464 1,204
30,
2023
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
6
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JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED ST
ATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Thirty-Nine Weeks Ended
March 28, March 30,
2024 2023
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 ( ) 14,744
2,236
Prepaid expenses and other current assets ( ) 535
1,125
Accounts payable 8,892 ( )
5,285
Accrued expenses ( ) 1,312
6,390
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
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JOHN B. SANFILIPPO & SON, INC.
NOTES TO CONSOL
IDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except where noted and per share data)
Note 1 - Basis of Presentation and Description of Business
As used herein, unless the context otherwise indicates, the terms "we", "us",
"our" or "Company" collectively refer to John B. Sanfilippo & Son, Inc. and
our wholly-owned subsidiary, JBSS Ventures, LLC. Our fiscal year ends on the
final Thursday of June each year, and typically consists of fifty-two weeks
(four thirteen-week quarters). Additional information on the comparability of
the periods presented is as follows:
.
References herein to fiscal 2024 and fiscal 2023 are to the fiscal year ending
June 27, 2024 and the fiscal year ended June 29, 2023, respectively.
.
References herein to the third quarter of fiscal 2024 and fiscal 2023 are to
the quarters ended March 28, 2024 and March 30, 2023, respectively.
.
References herein to the first three quarters or first thirty-nine weeks of
fiscal 2024 and fiscal 2023 are to the thirty-nine weeks ended March 28, 2024
and March 30, 2023, respectively.
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. We also market and
distribute, and in most cases, manufacture or process, a diverse product line
of food and snack products, including peanut butter, almond butter, cashew
butter, candy and confections, snack and trail mixes, nutrition bars, snack
bars, snack bites, sunflower kernels, dried fruit, corn snacks, chickpea
snacks, sesame sticks, other sesame snack products and baked cheese snack
products under our brand names, including
Just the Cheese
, and under private brands. 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 customers a complete portfolio of snack bars.
Our products are sold through
three
primary distribution channels, including food retailers in the consumer
channel, commercial ingredient users and contract packaging customers.
The accompanying unaudited financial statements fairly present the
consolidated statements of comprehensive income, consolidated balance sheets,
consolidated statements of stockholders' equity and consolidated statements of
cash flows, and reflect all adjustments, consisting only of normal recurring
adjustments which are necessary for the fair statement of the results of the
interim periods. Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses.
The interim results of operations are not necessarily indicative of the
results to be expected for a full year. The balance sheet data as of June 29,
2023 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 2023 Annual Report on
Form 10-K for the fiscal year ended June 29, 2023
.
Note 2
-
Lakeville Acquisition
On
September 29, 2023
, we completed the acquisition of certain assets from TreeHouse Foods, Inc.
(the "Seller") relating to its snack bars business. The acquired assets
include inventory, a manufacturing facility and related equipment located in
Lakeville, Minnesota, and product formulas (the "Lakeville Acquisition"). The
initial purchase price was approximately $
61,546
in cash, subject to certain post-closing adjustments. Following the closing,
we received payments from the Seller of $
2,572
for purchase price adjustments related to the actual inventory and fixed
assets acquired, for a revised purchase price of $
58,974
, net. The purchase price for the Lakeville Acquisition was primarily funded
from borrowings under the Credit Facility as amended by the Second 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 complete portfolio of snack bars, including fruit
and grain, crunchy, protein, sweet and salty and chewy bars that complement
internally developed nutrition bars.
The Lakeville Acquisition has been accounted for as a business combination in
accordance with ASC Topic 805, "Business Combinations".
8
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The following table summarizes the preliminary amounts allocated to the fair
values of certain 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 equipment 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 determined in accordance with our accounting policies.
The product formulas asset represents the value of these formulas designed to
replicate the taste, texture and appearance of branded snack bars. The fair
value of the product formulas was determined using the income approach through
a relief from royalty method analysis. We are amortizing formulas over a
weighted average life of
5.4
years.
There were no recognized or unrecognized material contingencies associated
with the acquired business
.
The $
61,950
fair value of the identifiable assets acquired exceeded the total purchase
price of $
58,974
. Accordingly, this acquisition resulted in a bargain purchase and we
recognized a gain o
f $
2,226
, net
of taxes, which is reported 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 divest 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 the 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 $
81
1 for the
quarter and thirty-nine weeks ended March 28, 2024, respectively. These costs
are included in Administrative expenses.
The following refle
cts the unaudited pro forma results of operations of the Company as if the
Lakeville Acquisition had taken place at the beginning of fiscal 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,
2024 2023 2024 2023
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
These unaudited pro forma results have been calculated after applying our
accounting policies and adjusting the results of the Lakeville Acquisition to
reflect elimination of transaction costs and the bargain purchase gain and to
record additional interest expense and cost of sales that would have been
incurred, assuming the fair value adjustment to inventory had been applied
from July 1, 2022, net of related income taxes in respect of pro forma net
income and diluted earnings per share performance. The impact to the above pro
forma information of incremental depreciation and amortization expense is
insignificant and therefore excluded from the calculation of pro forma results.
Since the Lakeville Acquisition, we continue to operate in a single reportable
operating segment that consists of selling various nut and nut-related
products and snacks through three sales distribution channels.
Revenues from the Lakeville Acquisition are primarily in our consumer
distribution channel.
9
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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 Co
mpany generally does not have material deferred revenue or contract liability
balances arising from transactions with customers.
10
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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,
2024 2023 2024 2023
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
2024 2023 2023
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
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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,
2024 2023 2024 2023
Operating lease costs $ 847 $ 529 $ 2,236 $ 1,544
(a)
Variable lease costs 34 74 ( ) 189
(b) 107
Total lease cost $ 881 $ 603 $ 2,129 $ 1,733
(a)
Includes short-term leases which are immaterial.
(b)
Variable lease costs consist of sales tax and lease overtime charges.
