10-Q 1 jbss-20231228.htm 10-Q 10-Q
2024Q20000880117false06-29SANFILIPPO JOHN B & SON INC 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Table of Contents

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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 December 28, 2023

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

incorporation or organization)

(I.R.S. Employer
Identification No.)

1703 North Randall Road

Elgin, Illinois

60123-7820

(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

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $.01 par value per share

 

JBSS

 

The NASDAQ Stock Market LLC

(NASDAQ Global Select Market)

Indicate by check mark whether the registrant (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 (§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 January 25, 2024, 9,002,660 shares of the Registrant’s Common Stock, $0.01 par value per share and 2,597,426 shares of the Registrant’s Class A Common Stock, $0.01 par value per share, were outstanding.

 

 

 


Table of Contents

 

JOHN B. SANFILIPPO & SON, INC.

FORM 10-Q

For the Quarter Ended December 28, 2023

INDEX

 

 

Page

Part I. Financial Information

 

Item 1. Financial Statements (Unaudited)

3

Consolidated Statements of Comprehensive Income for the Quarter and Twenty-Six Weeks Ended December 28, 2023 and December 29, 2022

3

Consolidated Balance Sheets as of December 28, 2023, June 29, 2023 and December 29, 2022

4

Consolidated Statements of Stockholders’ Equity for the Quarter and Twenty-Six Weeks Ended December 28, 2023 and December 29, 2022

6

Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended December 28, 2023 and December 29, 2022

7

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. Financial Statements

 

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except share and per share amounts)

 

 

For the Quarter Ended

 

 

For the Twenty-Six Weeks Ended

 

 

December 28,
2023

 

 

December 29,
2022

 

 

December 28,
2023

 

 

December 29,
2022

 

Net sales

 

$

291,222

 

 

$

274,328

 

 

$

525,327

 

 

$

526,929

 

Cost of sales

 

 

233,283

 

 

 

217,826

 

 

 

410,366

 

 

 

419,784

 

Gross profit

 

 

57,939

 

 

 

56,502

 

 

 

114,961

 

 

 

107,145

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling expenses

 

 

21,001

 

 

 

21,830

 

 

 

42,993

 

 

 

39,812

 

Administrative expenses

 

 

11,563

 

 

 

10,208

 

 

 

22,016

 

 

 

20,455

 

Bargain purchase gain, net

 

 

(2,226

)

 

 

 

 

 

(2,226

)

 

 

 

Total operating expenses

 

 

30,338

 

 

 

32,038

 

 

 

62,783

 

 

 

60,267

 

Income from operations

 

 

27,601

 

 

 

24,464

 

 

 

52,178

 

 

 

46,878

 

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense including $175, $189, $353 and $382 to related parties

 

 

1,055

 

 

 

615

 

 

 

1,282

 

 

 

1,276

 

Rental and miscellaneous expense, net

 

 

260

 

 

 

311

 

 

 

616

 

 

 

713

 

Pension expense (excluding service costs)

 

 

350

 

 

 

348

 

 

 

700

 

 

 

697

 

Total other expense, net

 

 

1,665

 

 

 

1,274

 

 

 

2,598

 

 

 

2,686

 

Income before income taxes

 

 

25,936

 

 

 

23,190

 

 

 

49,580

 

 

 

44,192

 

Income tax expense

 

 

6,765

 

 

 

6,283

 

 

 

12,821

 

 

 

11,740

 

Net income

 

$

19,171

 

 

$

16,907

 

 

$

36,759

 

 

$

32,452

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of actuarial loss included in net
   periodic pension cost

 

 

 

 

 

7

 

 

 

 

 

 

14

 

Income tax expense related to pension adjustments

 

 

 

 

 

(2

)

 

 

 

 

 

(3

)

Other comprehensive income, net of tax

 

 

 

 

 

5

 

 

 

 

 

 

11

 

Comprehensive income

 

$

19,171

 

 

$

16,912

 

 

$

36,759

 

 

$

32,463

 

Net income per common share-basic

 

$

1.65

 

 

$

1.46

 

 

$

3.17

 

 

$

2.81

 

Net income per common share-diluted

 

$

1.64

 

 

$

1.45

 

 

$

3.15

 

 

$

2.79

 

 

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)

 

 

December 28,
2023

 

 

June 29,
2023

 

 

December 29,
2022

 

ASSETS

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,975

 

 

$

1,948

 

 

$

620

 

Accounts receivable, less allowance for doubtful accounts of $370, $283
   and $
318

 

 

77,416

 

