10-Q 1 jbss-20240926.htm 10-Q 10-Q
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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 September 26, 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

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 October 24, 2024, 9,006,038 shares of the Registrant’s Common Stock, $0.01 par value per share and 2,597,426 shares of the Registrant’s Class A Common Stock, $0.01 par value per share, were outstanding.

 

 

 


 

JOHN B. SANFILIPPO & SON, INC.

FORM 10-Q

For the Quarter Ended September 26, 2024

INDEX

 

 

Page

Part I. Financial Information

 

Item 1. Financial Statements (Unaudited)

3

Consolidated Statements of Comprehensive Income for the Quarter Ended September 26, 2024 and September 28, 2023

3

Consolidated Balance Sheets as of September 26, 2024, June 27, 2024 and September 28, 2023

4

Consolidated Statements of Stockholders’ Equity for the Quarter Ended September 26, 2024 and September 28, 2023

6

Consolidated Statements of Cash Flows for the Quarter Ended September 26, 2024 and September 28, 2023

7

Notes to Consolidated Financial Statements

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3. Quantitative and Qualitative Disclosures About Market Risk

24

Item 4. Controls and Procedures

24

Part II. Other Information

 

Item 1. Legal Proceedings

24

Item 1A. Risk Factors

24

Item 5. Other Information

25

Item 6. Exhibits

25

Signature

28

 

 

 


 

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

 

 

September 26,
2024

 

 

September 28,
2023

 

Net sales

 

$

276,196

 

 

$

234,105

 

Cost of sales

 

 

229,652

 

 

 

177,083

 

Gross profit

 

 

46,544

 

 

 

57,022

 

Operating expenses:

 

 

 

 

 

 

Selling expenses

 

 

19,839

 

 

 

21,992

 

Administrative expenses

 

 

9,698

 

 

 

10,453

 

Total operating expenses

 

 

29,537

 

 

 

32,445

 

Income from operations

 

 

17,007

 

 

 

24,577

 

Other expense:

 

 

 

 

 

 

Interest expense including $163 and $178 to related parties, respectively

 

 

516

 

 

 

227

 

Rental and miscellaneous expense, net

 

 

411

 

 

 

356

 

Pension expense (excluding service costs)

 

 

361

 

 

 

350

 

Total other expense, net

 

 

1,288

 

 

 

933

 

Income before income taxes

 

 

15,719

 

 

 

23,644

 

Income tax expense

 

 

4,060

 

 

 

6,056

 

Net income and comprehensive income

 

$

11,659

 

 

$

17,588

 

Net income per common share-basic

 

$

1.00

 

 

$

1.52

 

Net income per common share-diluted

 

$

1.00

 

 

$

1.51

 

 

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

3


 

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

 

 

September 26,
2024

 

 

June 27,
2024

 

 

September 28,
2023

 

ASSETS

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

Cash

 

$

442

 

 

$

484

 

 

$

838

 

Accounts receivable, less allowance for doubtful accounts of $327, $318
   and $
281, respectively

 

 

83,787

 

 

 

84,960

 

 

 

68,363

 

Inventories

 

 

194,565

 

 

 

196,563

 

 

 

174,789

 

Prepaid expenses and other current assets

 

 

8,695

 

 

 

12,078

 

 

 

7,603

 

TOTAL CURRENT ASSETS

 

 

287,489

 

 

 

294,085

 

 

 

251,593

 

PROPERTY, PLANT AND EQUIPMENT:

 

 

 

 

 

 

 

 

 

Land

 

 

13,365

 

 

 

13,365

 

 

 

9,150

 

Buildings

 

 

116,330

 

 

 

115,517

 

 

 

104,982

 

Machinery and equipment

 

 

298,973

 

 

 

295,599

 

 

 

267,313

 

Furniture and leasehold improvements

 

 

5,448

 

 

 

5,423

 

 

 

5,275

 

Vehicles

 

 

1,090

 

 

 

912

 

 

 

729

 

Construction in progress

 

 

18,331

 

 

 

7,569

 

 

 

7,480

 

 

 

453,537

 

 

 

438,385

 

 

 

394,929

 

Less: Accumulated depreciation

 

 

291,835

 

 

 

287,168

 

 

 

271,418

 

 

 

161,702

 

 

 

151,217

 

 

 

123,511

 