Supplemental cash flow and other information related to leases was as follows:
For the Thirty-Nine Weeks Ended
March 28, March 30,
2024 2023
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,
2024 2023 2023
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
straightline 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
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Leasing revenue is as follows:
For the Quarter Ended For the Thirty-Nine Weeks Ended
March 28, March 30, March 28, March 30,
2024 2023 2024 2023
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,
2024 2023 2023
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 consist of the
following:
March 28, June 29, March 30,
2024 2023 2023
Customer relationships $ 21,350 $ 21,350 $ 21,350
Brand names 17,070 17,070 17,070
Product formulas 850 - -
Non-compete agreement 300 300 300
39,570 38,720 38,720
Less accumulated amortization:
Customer relationships ( ) ( ) ( )
20,518 19,834 19,572
Brand names ( ) ( ) ( )
12,491 11,955 11,776
Product formulas ( ) - -
81
Non-compete agreement ( ) ( ) ( )
277 273 272
( ) ( ) ( )
33,367 32,062 31,620
Net intangible assets $ 6,203 $ 6,658 $ 7,100
Customer relationships are being amortized on an accelerated basis. The brand
names remaining to be amortized consist of the
Squirrel Brand, Southern Style Nuts
and
Just the Cheese
brand names.
13
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Total amortization expense related to intangible assets, which is classified
in administrative expense in the Consolidated Statement of Comprehensive
Income, was $
381
and $
1,305
for the quarter and thirty-nine weeks ended March 28, 2024, respectively.
Amortization expense for the remainder of fiscal 2024
is expected to be approximately $
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
Our net goodwill at March 28, 2024
was comprised of $
9,650
from the 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 since
June 30, 2022 are as follows:
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
Note 7 - Credit Facility
Our 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 to September 29, 2028 and allows t
he Company to pay up to $
100,000
in dividends per year, subject to meeting availability tests
. The Credit Facility is secured by substantially all our assets other than
machinery and equipment, real property and fixtures.
At March 28, 2024, we had $
114,114
of available credit under the Credit Facility which reflects borrowings of $
32,093
and reduced availability as a result of $
3,793
in outstanding letters of credit. As of
March 28, 2024
, we were in compliance with all financial covenants under the Credit Facility.
Note 8
-
Earnings Per Common Share
The following table presents the reconciliation of the weighted average shares
outstanding used in computing basic and diluted earnings per share:
For the Quarter Ended For the Thirty-Nine Weeks Ended
March 28, March 30, March 28, March 30,
2024 2023 2024 2023
Weighted average number of shares outstanding - basic 11,626,886 11,592,362 11,614,388 11,570,954
Effect of dilutive securities:
Restricted stock units 71,645 63,832 69,191 61,702
Weighted average number of shares outstanding - diluted 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 any periods presented.
14
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Note 9 - Stock-Based Compensation Plans
At 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 form of options, restricted stock, restricted stock units
("RSUs"), 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 which 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 award).
Additionally, for awards of restricted stock, RSUs, performance shares or
other stock-based awards that are intended to qualify 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 (ii) the
maximum amount that may be paid to any participant for awards that are payable
in cash or property other than Common Stock in any calendar year is $
5,000
.
The following is a summary of
RSU activity for the first thirty-nine weeks of fiscal 2024:
Restricted Stock Units Shares Weighted Average Grant Date Fair Value
Outstanding at June 29, 2023 155,012 $ 67.87
Granted 56,168 $ 85.55
(a)
Vested ( ) $ 69.68
(b) 55,085
Forfeited ( ) $ 72.58
621
Outstanding at March 28, 2024 155,474 $ 73.60
(a)
The number of RSUs granted includes 8,031 RSUs with performance conditions for
which the performance criteria had yet to be achieved. The final number of
shares that will eventually be earned and vest (if any) has not yet been
determined.
(b)
The number of RSUs vested includes shares that were withheld on behalf of
employees to satisfy statutory tax withholding requirements.
At March 28, 2024, there were
23,588
RSUs outstanding that were vested but deferred.
The following table summarizes compensation expense charged to earnings for
all equity compensation plans for the periods presented:
For the Quarter Ended For the Thirty-Nine Weeks Ended
March 28, March 30, March 28, March 30,
2024 2023 2024 2023
Stock-based compensation expense $ 1,098 $ 941 $ 3,228 $ 3,228
As of March 28, 2024, there was $
5,665
of total unrecognized compensation expense related to non-vested RSUs granted
under our stock-based compensation plans. We expect to recognize that cost
over a weighted average period of
1.5
years.
15
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Note 10
-
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,
2024 2023 2024 2023
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
The components of net periodic benefit cost other than the service cost
component are included in the line item "Pension expense (excluding service
costs)" in the Consolidated Statements of Comprehensive Income.
Note 11 - Accumulated Other Comprehensive Loss
The table below sets forth the changes to accumulated other comprehensive loss
("AOCL") for the
thirty-nine weeks ended March 28, 2024 and March 30, 2023.
These changes are all related to our defined benefit pension plan.
For the Thirty-Nine Weeks Ended
Changes to AOCL March 28, March 30,
(a) 2024 2023
Balance at beginning of period $ ( ) $ ( )
204 2,480
Other comprehensive income before reclassifications - -
Amounts reclassified from accumulated other comprehensive loss - 21
Tax effect - ( )
5
Net current-period other comprehensive income - 16
Balance at end of period $ ( ) $ ( )
204 2,464
(a)
Amounts in parenthesis indicate debits/expense
.
The reclassifications out of AOCL for the
quarter and thirty-nine weeks ended March 28, 2024 and March 30, 2023 were as
follows:
For the For the Thirty-Nine Affected
Quarter Ended Weeks Ended Line Item
Reclassifications March 28, March 30, March 28, March 30, Consolidated
from AOCL to Earnings 2024 2023 2024 2023 Statements of
(b) Comprehensive
Income
Amortization of
defined benefit
pension
items:
Unrecognized $ - $ ( ) $ - $ ( ) Pension expense
net loss 7 21 (excluding service costs)
Tax - 2 - 5 Income tax
effect expense
Amortization of $ - $ ( ) $ - $ ( )
defined pension 5 16
items, net
of tax
(b)
Amounts in parenthesis indicate debits to expense. See Note 10 - "Retirement
Plan" above for additional details.