 

 

72,734

 

 

 

72,433

 

Inventories

 

 

197,335

 

 

 

172,936

 

 

 

173,075

 

Prepaid expenses and other current assets

 

 

13,040

 

 

 

6,812

 

 

 

11,693

 

TOTAL CURRENT ASSETS

 

 

289,766

 

 

 

254,430

 

 

 

257,821

 

PROPERTY, PLANT AND EQUIPMENT:

 

 

 

 

 

 

 

 

 

Land

 

 

13,365

 

 

 

9,150

 

 

 

9,150

 

Buildings

 

 

114,708

 

 

 

104,150

 

 

 

102,840

 

Machinery and equipment

 

 

286,317

 

 

 

261,706

 

 

 

254,013

 

Furniture and leasehold improvements

 

 

5,310

 

 

 

5,275

 

 

 

5,312

 

Vehicles

 

 

790

 

 

 

729

 

 

 

614

 

Construction in progress

 

 

3,960

 

 

 

7,123

 

 

 

9,877

 

 

 

424,450

 

 

 

388,133

 

 

 

381,806

 

Less: Accumulated depreciation

 

 

276,987

 

 

 

267,336

 

 

 

259,597

 

 

 

147,463

 

 

 

120,797

 

 

 

122,209

 

Rental investment property, less accumulated depreciation of $14,843,
   $
14,439 and $14,036

 

 

14,280

 

 

 

14,684

 

 

 

15,087

 

TOTAL PROPERTY, PLANT AND EQUIPMENT

 

 

161,743

 

 

 

135,481

 

 

 

137,296

 

 

 

 

 

 

 

 

 

 

 

Intangible assets, net

 

 

6,584

 

 

 

6,658

 

 

 

7,561

 

Deferred income taxes

 

 

562

 

 

 

3,592

 

 

 

2,608

 

Goodwill

 

 

11,750

 

 

 

11,750

 

 

 

12,030

 

Operating lease right-of-use assets

 

 

6,867

 

 

 

6,427

 

 

 

2,593

 

Other assets

 

 

7,187

 

 

 

6,949

 

 

 

6,021

 

TOTAL ASSETS

 

$

484,459

 

 

$

425,287

 

 

$

425,930

 

 

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)

 

 

December 28,
2023

 

 

June 29,
2023

 

 

December 29,
2022

 

LIABILITIES & STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

Revolving credit facility borrowings

 

$

32,052

 

 

$

 

 

$

22,805

 

Current maturities of long-term debt, net, including
   related party debt of $
704, $672 and $642

 

 

704

 

 

 

672

 

 

 

1,497

 

Accounts payable

 

 

62,955

 

 

 

42,680

 

 

 

49,342

 

Bank overdraft

 

 

1,500

 

 

 

285

 

 

 

1,970

 

Accrued payroll and related benefits

 

 

17,479

 

 

 

27,572

 

 

 

14,953

 

Other accrued expenses

 

 

13,601

 

 

 

14,479

 

 

 

13,495

 

TOTAL CURRENT LIABILITIES

 

 

128,291

 

 

 

85,688

 

 

 

104,062

 

 

 

 

 

 

 

 

 

 

 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

 

 

Long-term debt, less current maturities, net, including
   related party debt of $
6,742, $7,102 and $7,446

 

 

6,742

 

 

 

7,102

 

 

 

7,446

 

Retirement plan

 

 

27,338

 

 

 

26,653

 

 

 

29,132

 

Long-term operating lease liabilities, net of current portion

 

 

5,141

 

 

 

4,771

 

 

 

1,472

 

Long-term workers' compensation liabilities

 

 

7,291

 

 

 

7,321

 

 

 

7,459

 

Other

 

 

2,419

 

 

 

1,545

 

 

 

696

 

TOTAL LONG-TERM LIABILITIES

 

 

48,931

 

 

 

47,392

 

 

 

46,205

 

TOTAL LIABILITIES

 

 

177,222

 

 

 

133,080

 

 

 

150,267

 

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

 

Class A Common Stock, convertible to Common Stock on
   a per share basis, cumulative voting rights of ten votes
   per share, $
.01 par value; 10,000,000 shares authorized,
   
2,597,426 shares issued and outstanding

 

 

26

 

 

 

26

 

 

 

26

 

Common Stock, non-cumulative voting rights of one vote
   per share, $
.01 par value; 17,000,000 shares authorized,
   
9,120,560, 9,076,326 and 9,072,068 shares issued

 

 

91

 

 

 

91

 

 

 