Rental investment property, less accumulated depreciation of $15,448,
   $
15,246 and $14,641, respectively

 

 

13,675

 

 

 

13,877

 

 

 

14,482

 

TOTAL PROPERTY, PLANT AND EQUIPMENT

 

 

175,377

 

 

 

165,094

 

 

 

137,993

 

 

 

 

 

 

 

 

 

 

 

Intangible assets, net

 

 

5,441

 

 

 

5,822

 

 

 

6,216

 

Deferred income taxes

 

 

3,680

 

 

 

3,130

 

 

 

3,461

 

Goodwill

 

 

11,750

 

 

 

11,750

 

 

 

11,750

 

Operating lease right-of-use assets

 

 

28,034

 

 

 

27,404

 

 

 

6,845

 

Other assets

 

 

7,596

 

 

 

8,290

 

 

 

6,995

 

TOTAL ASSETS

 

$

519,367

 

 

$

515,575

 

 

$

424,853

 

 

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

4


 

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

 

 

September 26,
2024

 

 

June 27,
2024

 

 

September 28,
2023

 

LIABILITIES & STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

Revolving credit facility borrowings

 

$

47,152

 

 

$

20,420

 

 

$

6,008

 

Current maturities of related party long-term debt

 

 

815

 

 

 

737

 

 

 

688

 

Accounts payable

 

 

59,575

 

 

 

53,436

 

 

 

51,922

 

Bank overdraft

 

 

1,315

 

 

 

545

 

 

 

669

 

Accrued payroll and related benefits

 

 

10,809

 

 

 

35,601

 

 

 

12,034

 

Other accrued expenses

 

 

20,167

 

 

 

15,201

 

 

 

17,980

 

TOTAL CURRENT LIABILITIES

 

 

139,833

 

 

 

125,940

 

 

 

89,301

 

 

 

 

 

 

 

 

 

 

 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

 

 

Long-term related party debt, less current maturities

 

 

6,169

 

 

 

6,365

 

 

 

6,924

 

Retirement plan

 

 

26,463

 

 

 

26,154

 

 

 

26,788

 

Long-term operating lease liabilities, net of current portion

 

 

25,167

 

 

 

24,877

 

 

 

5,136

 

Long-term workers' compensation liabilities

 

 

7,779

 

 

 

7,673

 

 

 

7,304

 

Other

 

 

3,153

 

 

 

1,953

 

 

 

2,033

 

TOTAL LONG-TERM LIABILITIES

 

 

68,731

 

 

 

67,022

 

 

 

48,185

 

TOTAL LIABILITIES

 

 

208,564

 

 

 

192,962

 

 

 

137,486

 

 

 

 

 

 

 

 

 

 

 

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,
   
9,123,938, 9,123,938 and 9,090,931 shares issued, respectively

 

 

91

 

 

 

91

 

 

 

91

 

Capital in excess of par value

 

 

136,626

 

 

 

135,691

 

 

 

132,733

 

Retained earnings

 

 

174,220

 

 

 

186,965

 

 

 

155,925

 

Accumulated other comprehensive income (loss)

 

 

1,044

 

 

 

1,044

 

 

 

(204

)

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

 

 

(1,204

)

 

 

(1,204

)

 

 

(1,204

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

310,803

 

 

 

322,613

 

 

 

287,367

 

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

 

$

519,367

 

 

$

515,575

 

 

$

424,853

 

 

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

5


 

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

 

 

Income (Loss)

 

 

Stock

 

 

Total

 

Balance, June 27, 2024

 

2,597,426

 

 

$

26

 

 

 

9,123,938

 

 

$

91

 

 

$

135,691

 

 

$

186,965

 

 

$

1,044

 

 

$

(1,204

)

 

$

322,613

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,659

 

 

 

 

 

 

 

 

 

11,659

 

Cash dividends ($2.10 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24,404

)

 

 

 

 

 

 

 

 

(24,404

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

935

 

 

 

 

 

 

 

 

 

 

 

 

935

 

Balance, September 26, 2024

 

2,597,426

 

 

$

26

 

 

 

9,123,938

 

 

$

91

 

 

$

136,626

 

 

$

174,220

 

 

$

1,044

 

 

$

(1,204

)

 

$

310,803

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Class A

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

Common Stock

 

 

Common Stock

 

 

Excess of

 

 

Retained

 

 

Comprehensive

 

 