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 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.
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Note 13 - Fair Value of Financial Instruments
The Financial Accounting Standards Board 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:
March 28, June 29, March 30,
2024 2023 2023
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 - Recent Accounting Pronouncements
There were no recent accounting pronouncements adopted in the current fiscal
year.
There are no recent accounting pronouncements that have been issued and not
yet adopted that are expected to have a material impact on our Consolidated
Financial Statements.
Note 15 - Subsequent Event
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 Company (the "May 2024 Dividends"). The May 2024 Dividends will
be paid on
J
une 20,
2024
to stockholders of record as of the close of business on
M
ay 31,
2024
.
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Item 2. Ma
nagement's Discussion and Analysis of Financial Condition and Results of
Operations
OVERVIEW
The following discussion and analysis should be read in conjunction with the
unaudited Consolidated Financial Statements and the Notes to Consolidated
Financial Statements.
Our fiscal year ends on the final Thursday of June each year, and typically
consists of fifty-two weeks (four thirteen-week quarters). Additional
information on the comparability of the periods presented is as follows:
.
References herein to fiscal 2024 and fiscal 2023 are to the fiscal year ending
June 27, 2024 and the fiscal year ended June 29, 2023, respectively.
.
References herein to the third quarter of fiscal 2024 and fiscal 2023 are to
the quarters ended March 28, 2024 and March 30, 2023, respectively.
.
References herein to the first three quarters or first thirty-nine weeks of
fiscal 2024 and fiscal 2023 are to the thirty-nine weeks ended March 28, 2024
and March 30, 2023, respectively.
As used herein, unless the context otherwise indicates, the terms "we", "us",
"our" or "Company" collectively refer to John B. Sanfilippo & Son, Inc. and
our wholly-owned subsidiary, JBSS Ventures, LLC.
We are one of the leading processors and distributors of peanuts, pecans,
cashews, walnuts, almonds and other nuts in the United States. These nuts are
sold under our
Fisher
,
Orchard Valley Harvest
,
Squirrel Brand
and
Southern Style Nuts
brand names and under a variety of private brands. We also market and
distribute, and in most cases, manufacture or process, a diverse product line
of food and snack products, including peanut butter, almond butter, cashew
butter, candy and confections, snack and trail mixes, nutrition bars, snack
bars, snack bites, sunflower kernels, dried fruit, corn snacks, chickpea
snacks, sesame sticks, other sesame snack products and baked cheese snack
products under our brand names, including
Just the Cheese
, and under private brands. We distribute our products in the consumer,
commercial ingredients and contract packaging distribution channels.
Our Long-Range Plan defines our future growth priorities and focuses on
growing our private brand business across key customers, as well as
transforming
Fisher, Orchard Valley Harvest
and
Squirrel Brand
into leading brands while increasing distribution and diversifying our
portfolio into high growth snacking segments. We will execute on our
Long-Range Plan by providing 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 via product expansion and packaging innovation,
expanding distribution across current and alternative channels, diversifying
our product offerings and focusing on new ways for consumers to buy our
products, including sales via e-commerce platforms. Our Long-Range Plan also
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 2024, which expanded our ability
to produce private brand snack bars and allows us to provide our private brand
customers with a complete snack bar portfolio.
We will continue to focus our promotional and advertising activity to invest
in our brands to achieve growth. We intend to execute on an omnichannel
approach to win in key categories including recipe nuts, snack nuts, trail mix
and other snacking categories. We continue to see e-commerce growth across our
branded portfolio and anticipate taking various actions with the goal of
maintaining that growth across a variety of established and emerging
e-commerce platforms. We continue to face the ongoing challenges and/or
regulations specific to our business, such as food safety and regulatory
matters, the maintenance and growth of our customer 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.
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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.
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QUARTERLY HIGHLIGHTS
Our net sales of $271.9 million for the third quarter of fiscal 2024 increased
$33.3 million, or 14.0%, from our net sales of $238.5 million for the third
quarter of fiscal 2023. Net sales for the first thirty-nine weeks of fiscal
2024 increased by $31.7 million, or 4.1%, to $797.2 million compared to the
first thirty-nine weeks of fiscal 2023.
Sales volume, measured as pounds sold to customers, increased 22.6% compared
to the third quarter of fiscal 2023. Sales volume for the first thirty-nine
weeks of fiscal 2024 increased 8.8% compared to the first thirty-nine weeks of
fiscal 2023.
Gross profit decreased $0.6 million, and our gross profit margin, as a
percentage of net sales, decreased to 18.1% for the third quarter of fiscal
2024 compared to 20.9% for the third quarter of fiscal 2023. Gross profit
increased $7.2 million, and our gross profit margin increased to 20.6% from
20.5% for the first thirty-nine weeks of fiscal 2024 compared to the first
thirty-nine weeks of fiscal 2023.
Total operating expenses for the third quarter of fiscal 2024 increased by
$2.9 million, or 10.3%, compared to the third quarter of fiscal 2023. As a
percentage of net sales, total operating expenses in the third quarter of
fiscal 2024 decreased to 11.3% from 11.7% for the third quarter of fiscal
2023. Total operating expenses for the first thirty-nine weeks of fiscal 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 for the
first thirty-nine weeks of fiscal 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 third quarter of
fiscal 2024 increased $20.3 million, or 10.7%, in comparison to the total
value of inventories on hand at the end of the third quarter of fiscal 2023.
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
increase modestly in the 2023 crop year (which falls into our current 2024
fiscal year). We completed procurement of inshell walnuts during the first
half of fiscal 2024 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 decreased our walnut grower liability by
approximately $0.3 million during the third quarter of fiscal 2024, 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 the
portion of the adjustment to cost of sales was immaterial to our results of
operations.
