John B. Sanfilippo & Son, Inc. Third Quarter Diluted EPS Increased by 104.4% to $0.55 per share

Quarterly Comparison Overview:

  • Net sales decreased by 19.6%
  • Sales volume decreased by 10.8%
  • Gross profit increased by 11.1%
  • Net income increased by 105.8%

ELGIN, Ill.–(BUSINESS WIRE)–John B. Sanfilippo & Son, Inc. (NASDAQ: JBSS) (hereinafter
the “Company”) today announced operating results for its fiscal 2017
third quarter. Net income for the third quarter of fiscal 2017 was $6.3
million, or $0.55 per share diluted, compared to net income of $3.1
million, or $0.27 per share diluted, for the third quarter of fiscal
2016. Net income for the first three quarters of fiscal 2017 was $29.4
million, or $2.58 per share diluted, compared to net income of $23.1
million, or $2.04 per share diluted, for the first three quarters of
fiscal 2016.

Net sales decreased to $173.4 million for the third quarter of fiscal
2017 from $215.7 million for the third quarter of fiscal 2016. The
decrease in net sales was attributable to a 10.8% decrease in sales
volume, which is defined as pounds sold to customers, and a 9.9% decline
in the weighted average selling price per pound resulting primarily from
lower selling prices for almonds. Sales volume decreased for all major
nut product types, and sales volume declined in all distribution
channels.

The decrease in sales volume in the consumer channel primarily resulted
from a decline in sales of cashews and mixed nuts to private brand
customers. Sales volume also declined for our branded products in the
quarterly comparison as follows:

Fisher recipe nuts        

(3.2)%

Fisher snack nuts

(9.4)%

Orchard Valley Harvest and Sunshine Country produce
products

(5.5)%

 

The sales volume decline for Fisher recipe nuts primarily
resulted from inventory reduction initiatives implemented by some
customers during the current third quarter. The sales volume decline for Fisher
snack nuts was due to lower merchandising activity. The sales volume
decline for our Orchard Valley Harvest and Sunshine Country
produce brands was attributable to a decline in sales for our Sunshine
Country
produce brand, which resulted from lost distribution. The
decline in the Sunshine Country sales volume was partially offset
by a 4.6% increase in sales volume for our Orchard Valley Harvest
produce brand due to increased merchandising activity.

The decrease in sales volume in the contract packaging channel was
attributable to a reduction in merchandising activity implemented by one
customer in this channel. The sales volume decline in the commercial
ingredients channel resulted mainly from lost business with a bulk
almond butter customer, which occurred in the second quarter of fiscal
2017.

Net sales decreased to $645.0 million for the first three quarters of
fiscal 2017 from $720.5 million for the first three quarters of fiscal
2016. The decline in net sales was attributable to an 8.8% reduction in
the weighted average selling price per pound, which primarily occurred
as a result of lower selling prices for almonds and walnuts, and a 1.9%
decrease in sales volume. The sales volume decline was mainly
attributable to lower sales volume for almonds and mixed nuts, which was
offset in part by sales volume increases for peanuts, snack and trail
mixes and walnuts. Sales volume increased in the consumer and contract
packaging distribution channels and declined in the commercial
ingredients distribution channel. The sales volume increase in the
consumer distribution channel came mainly from increased sales of Fisher
recipe nuts, Orchard Valley Harvest produce products and private
brand snack nuts. The sales volume increase in the contract packaging
channel resulted primarily from increased sales of snack and trail
mixes, peanuts, cashews and almonds to existing customers. The decline
in sales volume in the commercial ingredients distribution channel was
primarily attributable to the loss of a bulk almond butter customer,
decreased sales of bulk inshell walnuts to international customers and
lower sales of peanuts to other peanut shellers.

Gross profit margin increased to 16.4% of net sales for the third
quarter of fiscal 2017 from 11.9% for the third quarter of fiscal 2016,
and gross profit increased by 11.1%. The increases in gross profit
margin and gross profit were primarily attributable to lower acquisition
costs for almonds and improved alignment of selling prices and
acquisition costs for pecans and walnuts.

Gross profit margin for the first three quarters of fiscal 2017
increased to 16.8% of net sales from 14.4% for the first three quarters
of fiscal 2016, while gross profit increased by 4.3%. The increases in
gross profit margin and gross profit primarily occurred for the same
reasons cited in the quarterly comparison.