Treasury

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Par Value

 

 

Earnings

 

 

Income (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

 

 

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

6


 

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

 

 

For the Quarter Ended

 

 

September 26,
2024

 

 

September 28,
2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

11,659

 

 

$

17,588

 

Depreciation and amortization

 

 

6,545

 

 

 

5,236

 

Amortization of operating lease right-of-use assets

 

 

1,084

 

 

 

439

 

Loss on disposition of assets, net

 

 

135

 

 

 

126

 

Deferred income tax (benefit) expense

 

 

(550

)

 

 

131

 

Stock-based compensation expense

 

 

935

 

 

 

747

 

Change in assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

1,245

 

 

 

4,511

 

Inventories

 

 

1,998

 

 

 

(1,853

)

Prepaid expenses and other current assets

 

 

2,333

 

 

 

(791

)

Accounts payable

 

 

3,106

 

 

 

8,796

 

Accrued expenses

 

 

(23,185

)

 

 

(16,017

)

Income taxes payable

 

 

4,141

 

 

 

3,844

 

Other long-term assets and liabilities

 

 

(882

)

 

 

(651

)

Other, net

 

 

370

 

 

 

(225

)

Net cash provided by operating activities

 

 

8,934

 

 

 

21,881

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(11,900

)

 

 

(5,993

)

Other, net

 

 

(56

)

 

 

(53

)

Net cash used in investing activities

 

 

(11,956

)

 

 

(6,046

)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Net short-term borrowings

 

 

26,732

 

 

 

6,008

 

Principal payments on long-term debt

 

 

(118

)

 

 

(162

)

Increase in bank overdraft

 

 

770

 

 

 

384

 

Dividends paid

 

 

(24,404

)

 

 

(23,175

)

Net cash provided by (used in) financing activities

 

 

2,980

 

 

 

(16,945

)

 

 

 

 

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(42

)

 

 

(1,110

)

Cash and cash equivalents, beginning of period

 

 

484

 

 

 

1,948

 

Cash, end of period

 

$

442

 

 

$

838

 

 

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

7


 

JOHN B. SANFILIPPO & SON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 1 – Basis of Presentation and Description of Business

As used herein, unless the context otherwise indicates, the terms “we”, “us”, “our” or “Company” collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiary, JBSS Ventures, LLC. Our fiscal year ends on the final Thursday of June each year, and typically consists of fifty-two weeks (four thirteen-week quarters). Additional information on the comparability of the periods presented is as follows:

References herein to fiscal 2025 and fiscal 2024 are to the fiscal year ending June 26, 2025 and the fiscal year ended June 27, 2024, respectively.
References herein to the first quarter of fiscal 2025 and fiscal 2024 are to the quarters ended September 26, 2024 and September 28, 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 offer our private brand customers a complete portfolio of snack and nutrition bars. We market and distribute, and in most cases, manufacture or process, a diverse product line of food and snack products, including nutrition bars, snack bars, peanut butter, almond butter, cashew butter, candy and confections, snack and trail mixes, sunflower kernels, dried fruit, corn snacks, sesame sticks, other sesame snack products and baked cheese snack products under our brand names, including Just the Cheese, and under private brands. Our products are sold through three primary distribution channels, including food retailers in the consumer channel, commercial ingredient users and contract manufacturing 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 27, 2024 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 2024 Annual Report on Form 10-K for the fiscal year ended June 27, 2024.

Note 2 – 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, trail mixes and snack and nutrition bars.

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.

8


 

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 consisting of promotional allowances, volume and customer rebates, in-store display incentives and marketing allowances, among others, 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 experience. 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. The contract asset balance at September 26, 2024 is $619 and is recorded in the caption “Prepaid expenses and other current assets” on the Consolidated Balance Sheets. There was no contract asset balance for the other periods presented. The Company generally does not have material deferred revenue or contract liability balances arising from transactions with customers.

 

Disaggregation of Revenue

Revenue disaggregated by sales channel is as follows:

 

 

For the Quarter Ended

 

Distribution Channel

 

September 26,
2024

 

 

September 28,
2023

 

Consumer

 

$

229,384

 

 

$

184,334

 

Commercial Ingredients

 

 

26,900

 

 

 

28,135

 

Contract Manufacturing

 

 

19,912

 

 

 

21,636

 

Total

 

$

276,196

 

 

$

234,105

 

 

Note 3 – Leases

Description of Leases

We lease warehouse space, equipment used in the transportation of goods in our warehouses and a limited number of automobiles. Our leases generally do not contain any explicit guarantees of residual value and, with the exception of our warehousing and distribution center in Huntley, IL, generally do not contain non-lease components. Our leases for warehouse transportation equipment generally require the equipment to be returned to the lessor in good working order.