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RESULTS OF OPERATIONS
Net Sales
In the third quarter of fiscal 2024, our net sales increased 14.0% to $271.9
million compared to net sales of $238.5 million for the third quarter of
fiscal 2023, primarily due to the Lakeville Acquisition, which closed on the
first day of our second quarter and increased quarterly net sales by
approximately $46.9 million. Sales volume, which is defined as pounds sold to
customers, increased 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 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 first thirty-nine weeks of fiscal 2024 our net sales were $797.2
million, an increase of $31.7 million, or 4.1%, compared to the same period of
fiscal 2023. 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.
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 Thirty-Nine Weeks Ended
Product Type March 28, March 30, March 28, March 30,
2024 2023 2024 2023
Peanuts & Peanut Butter 18.0 % 20.1 % 18.0 % 18.5 %
Pecans 6.2 8.0 10.1 12.2
Cashews & Mixed Nuts 17.3 22.0 18.5 20.9
Walnuts 3.7 4.8 4.6 5.8
Almonds 7.7 9.3 8.0 8.9
Trail & Snack Mixes 23.5 28.2 24.8 27.0
Snack Bars 17.6 0.2 9.7 0.1
Other 6.0 7.4 6.3 6.6
Total 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
Distribution Channel March 28, Percentage March 30, Percentage $ %
2024 of Total 2023 of Total Change Change
Consumer $ 225,994 83.1 % $ 185,128 77.6 % $ 40,866 22.1 %
(1)
Commercial Ingredients 26,955 9.9 30,901 13.0 (3,946 ) (12.8 )
Contract Packaging 18,935 7.0 22,506 9.4 (3,571 ) (15.9 )
Total $ 271,884 100.0 % $ 238,535 100.0 % $ 33,349 14.0 %
(1)
Sales of branded products were approximately 14% and 18% of total consumer
sales during the third quarter of fiscal 2024 and fiscal 2023, respectively.
Fisher
branded products were approximately 54% and 52% of branded sales during the
third quarter of fiscal 2024 and fiscal 2023, respectively, with
Orchard Valley Harvest
branded
products accounting for the majority of the remaining branded product sales.
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The following table shows a comparison of net sales by distribution channel
(dollars in thousands):
For the Thirty-Nine Weeks Ended
Distribution Channel March 28, Percentage March 30, Percentage $ %
2024 of Total 2023 of Total Change Change
Consumer $ 651,690 81.7 % $ 606,188 79.2 % $ 45,502 7.5 %
(1)
Commercial Ingredients 82,802 10.4 90,827 11.9 (8,025 ) (8.8 )
Contract Packaging 62,719 7.9 68,449 8.9 (5,730 ) (8.4 )
Total $ 797,211 100.0 % $ 765,464 100.0 % $ 31,747 4.1 %
(1)
Sales of branded products were approximately 19% and 22% of total consumer
sales during the first thirty-nine weeks of fiscal 2024 and fiscal 2023,
respectively.
Fisher
branded products were approximately 65% and 66% of branded sales during the
first thirty-nine weeks of fiscal 2024 and fiscal 2023, respectively, with
Orchard Valley Harvest
branded
products accounting for the majority of the remaining branded product sales.
Net sales in the consumer distribution channel increased $40.9 million, or
22.1%, and sales volume increased 33.1% in the third quarter of fiscal 2024
compared to the third quarter of fiscal 2023 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 increased 0.3%.
Private brand sales volume increased 38.6% driven by the Lakeville
Acquisition, whose sales volume is almost exclusively private brand bars.
Excluding the Lakeville Acquisition, private brand sales volume increased
approximately 0.5%. Sales volume of
Fisher
snack nuts decreased 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 first thirty-nine weeks of fiscal 2024, net sales in the consumer
distribution channel increased $45.5 million, or 7.5%, and sales volume
increased 13.9% compared to the same period of fiscal 2023 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 decreased 2.8%. Private brand sales volume increased 17.7% driven by
the 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
primarily due to increased distribution at a major customer in the non-food
sector.
Net sales in the commercial ingredients distribution channel decreased $3.9
million, or 12.8%, and sales volume decreased 2.4% in the third quarter of
fiscal 2024 compared to the third quarter of fiscal 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 first thirty-nine weeks of fiscal 2024, net sales in the commercial
ingredients distribution channel decreased $8.0 million, or 8.8%, and sales
volume decreased 0.7% compared to the same period of fiscal 2023. Excluding
the Lakeville Acquisition, sales volume decreased 2.1% due to the reason cited
in the quarterly comparison and an 11.4% decrease in sales volume of peanut
crushing stock to peanut oil processors due to reduced peanut shelling.
Net sales in the contract packaging distribution channel decreased $3.6
million, or 15.9%, and sales volume decreased 11.3% in the third quarter of
fiscal 2024 compared to the third quarter of fiscal 2023. The decrease in
sales volume was due to decreased cashew and mixed nuts distribution by a
major customer due to soft consumer demand.
In the first thirty-nine weeks of fiscal 2024, net sales in the contract
packaging distribution channel decreased $5.7 million, or 8.4%, and sales
volume decreased 13.4% compared to the same period of fiscal 2023. The sales
volume decrease was attributable to the reason cited in the quarterly
comparison.
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Gross Profit
Gross profit decreased by $0.6 million, or 1.2%, to $49.2 million for the
third quarter of fiscal 2024 compared to $49.8 million for the third quarter
of fiscal 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 18.1% for the third
quarter of fiscal 2024 compared to 20.9% for the third quarter of fiscal 2023
mainly related to the higher sales base due to the Lakeville Acquisition.
Gross profit was $164.1 million for the first thirty-nine weeks of fiscal 2024
compared to $156.9 million for the first thirty-nine weeks of fiscal 2023. Our
gross profit margin, as a percentage of net sales, increased slightly to 20.6%
for the first thirty-nine weeks of fiscal 2024 compared to 20.5% for the first
thirty-nine weeks of fiscal 2023.
Operating Expenses
Total operating expenses for the third quarter of fiscal 2024 increased by
$2.9 million, or 10.3%, to $30.8 million. Operating expenses decreased to
11.3% of net sales for the third quarter of fiscal 2024 compared to 11.7% of
net sales for the third quarter of fiscal 2023.