91

 

Capital in excess of par value

 

 

133,432

 

 

 

131,986

 

 

 

130,731

 

Retained earnings

 

 

175,096

 

 

 

161,512

 

 

 

148,488

 

Accumulated other comprehensive loss

 

 

(204

)

 

 

(204

)

 

 

(2,469

)

Treasury stock, at cost; 117,900 shares of Common Stock

 

 

(1,204

)

 

 

(1,204

)

 

 

(1,204

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

307,237

 

 

 

292,207

 

 

 

275,663

 

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

 

$

484,459

 

 

$

425,287

 

 

$

425,930

 

 

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 STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Class A

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

Common Stock

 

 

Common Stock

 

 

Excess of

 

 

Retained

 

 

Comprehensive

 

 

Treasury

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Par Value

 

 

Earnings

 

 

Loss

 

 

Stock

 

 

Total

 

Balance, June 29, 2023

 

2,597,426

 

 

$

26

 

 

 

9,076,326

 

 

$

91

 

 

$

131,986

 

 

$

161,512

 

 

$

(204

)

 

$

(1,204

)

 

$

292,207

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,588

 

 

 

 

 

 

 

 

 

17,588

 

Cash dividends ($2.00 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,175

)

 

 

 

 

 

 

 

 

(23,175

)

Equity award exercises

 

 

 

 

 

 

 

14,605

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

747

 

 

 

 

 

 

 

 

 

 

 

 

747

 

Balance, September 28, 2023

 

2,597,426

 

 

$

26

 

 

 

9,090,931

 

 

$

91

 

 

$

132,733

 

 

$

155,925

 

 

$

(204

)

 

$

(1,204

)

 

$

287,367

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,171

 

 

 

 

 

 

 

 

 

19,171

 

Equity award exercises, net
   of shares withheld for employee
   taxes

 

 

 

 

 

 

 

29,629

 

 

 

 

 

 

(684

)

 

 

 

 

 

 

 

 

 

 

 

(684

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

1,383

 

 

 

 

 

 

 

 

 

 

 

 

1,383

 

Balance, December 28, 2023

 

2,597,426

 

 

$

26

 

 

 

9,120,560

 

 

$

91

 

 

$

133,432

 

 

$

175,096

 

 

$

(204

)

 

$

(1,204

)

 

$

307,237

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Class A

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

Common Stock

 

 

Common Stock

 

 

Excess of

 

 

Retained

 

 

Comprehensive

 

 

Treasury

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Par Value

 

 

Earnings

 

 

Loss

 

 

Stock

 

 

Total

 

Balance, June 30, 2022

 

2,597,426

 

 

$

26

 

 

 

9,047,359

 

 

$

90

 

 

$

128,800

 

 

$

153,589

 

 

$

(2,480

)

 

$

(1,204

)

 

$

278,821

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,545

 

 

 

 

 

 

 

 

 

15,545

 

Cash dividends ($2.25 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,981

)

 

 

 

 

 

 

 

 

(25,981

)

Pension liability amortization, net
   of income tax expense of $
1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

6

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

772

 

 

 

 

 

 

 

 

 

 

 

 

772

 

Balance, September 29, 2022

 

2,597,426

 

 

$

26

 

 

 

9,047,359

 

 

$

90

 

 

$

129,572

 

 

$

143,153

 

 

$

(2,474

)

 

$

(1,204

)

 

$

269,163

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,907

 

 

 

 

 

 

 

 

 

16,907

 

Cash dividends ($1.00 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,572

)

 

 

 

 

 

 

 

 

(11,572

)

Pension liability amortization, net
   of income tax expense of $
2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Equity award exercises, net
   of shares withheld for employee
   taxes

 

 

 

 

 

 

 

24,709

 

 

 

1

 

 

 

(356

)

 

 

 

 

 

 

 

 

 

 

 

(355

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

1,515

 

 

 

 

 

 

 

 

 

 

 

 

1,515

 

Balance, December 29, 2022

 

2,597,426

 

 

$

26

 

 

 

9,072,068

 

 

$

91

 

 

$

130,731

 

 

$

148,488

 

 

$

(2,469

)

 

$

(1,204

)

 

$

275,663

 

 

The accompanying unaudited notes are an integral part of these consolidated financial statements.