9


 

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. With the exception of our warehouse leases, none of our other 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 7.3 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:

 

September 26,
2024

 

 

June 27,
2024

 

 

September 28,
2023

 

 

Affected Line Item in Consolidated Balance Sheets

Assets

 

 

 

 

 

 

 

 

 

 

Operating lease right-of-use assets

$

28,034

 

 

$

27,404

 

 

$

6,845

 

 

Operating lease right-of-use assets

Total lease right-of-use assets

$

28,034

 

 

$

27,404

 

 

$

6,845

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

Operating leases

$

3,383

 

 

$

2,623

 

 

$

1,775

 

 

Other accrued expenses

Noncurrent:

 

 

 

 

 

 

 

 

 

 

Operating leases

 

25,167

 

 

 

24,877

 

 

 

5,136

 

 

Long-term operating lease liabilities

Total lease liabilities

$

28,550

 

 

$

27,500

 

 

$

6,911

 

 

 

 

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

 

 

For the Quarter Ended

 

 

September 26,
2024

 

 

September 28,
2023

 

Operating lease costs (a)

 

$

1,742

 

 

$

670

 

Variable lease costs (b)

 

 

172

 

 

 

(174

)

Total lease cost

 

$

1,914

 

 

$

496

 

 

(a)
Includes short-term leases which are immaterial.
(b)
Variable lease costs consist of property taxes, sales tax, insurance and lease overtime charges.

Supplemental cash flow and other information related to leases was as follows:

 

 

For the Quarter Ended

 

 

September 26,
2024

 

 

September 28,
2023

 

Operating cash flows information:

 

 

 

 

 

 

Cash paid for amounts included in measurements for lease liabilities

 

$

1,073

 

 

$

578

 

 

 

 

 

 

 

 

Non-cash activity:

 

 

 

 

 

 

Right-of-use assets obtained in exchange for new operating lease obligations

 

$

1,714

 

 

$

860

 

 

 

September 26,
2024

 

 

June 27,
2024

 

 

September 28,
2023

 

Weighted average remaining lease term (in years)

 

 

6.3

 

 

 

6.6

 

 

 

4.4

 

Weighted average discount rate

 

 

6.8

%

 

 

6.8

%

 

 

6.8

%

 

10


 

 

Maturities of operating lease liabilities as of September 26, 2024 are as follows:

 

Fiscal Year Ending

 

 

 

June 26, 2025 (excluding the quarter ended September 26, 2024)

 

$

3,629

 

June 25, 2026

 

 

5,610

 

June 24, 2027

 

 

5,723

 

June 29, 2028

 

 

5,602

 

June 28, 2029

 

 

4,709

 

June 27, 2030

 

 

3,864

 

Thereafter

 

 

6,392

 

Total lease payment

 

 

35,529

 

Less imputed interest

 

 

(6,979

)

Present value of operating lease liabilities

 

$

28,550

 

 

At September 26, 2024, the Company has additional operating leases of approximately $598 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 second quarter of fiscal 2025 with initial lease terms ranging from 3 to 6 years.

Lessor Accounting

We lease office space in our four-story office building located in Elgin, IL. As a lessor, we retain substantially all of the risks and benefits of ownership of the investment property and under Topic 842: Leases we continue to account for all of our leases as operating leases. Lease agreements may include options to renew. We accrue fixed lease income on a straight‑line basis over the terms of the leases. There is generally no variable lease consideration and an immaterial amount of non-lease components such as recurring utility and storage fees. Leases between related parties are immaterial.