Selling expenses for the third quarter of fiscal 2024 were $18.7 million, an
increase of $0.5 million, or 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 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 $2.8 million
increase in advertising and consumer insight research expense, a $1.2 million
increase in compensation-related expenses, a $1.1 million increase in outside
distribution expense, which was primarily due to the Lakeville Acquisition, an
increase in consulting expenses of $0.4 million. These increases were offset
by a $1.6 million decrease in freight expense due to lower freight rates and
fewer delivered sales pounds.
Administrative expenses for the first thirty-nine weeks of fiscal 2024
increased $3.9 million, or 12.8%, to $34.2 million compared the first
thirty-nine weeks of fiscal 2023. The increase was due to a $3.1 million
increase in compensation-related expenses and an increase in charitable food
donations of $0.8 million.
Income from Operations
Due to the factors discussed above, income from operations was $18.4 million,
or 6.7% of net sales, for the third quarter of fiscal 2024 compared to $21.8
million, or 9.1% of net sales, for the third quarter of fiscal 2023.
Due to the factors discussed above, income from operations was $70.5 million,
or 8.8% of net sales, for the first thirty-nine weeks of fiscal 2024 compared
to $68.7 million, or 9.0% of net sales, for the first thirty-nine weeks of
fiscal 2023.
Interest Expense
Interest expense was $0.8 million for the third quarter of fiscal 2024
compared to $0.6 million for the third quarter of fiscal 2023. Interest
expense was $2.1 million for the first thirty-nine weeks of fiscal 2024 and
$1.8 million for the first thirty-nine weeks of fiscal 2023. The increase in
interest expense for both periods was due to higher average debt levels,
primarily due to the Lakeville Acquisition.
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Rental and Miscellaneous Expense, Net
Net rental and miscellaneous expense was $0.3 million for the third quarter of
fiscal 2024 and $0.4 million for the third quarter of fiscal 2023.
Net rental and miscellaneous expense was $0.9 million for the first
thirty-nine weeks of fiscal 2024 and $1.1 million for the first thirty-nine
weeks of fiscal 2023.
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 $1.0 million for the first thirty-nine
weeks of fiscal 2023.
Income Tax Expense
Income tax expense was $3.4 million, or 20.2% of income before income taxes
("effective tax rate"), for the third quarter of fiscal 2024 compared to $4.8
million, or 23.4% of income before income taxes, for the third quarter of
fiscal 2023. The effective tax rate decreased in the current third quarter
primarily due to an increase in our estimated research and development tax
credit.
Income tax expense was $16.2 million, or 24.4% of income before income taxes,
for the first thirty-nine weeks of fiscal 2024 compared to $16.6 million, or
25.6% of income before income taxes, for the first thirty-nine weeks of fiscal
2023.
Net Income
Net income was $13.5 million, or $1.16 per common share basic and $1.15 per
common share diluted, for the third quarter of fiscal 2024, compared to $15.7
million, or $1.36 per common share basic and $1.35 per common share diluted,
for the third quarter of fiscal 2023.
Net income was $50.2 million, or $4.33 per common share basic and $4.30 per
common share diluted, for the first thirty-nine weeks of fiscal 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 Long-Range Plan through growing our
branded and private brand programs, consummate and integrate business
acquisitions, return cash to our stockholders through dividends, repay
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 Facility. We anticipate that expected net cash
flow generated from operations and amounts available pursuant to the Credit
Facility will be sufficient to fund our operations for the next twelve months.
Our available credit under our Credit Facility has allowed us to devote more
funds to promote our products, increase consumer insight capabilities and
promotional efforts, reinvest in the Company through capital expenditures,
develop new products, pay cash dividends, consummate strategic investments and
business acquisitions, such as the recent Lakeville Acquisition and the
acquisition of the
Just the Cheese
brand in fiscal 2023, and explore other growth strategies outlined in our
Long-Range Plan.
Cash flows from operating activities have historically been driven by net
income but are also significantly influenced by inventory requirements, which
can change based upon fluctuations in both quantities and market prices of the
various nuts and nut products we buy and sell. Current market trends in nut
prices and crop estimates also impact nut procurement.
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The following table sets forth certain cash flow information for the first
half of fiscal 2024 and 2023, respectively (dollars in thousands):
March 28, March 30, $
2024 2023 Change
Operating activities $ 66,438 $ 72,389 $ (5,951 )
Investing activities (76,495 ) (19,142 ) (57,353 )
Financing activities 8,486 (53,297 ) 61,783
Total change in cash $ (1,571 ) $ (50 ) $ (1,521 )
Operating Activities
Net cash provided by operating activities was $66.4 million for the first
thirty-nine weeks of fiscal 2024 compared to net cash provided by operating
activities of $72.4 million for the comparative period of fiscal 2023. The
decrease in operating cash flow was primarily due to changes in working
capital.
Total inventories were $210.7 million at March 28, 2024, an increase of $37.7
million, or 21.8%, from the inventory balance at June 29, 2023, and an
increase of $20.3 million, or 10.7%, from the inventory balance at March 30,
2023. The increase in inventories at March 28, 2024 compared to March 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 work-in-process and finished goods inventory on
hand.
Raw nut and dried fruit input stocks, some of which are classified as
work-in-process, increased by 13.9 million pounds, or 22.4%, at March 28, 2024
compared to 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 third quarter of fiscal 2024 decreased 11.7% compared to the
end of the third quarter of fiscal 2023 primarily due to higher quantities of
peanuts, inshell walnuts and pecans.