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Table of Contents

 

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

 

 

For the Twenty-Six Weeks Ended

 

 

December 28,
2023

 

 

December 29,
2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

36,759

 

 

$

32,452

 

Depreciation and amortization

 

 

11,715

 

 

 

10,099

 

Loss on disposition of assets, net

 

 

140

 

 

 

19

 

Deferred income tax expense

 

 

2,280

 

 

 

628

 

Stock-based compensation expense

 

 

2,130

 

 

 

2,287

 

Bargain purchase gain, net

 

 

(2,226

)

 

 

 

Change in assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

(4,542

)

 

 

(2,822

)

Inventories

 

 

11,101

 

 

 

32,020

 

Prepaid expenses and other current assets

 

 

(2,942

)

 

 

(1,885

)

Accounts payable

 

 

20,557

 

 

 

1,492

 

Accrued expenses

 

 

(10,077

)

 

 

(1,794

)

Income taxes receivable

 

 

(4,180

)

 

 

(2,523

)

Other long-term assets and liabilities

 

 

132

 

 

 

721

 

Other, net

 

 

325

 

 

 

258

 

Net cash provided by operating activities

 

 

61,172

 

 

 

70,952

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(10,882

)

 

 

(11,420

)

Business acquisitions, net

 

 

(58,974

)

 

 

(3,500

)

Other, net

 

 

(53

)

 

 

(56

)

Net cash used in investing activities

 

 

(69,909

)

 

 

(14,976

)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Net short-term borrowings (repayments)

 

 

32,052

 

 

 

(17,634

)

Debt issue costs

 

 

(316

)

 

 

 

Principal payments on long-term debt

 

 

(328

)

 

 

(1,984

)

Increase in bank overdraft

 

 

1,215

 

 

 

1,756

 

Dividends paid

 

 

(23,175

)

 

 

(37,553

)

Taxes paid related to net share settlement of equity awards

 

 

(684

)

 

 

(356

)

Net cash provided by (used in) financing activities

 

 

8,764

 

 

 

(55,771

)

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

27

 

 

 

205

 

Cash and cash equivalents, beginning of period

 

 

1,948

 

 

 

415

 

Cash, end of period

 

$

1,975

 

 

$

620

 

 

The accompanying unaudited notes are an integral part of these consolidated financial statements.

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Table of Contents

 

JOHN B. SANFILIPPO & SON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands, except where noted and per share data)

Note 1 – Basis of Presentation and Description of Business

As used herein, unless the context otherwise indicates, the terms “we”, “us”, “our” or “Company” collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiary, JBSS Ventures, LLC. Our fiscal year ends on the final Thursday of June each year, and typically consists 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 second quarter of fiscal 2024 and fiscal 2023 are to the quarters ended December 28, 2023 and December 29, 2022, respectively.
References herein to the first half or first twenty-six weeks of fiscal 2024 and fiscal 2023 are to the twenty-six weeks ended December 28, 2023 and December 29, 2022, 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 current 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 payment 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”.

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Table of Contents

 

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 of $2,226, net of taxes, which is reported in the caption “Bargain purchase gain, net” in our consolidated financial results for the quarter and twenty-six weeks ended December 28, 2023. 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 $28,692 and a loss before income taxes of $3,957 from the closing of the Lakeville Acquisition on September 29, 2023 are included in our consolidated financial results as of December 28, 2023. The Company also incurred acquisition-related costs of $161 and $665 for the quarter and twenty-six weeks ended December 28, 2023, respectively. These costs are included in Administrative expenses.

The following reflects the unaudited pro forma results of operations of the Company as if the Lakeville Acquisition had taken place at the beginning of fiscal 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 Twenty-Six Weeks Ended

 

 

 

December 28,
2023

 

 

December 29,
2022

 

 

December 28,
2023

 

 

December 29,
2022

 

Pro forma net sales

 

$

291,222

 

 

$

313,870

 

 

$

565,640

 

 

$

608,754

 

Pro forma net income

 

 

18,883

 

 

 

16,697

 

 

 

33,335

 

 

 

29,797

 

Pro forma diluted earnings per share

 

$

1.62

 

 

$

1.44

 

 

$

2.86

 

 

$

2.56

 

 

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.

 

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Table of Contents

 

Note 3 – Revenue Recognition

We recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. For each customer contract, a five-step process is followed in which we identify the contract, identify performance obligations, determine the transaction price, allocate the contract transaction price to the performance obligations, and recognize the revenue when (or as) the performance obligation is transferred to the customer.

When Performance Obligations Are Satisfied

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations are primarily for the delivery of raw and processed recipe and snack nuts, nut butters and trail mixes.

Our customer contracts do not include more than one performance obligation. If a contract were to contain more than one performance obligation, we are required to allocate the contract’s transaction price to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by directly observable data.