Leasing revenue is as follows:

 

 

For the Quarter Ended

 

 

September 26,
2024

 

 

September 28,
2023

 

Lease income related to lease payments

 

$

479

 

 

$

444

 

 

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 26, 2025 (excluding the quarter ended September 26, 2024)

 

$

970

 

June 25, 2026

 

 

972

 

June 24, 2027

 

 

930

 

June 29, 2028

 

 

328

 

June 28, 2029

 

 

336

 

June 27, 2030

 

 

343

 

Thereafter

 

 

1,135

 

 

$

5,014

 

 

Note 4 – Inventories

Inventories consist of the following:

 

 

September 26,
2024

 

 

June 27,
2024

 

 

September 28,
2023

 

Raw material and supplies

 

$

63,088

 

 

$

85,300

 

 

$

49,565

 

Work-in-process and finished goods

 

 

131,477

 

 

 

111,263

 

 

 

125,224

 

Total

 

$

194,565

 

 

$

196,563

 

 

$

174,789

 

 

11


 

 

Note 5 – Goodwill and Intangible Assets

Identifiable intangible assets subject to amortization consist of the following:

 

 

September 26,
2024

 

 

June 27,
2024

 

 

September 28,
2023

 

Customer relationships

 

$

21,350

 

 

$

21,350

 

 

$

21,350

 

Brand names

 

 

17,070

 

 

 

17,070

 

 

 

17,070

 

Product formulas

 

 

850

 

 

 

850

 

 

 

-

 

Non-compete agreement

 

 

300

 

 

 

300

 

 

 

300

 

 

 

39,570

 

 

 

39,570

 

 

 

38,720

 

Less accumulated amortization:

 

 

 

 

 

 

 

 

 

Customer relationships

 

 

(20,842

)

 

 

(20,680

)

 

 

(20,095

)

Brand names

 

 

(12,845

)

 

 

(12,668

)

 

 

(12,134

)

Product formulas

 

 

(162

)

 

 

(121

)

 

 

-

 

Non-compete agreement

 

 

(280

)

 

 

(279

)

 

 

(275

)

 

 

(34,129

)

 

 

(33,748

)

 

 

(32,504

)

Net intangible assets

 

$

5,441

 

 

$

5,822

 

 

$

6,216

 

 

Customer relationships are being amortized on an accelerated basis. The brand names remaining to be amortized consist of Squirrel Brand, Southern Style Nuts and Just the Cheese brand names. Product formulas relate to the acquisition of certain snack bar assets completed in fiscal 2024.

Total amortization expense related to intangible assets, which is classified in administrative expense in the Consolidated Statement of Comprehensive Income, was $381 for the quarter ended September 26, 2024. Amortization expense for the remainder of fiscal 2025 is expected to be approximately $993 and expected amortization expense the next five fiscal years is as follows:

 

Fiscal Year Ending

 

 

 

June 25, 2026

 

$

1,038

 

June 24, 2027

 

 

863

 

June 29, 2028

 

 

685

 

June 28, 2029

 

 

496

 

June 27, 2030

 

 

400

 

 

Our net goodwill at September 26, 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 29, 2023 are as follows:

 

Gross goodwill balance at June 29, 2023

 

$

20,516

 

Accumulated impairment losses

 

 

(8,766

)

Net goodwill balance at June 29, 2023

 

 

11,750

 

Goodwill acquired during fiscal 2024

 

 

 

Net balance at June 27, 2024

 

 

11,750

 

Goodwill acquired during fiscal 2025

 

 

 

Net balance at September 26, 2024

 

$

11,750

 

 

Note 6 – Credit Facility

Our Amended and Restated Credit Agreement dated March 5, 2020 provides for a $117,500 senior secured revolving credit facility (the “Credit Facility”). The Credit Facility is secured by our accounts receivable and inventory.

On September 29, 2023, we entered into the Second Amendment to our Amended and Restated Credit Agreement, which (among other things) increased the amount available to borrow under the Credit Facility to $150,000, extended the maturity date to September 29, 2028 and allows the Company to pay up to $100,000 in dividends per year, subject to meeting availability tests.

12


 

At September 26, 2024, we had $97,705 of available credit under the Credit Facility which reflects borrowings of $47,152 and reduced availability as a result of $5,143 in outstanding letters of credit. As of September 26, 2024, we were in compliance with all financial covenants under the Credit Facility.

Note 7 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

 

 

September 26,
2024

 

 

September 28,
2023

 

Weighted average number of shares outstanding – basic

 

 

11,630,405

 

 

 

11,594,960

 

Effect of dilutive securities:

 

 

 

 

 

 

Restricted stock units

 

 

83,957

 

 

 

79,782

 

Weighted average number of shares outstanding – diluted

 

 

11,714,362

 

 

 

11,674,742

 

 

There were no anti-dilutive awards excluded from the computation of diluted earnings per share for any periods presented.