Investing Activities
Cash used in investing activities was $76.5 million during the first
thirty-nine weeks of fiscal 2024 compared to $19.1 million for the same period
last year. The increase in cash used in investing activities was primarily due
to the $59.0 million net purchase price for the Lakeville Acquisition. This
was partially offset by the $3.5 million purchase price for the acquisition of
the
Just the Cheese
brand in the second quarter of fiscal 2023. Capital asset purchases were $17.5
million during the first thirty-nine weeks of fiscal 2024 compared to $15.6
million for the first thirty-nine weeks of fiscal 2023. We expect total
capital expenditures for new equipment, facility upgrades, and food safety
enhancements, including for our newly acquired bar business in Lakeville,
Minnesota, to be approximately $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 Activities
Cash provided by financing activities was $8.5 million during the first
thirty-nine weeks of fiscal 2024 compared to cash used of $53.3 million for
the same period last year. Net 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 in
the first three quarters of fiscal 2024 were approximately $14.4 million lower
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 our Elgin headquarters ("Elgin Site"). The Elgin Site includes both an
office building and a warehouse. We are currently attempting to find
additional tenants for the available space in the office building at the Elgin
Site. Until additional tenant(s) are found, we will not receive the benefit of
rental income associated with such space. Approximately 65% of the rentable
area in the office building is currently vacant. Approximately 29% of the
rentable area has not been built-out. There can be no assurance that we will
be able to lease the unoccupied space and further capital expenditures will
likely be necessary to lease the remaining space.
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.
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Financing Arrangements
On February 7, 2008, we entered into the Former Credit Agreement (as defined
below) with a bank group (the "Bank Lenders") providing a $117.5 million
revolving loan commitment and letter of credit subfacility.
On March 5, 2020, we entered into an Amended and Restated Credit Agreement
(the "Amended and Restated Credit Agreement") which amended and restated our
Credit Agreement (the "Former Credit Agreement"). The Amended and Restated
Credit Agreement provided for a $117.5 million senior secured revolving credit
facility with the same borrowing capacity, interest rates and applicable
margin as the Former Credit Agreement and extended the term of the Former
Credit Agreement from July 7, 2021 to March 5, 2025.
The Amended and Restated Credit Facility is secured by substantially all of
our assets other than machinery and equipment, real property
.
On May 8, 2023, we entered into the First Amendment to our Amended and
Restated 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
Restated Credit Facility, which (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 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 on SOFR plus an applicable
margin as noted above.
At March 28, 2024, the weighted average interest rate for the Credit Facility
was 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. As of March 28, 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 March 28, 2024, we had $114.1 million
of available credit under the Credit Facility. If this entire amount were
borrowed at March 28, 2024, we would still be in compliance with all
restrictive covenants under the Credit 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 a ten-year term at a fair market
value rent with three five-year renewal options. In September 2015, we
exercised two of the five-year renewal options which extended the lease term
to September 2026. The lease extension also reduced the monthly lease payment
on the Selma Properties, beginning in September 2016, to reflect then current
market conditions. At the end of each five-year renewal option, the base
monthly lease amounts are reassessed, and the monthly payments increased to
$114 beginning in September 2021. One five-year renewal option remains. Also,
we have an option to purchase the Selma Properties from the owner at 95% (100%
in certain circumstances) of the then fair market value, but not less than the
original $14.3 million purchase price. The provisions of the arrangement are
not eligible for sale-leaseback accounting and the $14.3 million was recorded
as a debt obligation. No gain or loss was recorded on the Selma Properties
transaction. As of March 28, 2024, $7.3 million of the debt obligation was
outstanding.
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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's Discussion and Analysis of Financial Condition and Results of
Operations" in our Form 10-K for the fiscal year ended June 29, 2023.
Recent Accounting Pronouncements
Refer to Note 14 - "Recent Accounting Pronouncements" of the Notes to
Consolidated Financial Statements, contained in Part I, Item 1 of this form
10-Q, for a discussion of recently issued and adopted accounting pronouncements.
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FORWARD LOOKING STATEMENTS
Some of the statements in this release are forward-looking. These
forward-looking statements may be generally identified by the use of
forward-looking words and phrases such as "will", "intends", "may",
"believes", "anticipates", "should" and "expects" and are based on the
Company's current expectations or beliefs concerning future events and involve
risks and uncertainties. Consequently, the Company's actual results could
differ materially. The Company undertakes no obligation to update publicly or
otherwise revise any forward-looking statements, whether as a result of new
information, future events or other factors that affect the subject of these
statements, except where expressly required to do so by law. Among the factors
that could cause results to differ materially from current expectations are:
(i) sales activity for the Company's products, such as a decline in sales to
one or more key customers, 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; (ii)
changes in the availability and costs of raw materials and ingredients and the
impact of fixed price commitments with customers; (iii) the ability to pass on
price increases to customers if commodity costs rise and the potential for a
negative impact on demand for, and sales of, our products from price
increases; (iv) the ability to measure and estimate bulk inventory,
fluctuations in the value and quantity of the Company's nut inventories due to
fluctuations in the market prices of nuts and bulk inventory estimation
adjustments, respectively; (v) the Company's ability to appropriately respond
to, or lessen the negative impact of, competitive and pricing pressures; (vi)
losses associated with product recalls, product contamination, food labeling
or other food safety issues, or the potential for lost sales or product
liability if customers lose confidence in the safety of the Company's products
or in nuts or nut products in general, or are harmed as a result of using the
Company's products; (vii) the ability of the Company to control costs
(including inflationary costs) and manage shortages in areas such as inputs,
transportation and labor; (viii) uncertainty in economic conditions, including
the potential for inflation or economic downturn 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; (x) the adverse effect of labor unrest or disputes,
litigation and/or legal settlements, including potential unfavorable outcomes
exceeding any amounts accrued; (xi) losses due to significant disruptions at
any of our production or processing facilities or employee unavailability due
to labor shortages; (xii) the ability to implement our Long-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; (xiii) technology disruptions or failures or
the occurrence of cybersecurity incidents or breaches; (xiv) the inability to
protect the Company's brand value, intellectual property or avoid intellectual
property disputes; (xv) our ability to manage the impacts of changing weather
patterns on raw material availability due to climate change; and (xvi) our
ability to operate and integrate the acquired snack bar related assets of
TreeHouse and realize efficiencies and synergies from such acquisition.