Revenue recognition is generally completed at a point in time when product control is transferred to the customer. For virtually all of our revenues, control transfers to the customer when the product is shipped or delivered to the customer based upon applicable shipping terms. This allows the customer to then direct the use and obtain substantially all of the remaining benefits from the asset at that point in time. Therefore, the timing of our revenue recognition requires little judgment.

Variable Consideration

Some of our products are sold through specific incentive programs including, but not limited to, promotional allowances, volume and customer rebates, in-store display incentives and marketing allowances to consumer and some commercial ingredient customers. The ultimate cost of these programs is dependent on certain factors such as actual purchase volumes or customer activities. It is also dependent on significant management judgment when determining estimates. The Company accounts for these programs as variable consideration and recognizes a reduction in revenue (and a corresponding reduction in the transaction price) in the same period as the underlying program based upon the terms of the specific arrangements.

Trade promotions, consisting primarily of customer pricing allowances, merchandising funds and consumer coupons, are also offered through various programs to customers and consumers. A provision for estimated trade promotions is recorded as a reduction of revenue (and a reduction in the transaction price) in the same period when the sale is recognized. Revenues are also recorded net of expected customer deductions which are provided for based upon past experiences. Evaluating these estimates requires management judgment.

We generally use the most likely amount method to determine the variable consideration. We believe there will not be significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. The Company reviews and updates its estimates and related accruals of variable consideration and trade promotions at least quarterly based on the terms of the agreements and historical experience. Any uncertainties in the ultimate resolution of variable consideration due to factors outside of the Company’s influence are typically resolved within a short timeframe. Therefore, no additional constraint on the variable consideration is required.

Contract Balances

Contract assets or liabilities result from transactions with revenue recorded over time. If the measure of remaining rights exceeds the measure of the remaining performance obligations, the Company records a contract asset. Conversely, if the measure of the remaining performance obligations exceeds the measure of the remaining rights, the Company records a contract liability. There was no contract asset balance for any periods presented. The Company generally does not have material deferred revenue or contract liability balances arising from transactions with customers.

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Table of Contents

 

Disaggregation of Revenue

Revenue disaggregated by sales channel is as follows:

 

 

For the Quarter Ended

 

 

For the Twenty-Six Weeks Ended

 

Distribution Channel

 

December 28,
2023

 

 

December 29,
2022

 

 

December 28,
2023

 

 

December 29,
2022

 

Consumer

 

$

241,362

 

 

$

224,513

 

 

$

425,696

 

 

$

421,060

 

Commercial Ingredients

 

 

27,712

 

 

 

28,419

 

 

 

55,847

 

 

 

59,926

 

Contract Packaging

 

 

22,148

 

 

 

21,396

 

 

 

43,784

 

 

 

45,943

 

Total

 

$

291,222

 

 

$

274,328

 

 

$

525,327

 

 

$

526,929

 

 

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 5.5 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:

 

December 28,
2023

 

 

June 29,
2023

 

 

December 29,
2022

 

 

Affected Line Item in Consolidated Balance Sheets

Assets

 

 

 

 

 

 

 

 

 

 

Operating lease right-of-use assets

$

6,867

 

 

$

6,427

 

 

$

2,593

 

 

Operating lease right-of-use assets

Total lease right-of-use assets

$

6,867

 

 

$

6,427

 

 

$

2,593

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

Operating leases

$

1,751

 

 

$

1,729

 

 

$

1,166

 

 

Other accrued expenses

Noncurrent:

 

 

 

 

 

 

 

 

 

 

Operating leases

 

5,141

 

 

 

4,771

 

 

 

1,472

 

 

Long-term operating lease liabilities

Total lease liabilities

$

6,892

 

 

$

6,500

 

 

$

2,638

 

 

 

 

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Table of Contents

 

The following tables summarize the Company’s total lease costs and other information arising from operating lease transactions:

 

 

For the Quarter Ended

 

 

For the Twenty-Six Weeks Ended

 

 

December 28,
2023

 

 

December 29,
2022

 

 

December 28,
2023

 

 

December 29,
2022

 

Operating lease costs (a)

 

$

719

 

 

$

541

 

 

$

1,389

 

 

$

1,015

 

Variable lease costs (b)

 

 

33

 

 

 

58

 

 

 

(141

)

 

 

115

 

Total lease cost

 

$

752

 

 

$

599

 

 

$

1,248

 

 

$

1,130

 

 

(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 Twenty-Six Weeks Ended

 

 

December 28,
2023