Note 8 – Stock-Based Compensation Plans

During the quarter ended September 26, 2024, there was no significant restricted stock unit (“RSU”) or performance stock unit (“PSU”) activity. Compensation expense attributable to stock-based compensation during the first quarter of fiscal 2025 and fiscal 2024 was $935 and $747, respectively. As of September 26, 2024, there was $4,023 of total unrecognized compensation expense related to non-vested RSUs and PSUs granted under our stock-based compensation plans. We expect to recognize that cost over a weighted average period of 1.1 years.

Note 9 Retirement Plan

The Supplemental Employee Retirement Plan (“Retirement Plan”) is an unfunded, non-qualified benefit 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

 

 

 

September 26,
2024

 

 

September 28,
2023

 

Service cost

 

$

129

 

 

$

63

 

Interest cost

 

 

361

 

 

 

350

 

Net periodic benefit cost

 

$

490

 

 

$

413

 

 

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 10 – 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 financial position, results of operations or cash flows, legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur. Unfavorable outcomes could include substantial monetary damages in excess of any appropriate accruals, which management has established. 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.

13


 

Note 11 – Fair Value of Financial Instruments

The Financial Accounting Standards Board (the “FASB”) defines fair value as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels:

 

 

 

 

 

 

 

 

Level 1

 

 

 

 

Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities.

 

 

 

Level 2

 

 

 

 

Observable inputs other than quoted prices in active markets. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

 

 

 

Level 3

 

 

 

 

Unobservable inputs for which there is little or no market data available.

 

The carrying values of cash, trade accounts receivable and accounts payable approximate their fair values at each balance sheet date because of the short-term maturities and nature of these balances.

The carrying value of our revolving credit facility borrowings approximates fair value at each balance sheet date because interest rates on this instrument approximate current market rates (Level 2 criteria) and because of the short-term maturity and nature of this balance. In addition, there has been no significant change in our inherent credit risk.

The following table summarizes the carrying value and fair value estimate of our current and long-term debt:

 

 

September 26,
2024

 

 

June 27,
2024

 

 

September 28,
2023

 

Carrying value of current and long-term debt:

 

$

6,984

 

 

$

7,102

 

 

$

7,612

 

Fair value of current and long-term debt:

 

 

6,649

 

 

 

6,496

 

 

 

7,033

 

 

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 12 – Recent Accounting Pronouncements

The following recent accounting pronouncements have not yet been adopted:

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280)”. The amendments in this update modify the disclosure requirements by expanding the disclosures required for reportable segments in annual and interim consolidated financial statements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments require that any entity that has a single reportable segment provide all the disclosures required either in this update or already existing in Topic 280. The amendments are effective public entities for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments will be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the impact of this update but do not expect it to have a material impact on our Consolidated Financial Statements.

14


 

Item 2. Management'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 2025 and fiscal 2024 are to the fiscal year ending June 26, 2025 and the fiscal year ended June 27, 2024, respectively.
References herein to the first quarter of fiscal 2025 and fiscal 2024 are to the quarters ended September 26, 2024 and September 28, 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 offer our private brand customers a complete portfolio of snack and nutrition bars. We market and distribute, and in most cases, manufacture or process, a diverse product line of food and snack products, including nutrition bars, snack bars, peanut butter, almond butter, cashew butter, candy and confections, snack and trail mixes, sunflower kernels, dried fruit, corn 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 manufacturing 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 our private brand customers 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 and expanding our overall snack bar capabilities. 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 fiscal 2024 acquisition of certain snack bar assets including inventory, product formulas, a manufacturing facility and related equipment located in Lakeville, Minnesota, (the “Lakeville Acquisition”). The Lakeville Acquisition expands our ability to produce private brand snack bars, increased our overall production capabilities and allows us to provide our private brand customers with a complete snack bar portfolio. In addition, we also recently acquired additional snack bar production assets that will expand our manufacturing capacity and support further growth in our bar program.

We will continue to focus our promotional and advertising activity to invest in our brands to achieve sales volume 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 sales volume growth across our branded portfolio and anticipate taking various actions with the goal of maintaining that growth across a variety of established 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 and overall category growth for branded and private brand products and varying consumer demand for nut and nut-related products and snack bars in a challenging snack food environment.