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Item 3. Quantitative a
nd Qualitative Disclosures About Market Risk
There has been no material change in our assessment of our sensitivity to
market risk since our presentation set forth in Part I - Item 7A "Quantitative
and Qualitative Disclosures About Market Risk," in our Annual Report on Form
10-K for the fiscal year ended June 29, 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 Rule 13a-15(e)) as of
March 28, 2024. Based on such evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that, as of March 28, 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 Rule
13a-15(f)) during the quarter ended March 28, 2024 that have materially
affected or are reasonably likely to materially affect our internal control
over financial reporting.
PART II
-
OTHER INFORMATION
Item 1. Legal P
roceedings
For a discussion of legal proceedings, see Note 12 - "Commitments and
Contingent Liabilities" in Part I, Item 1 of this Form 10-Q.
Item 1A. Risk Factors
In addition to the other information set forth in this report on Form 10-Q,
you should also consider the factors, risks and uncertainties which could
materially affect our Company's business, financial condition or future
results as discussed in Part I, Item 1A - "Risk Factors" of our Annual Report
on Form 10-K for the fiscal year ended June 29, 2023. There were no
significant changes to the risk factors identified on the Form 10-K for the
fiscal year ended June 29, 2023 during the third quarter of fiscal 2024.
See Part I, Item 2 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources" in this
Form 10-Q, and see Part II, Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources" in the Company's Annual Report on Form 10-K for the fiscal year
ended June 29, 2023.
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 March 5, 2024 2,000 December 2, 2024
,
Chief Financial Officer
(1)
The plan expires on the date in this column, or upon the earlier completion of
all authorized transactions under the Rule 10b5-1 plan.
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.
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EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
Exhibit Description
No.
2.1 Asset Purchase Agreement, dated as of September 5, 2023, by and among
John B. Sanfilippo & Son, Inc. and TreeHouse Foods, Inc., Bay Valley
Foods, LLC and TreeHouse Private Brands, Inc. (incorporated by
reference from Exhibit 2.1 to the Form 8-K filed on September 8, 2023)
3.1 Restated Certificate of Incorporation of
the Company (incorporated by reference
from Exhibit 3.1 to the Form 10-Q for
the quarter ended March 24, 2005)
3.2 Amended and Restated Bylaws of the
Company (incorporated by reference from
Exhibit 3.2 to the Form 10-K for the
fiscal year ended June 25, 2015)
*10.1 Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement
Number Two among Michael J. Valentine, as trustee of the Valentine Life Insurance Trust,
Mathias Valentine, Mary Valentine and the Company, dated December 31, 2003 (incorporated
by reference from Exhibit 10.35 to the Form 10-Q for the quarter ended December 25, 2003)
*10.2 Amendment, dated February 12, 2004, to Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar
Insurance Agreement Number Two among Michael J. Valentine, as trustee of the Valentine Life
Insurance Trust, Mathias Valentine, Mary Valentine and the Company, dated December 31, 2003
(incorporated by reference from Exhibit 10.47 to the Form 10-Q for the quarter ended March 25, 2004)
*10.3 Restated Supplemental Retirement
Plan (incorporated by reference from
Exhibit 10.16 to the Form 10-K for
the fiscal year ended June 28, 2007)
*10.4 Form of Indemnification Agreement (incorporated by reference
from Exhibit 10.01 to the Form 8-K filed on May 5, 2009)
*10.5 2014 Omnibus Incentive Plan (incorporated
by reference from Exhibit 4.1
to the Registration Statement on
Form S-8 filed on October 28, 2014)
*10.6 Amendment No. 1 to the 2014 Omnibus
Incentive Plan (incorporated by reference
from Exhibit 10.12 to the Form 10-K
for the year ended June 30, 2016)
*10.7 Form of Non-Employee Director Restricted Stock Unit Award Agreement
(non-deferral) under 2014 Omnibus Plan (fiscal 2021, 2022
and 2023 awards cycle) (incorporated by reference from Exhibit
10.38 to the Form 10-Q for the quarter ended December 24, 2015)
*10.8 Form of Non-Employee Director Restricted Stock Unit Award
Agreement (deferral) under 2014 Omnibus Plan (fiscal 2021 and
2022 awards cycle) (incorporated by reference from Exhibit 10.39
to the Form 10-Q for the quarter ended December 24, 2015)
*10.9 Form of Employee Restricted Stock Unit Award Agreement
under 2014 Omnibus Plan (fiscal 2021 and 2022 awards
cycle) (incorporated by reference from Exhibit 10.10 to
the Form 10-Q for the quarter ended December 24, 2020)
*10.10 Form of Employee Restricted Stock Unit Award Agreement
under 2014 Omnibus Plan (fiscal 2023 awards cycle)
(incorporated by reference from Exhibit 10.10 to the
Form 10-Q for the quarter ended December 29, 2022
)
*10.11 2023 Omnibus Incentive Plan (incorporated by reference from
Annex A to the form DEF 14A filed on September 12, 2023)
*10.12 Amended and Restated Sanfilippo Value Added
Plan, dated August 23, 2023 (incorporated by
reference from Exhibit 10.12 to the Form 10-Q
for the quarter ended September 28, 2023)
*10.13 Form of Non-Employee Director Restricted Stock Unit Award
Agreement under 2023 Omnibus Plan (fiscal 2024 awards
cycle) (incorporated by reference from Exhibit 10.13 to
the Form 10-Q for the quarter ended December 28, 2023)
*10.14 Form of Employee Restricted Stock Unit Award Agreement
under 2023 Omnibus Plan (fiscal 2024 awards cycle)
(incorporated by reference from Exhibit 10.14 to the
Form 10-Q for the quarter ended December 28, 2023)
*10.15 Form of Employee Performance Restricted Stock Unit Award
Agreement under 2023 Omnibus Plan (fiscal 2024 awards
cycle) (incorporated by reference from Exhibit 10.15 to
the Form 10-Q for the quarter ended December 28, 2023)
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Exhibit Description
No.
10.16 Amended and restated Credit Agreement dated as of March 5, 2020, by and among John
B. Sanfilippo & Son, Inc., Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender
and the administrative agent, and Southwest Georgia Farm Credit, ACA, as a lender.
(incorporated by reference from Exhibit 10.1 to the Form 8-K filed on March 11, 2020)
10.17 First Amendment to Amended and Restated
Credit Agreement dated as of May 8, 2023
(incorporated by reference from Exhibit 10.13
to the Form 10-K filed on August 23, 2023)
10.18 Second Amendment to Amended and Restated Credit
Agreement dated as of September 29, 2023
(incorporated by reference from Exhibit 10.1
to the Form 8-K filed on October 2, 2023)
*10.19 Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number One among
John E. Sanfilippo, as trustee of the Jasper and Marian Sanfilippo Irrevocable Trust, dated September
23, 1990, Jasper B. Sanfilippo, Marian R. Sanfilippo and Registrant, dated December 31, 2003
(incorporated by reference from Exhibit 10.34 to the Form 10-Q for the quarter ended December 25, 2003)
*10.20 Amendment, dated February 12, 2004, to Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance
Agreement Number One among John E. Sanfilippo, as trustee of the Jasper and Marian Sanfilippo Irrevocable
Trust, dated September 23, 1990, Jasper B. Sanfilippo, Marian R. Sanfilippo and Registrant, dated December 31,
2003 (incorporated by reference from Exhibit 10.46 to the Form 10-Q for the quarter ended March 25, 2004)
*10.21 Split-Dollar Insurance Agreement Notice of Termination and Purchase Agreement, by and among John B.
Sanfilippo & Son, Inc., John E. Sanfilippo, on behalf of and as sole trustee of the Jasper and Marian
Sanfilippo Irrevocable Trust, dated September 23, 1990 and Marian R. Sanfilippo, dated December 24, 2021.
(incorporated by reference from Exhibit 10.15 to the Form 10-Q for the quarter ended March 24, 2022)
*10.22 Amendment
No. 1 to the Split-Dollar Insurance Agreement Notice of Termination and Purchase Agreement, by and among
John B. Sanfilippo & Son, Inc., John E. Sanfilippo, on behalf of and as sole trustee of the Jasper and
Marian Sanfilippo Irrevocable Trust, dated September 23, 1990 and Marian R. Sanfilippo, dated February 21,
2022. (incorporated by reference from Exhibit 10.16 to the Form 10-Q for the quarter ended March 24, 2022)
*10.23 Separation Benefits & General Release Agreement, effective
June 29, 2023, between John B. Sanfilippo & Son,
Inc. and Shayn E. Wallace (incorporated by reference from
Exhibit 10.1 to the Form 8-K filed on June 30, 2023)
*10.24 Retirement Agreement and General Release, dated January 23,
2023 by and between John B. Sanfilippo & Son, Inc. and
Michael Valentine (incorporated by reference from Exhibit
10.20 to the Form 10-Q for the quarter ended March 30, 2023)
*10.25 Nonqualified Deferred Compensation Plan Adoption
Agreement of the Company dated as of November 22, 2022
(incorporated by reference from Exhibit 10.18 to the
Form 10-Q for the quarter ended December 29, 2022)
*10.26 John B. Sanfilippo & Son, Inc. Nonqualified Deferred
Compensation Plan dated as of November 22, 2022
(incorporated by reference from Exhibit 10.19 to the
Form 10-Q for the quarter ended December 29, 2022)
31.1 Certification of Jeffrey T. Sanfilippo pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, as amended
31.2 Certification of Frank S. Pellegrino pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, as amended
32.1 Certification of Jeffrey T. Sanfilippo
pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, as amended
32.2 Certification of Frank S. Pellegrino
pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, as amended
101.INS Inline eXtensible Business Reporting Language (XBRL)
Instance Document - the instance document does not
appear in the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema
With Embedded Link Base Documents
104 Cover Page Interactive Data File (embedded
within the Inline XBL document)
* Indicates a management contract or compensatory plan or arrangement.
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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 May 1, 2024.
JOHN B. SANFILIPPO & SON, INC.
By
/s/
Frank S. Pellegrino
Frank S. Pellegrino
Chief Financial Officer, Executive
Vice President, Finance and Administration
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Exhibit 31.1
CERTIFICATION
I, Jeffrey T. Sanfilippo, certify that:
1. I have reviewed this Report on Form 10-Q of John B. Sanfilippo & Son, Inc.
for the quarter ended March 28, 2024;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control
over financial reporting that occurred during the registrants most recent
fiscal quarter (the registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrants auditors and the audit committee of the registrants board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrants ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal control over
financial reporting.
May 1, 2024
/s/ Jeffrey T. Sanfilippo
Jeffrey T. Sanfilippo
Chairman of the Board and
Chief Executive Officer
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Exhibit 31.2
CERTIFICATION
I, Frank S. Pellegrino, certify that:
1. I have reviewed this Report on Form 10-Q of John B. Sanfilippo & Son, Inc.
for the quarter ended March 28, 2024;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control
over financial reporting that occurred during the registrants most recent
fiscal quarter (the registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrants auditors and the audit committee of the registrants board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrants ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal control over
financial reporting.
May 1, 2024
/s/ Frank S. Pellegrino
Frank S. Pellegrino
Chief Financial Officer, Executive Vice President, Finance and Administration
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Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of John B. Sanfilippo & Son, Inc. (the
Company) on Form 10Q for the quarter ended March 28, 2024 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, Jeffrey
T. Sanfilippo, Chief Executive Officer and Chairman of the Board, certify,
pursuant to 18 U.S.C. (s) 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that based on my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
May 1, 2024
/s/ Jeffrey T. Sanfilippo
Jeffrey T. Sanfilippo
Chief Executive Officer and Chairman of the Board
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Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of John B. Sanfilippo & Son, Inc. (the
Company) on Form 10Q for the quarter ended March 28, 2024 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, Frank
S. Pellegrino, Chief Financial Officer, Executive Vice President, Finance and
Administration, certify, pursuant to 18 U.S.C. (s) 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
May 1, 2024
/s/ Frank S. Pellegrino
Frank S. Pellegrino
Chief Financial Officer, Executive Vice President, Finance and Administration
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