We face a number of challenges in the future, which include the impacts of higher prices in food, in part due to underlying commodity acquisition costs, uncertainty over interest rates that may negatively impact economic growth, consumers reducing their snack purchases, including branded nut products or products with lower gross profit margin, potential for economic downturn in the markets in which we operate and continued supply chain challenges. To stay compliant with recent changes in employment laws across states where we operate and remain competitive in attracting qualified talent, we expect our labor costs to continue to increase.

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Inflation and Consumer Trends

We face changing industry trends as consumers' purchasing preferences evolve. We have continued to see higher selling prices at retail, with price increases starting to moderate for some products, including snack nuts and trail mix, and decrease for other products. While moderated, 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 reduced government support through programs such as SNAP or a variety of other macroeconomic reasons, are causing consumers to purchase fewer snack products. We have seen this through the sales volume decline in the recipe, snack nut and snack bar categories since fiscal 2023, with indicators of this trend reversing in the start of fiscal 2025. Consumers continue to shift their preferences to private brands or lower priced nuts or snack bars or purchase snack products outside the snack nut, trail mix and snack bar categories. We are also seeing signs of consumers shifting to more value-focused retailers, such as mass merchandising retailers and club stores, not all of which we distribute or sell to. We have responded by focusing on our strengths, including our knowledge of the snack and trail nut categories, product innovation and judicious use of trade spending and pricing actions.

Supply Chain and Transportation

Global supply chain pressures have eased compared to fiscal 2024, but pockets of challenges, delays and extended lead-times still exist. 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. Overall packaging and ingredient inflation appears to be leveling off. The East Coast/Gulf port strike was suspended after three days, but there is risk of recurrence in January 2025, if the parties are unable to reach agreement on the remaining contract terms. Any such strikes may negatively affect our ability to obtain certain raw materials or ship our products.

Freight rates have remained decreased compared to the prior fiscal year, and fuel costs stabilized in fiscal 2024. However, trucking capacity continues to decline due to (among other things) recent bankruptcies of trucking companies, potentially leading to further instability in the transportation industry in fiscal 2025. We are closely monitoring the situation with the East Coast port workers, which could further disrupt the freight industry. While indicators suggest transportation prices are stabilizing, the overall transportation environment remains unpredictable.

Despite the widespread flooding and damage to the southeast region of the U.S. as a result of hurricanes Helene and Milton, we do not anticipate any material impact on the supply or acquisition prices of raw materials we procure from that area. Peanut crop loss and damage in the eastern Georgia region is expected to be minimal. The overall crop is estimated to be slightly larger than the prior year. The primary impact from the hurricane is the logistical delay of growers reaching their fields to continue the harvest, as well as some infrastructure damage to buying points. We expect there to be an adequate supply and minimal impact to cost of peanuts as a result of the hurricanes. Regarding pecans, initial estimates indicate a minimal loss of the Georgia crop and therefore we expect there to be an adequate supply and minimal impact to cost.

Our most significant ingredient requirements include cocoa products, dried fruits, sweeteners, vegetable oils, oats, flour and dairy. Many of these materials and their associated costs are subject to price fluctuations from several factors, including changing commodity markets, other market conditions, demand for raw materials, weather, growing and harvesting conditions, climate change, energy costs, currency fluctuations, supplier capacities, governmental actions, import and export requirements (including tariffs), and on-going political instability and other factors beyond our control.

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 further mitigate impacts to our supply chain as they develop. If these supply chain pressures continue or worsen, or we cannot obtain the transportation and labor services needed to obtain raw materials or fulfill customer orders, such shortages and supply chain issues could have an unfavorable impact on net sales and our operations in fiscal 2025. Furthermore, record cocoa prices have been fueled by speculation of a short crop in calendar 2024. Cocoa markets have retreated from recent all-time highs, but remain sharply elevated versus levels a year ago and this has continued into fiscal 2025. Cocoa production was down significantly in Ghana and Ivory Coast due to a combination of inclement weather and crop disease. Despite higher cocoa prices, consumption remained strong, leading to predictions of a large production deficit. Additionally, as costs increase due to these circumstances or due to overall inflationary pressures, there is a further risk of our not being able to pass (in part or in full) such potential cost increases on to our customers or in a timely manner. If we cannot align costs with prices for our products, our financial performance could be adversely impacted.

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