Total operating expenses in the quarterly comparison declined by $2.1
million, and total operating expenses in the year to date comparison
declined by $3.3 million. The declines in total operating expenses in
both comparisons were due to lower advertising, compensation and broker
commission expenses, which were partially offset by increases in
shipping expense due to an increase in delivered sales pounds. The
decline in advertising expense was primarily due to the later Easter
holiday. Total operating expenses for the current third quarter
increased to 10.4% of net sales from 9.3% of net sales for the third
quarter of fiscal 2016. Total operating expenses for the first three
quarters of fiscal 2017 increased to 9.5% of net sales from 9.0% of net
sales for the first three quarters of fiscal 2016. The increases in
total operating expenses, as a percentage of net sales, for both
comparisons were attributable to a lower net sales base.

Interest expense for the current third quarter of $0.9 million was
unchanged compared to interest expense for last year’s third quarter.
Interest expense for the current year to date period was $2.1 million
compared to $2.6 million for the first three quarters of fiscal 2016.
The decrease in interest expense in the year to date comparison
primarily resulted from lower debt levels during the first half of the
current fiscal year.

The value of total inventories on hand at the end of the current third
quarter decreased by $5.9 million, or 2.9%, when compared to the value
of total inventories on hand at the end of the third quarter of fiscal
2016. The decrease in the value of total inventories was primarily due
to lower quantities of finished goods combined with a lower weighted
average cost per pound. Higher acquisition costs for pecans, which were
largely offset by lower acquisition costs for almonds, led to a 1.4%
increase in the weighted average cost per pound of raw nut and dried
fruit input stocks on hand in the quarterly comparison.

“As we have discussed in previous quarterly releases, commodity price
decreases and the loss of a bulk almond butter customer in our
commercial ingredients channel had an unfavorable impact on net sales
during this quarter. To offset the negative impact on net income from
this sales decline, we recognized early in the current fiscal year that
we would have to increase gross profit margin, capture savings in our
selling and administrative expenses and grow sales volume,” stated
Jeffrey T. Sanfilippo, Chief Executive Officer. “Since last year’s third
quarter, we made significant improvements in managing our walnut
inventory, aligning our selling prices and acquisition costs and
leveraging our commodity procurement expertise to drive the considerable
increase in our gross profit margin that occurred in the quarterly
comparison. We were also successful in reducing selling and
administrative expenses,” Mr. Sanfilippo noted. “Though sales volume was
generally down for our brands, at retail, our Fisher recipe nut
and Orchard Valley Harvest brands outperformed in their
respective categories in the quarterly comparison according to IRi
market data,” Mr. Sanfilippo stated. “Fisher recipe nut pound
volume increased by 3%, while total category pound volume declined by
7%. Pound volume for our Orchard Valley Harvest brand grew by
55%, while the total produce category pound volume only grew by 12%,”
Mr. Sanfilippo noted. “Pound volume for Fisher snack nuts
declined by 3%, which mirrored the pound volume decline for the entire
snack nut category,” Mr. Sanfilippo stated. “Going forward, we will
continue our efforts to grow sales volume, especially for our brands and
in alternative distribution channels. We also anticipate that the recent
sales volume growth trends in our contract packaging channel should
resume with the launch of new products by several of our customers in
that channel, which are expected to occur in our fiscal 2017 fourth
quarter,” Mr. Sanfilippo concluded.

The Company will host an investor conference call and webcast on
Thursday, May 4, 2017, at 10:00 a.m. Eastern (9:00 a.m. Central) to
discuss these results. To participate in the call via telephone, dial
1-844-536-5471 from the U.S. or 1-614-999-9317 internationally and enter
the participant passcode of 13634433. This call is being webcast by
NASDAQ OMX and can be accessed at the Company’s website at www.jbssinc.com.

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) the risks
associated with our vertically integrated model with respect to pecans,
peanuts and walnuts; (ii) sales activity for the Company’s products,
such as a decline in sales to one or more key customers, a decline in
sales of private brand products or changing consumer preferences; (iii)
changes in the availability and costs of raw materials and the impact of
fixed price commitments with customers; (iv) the ability to pass on
price increases to customers if commodity costs rise and the potential
for a negative impact on demand for, and sales of, our products from
price increases; (v) the ability to measure and estimate bulk inventory,
fluctuations in the value and quantity of the Company’s nut inventories
due to fluctuations in the market prices of nuts and bulk inventory
estimation adjustments, respectively; (vi) the Company’s ability to
appropriately respond to, or lessen the negative impact of, competitive
and pricing pressures; (vii) losses associated with product recalls,
product contamination, food labeling or other food safety issues, or the
potential for lost sales or product liability if customers lose
confidence in the safety of the Company’s products or in nuts or nut
products in general, or are harmed as a result of using the Company’s
products; (viii) the ability of the Company to retain key personnel;
(ix) the effect of the actions and decisions of the group that has the
majority of the voting power with regard to the Company’s outstanding
common equity (which may make a takeover or change in control more
difficult), including the effect of any agreements pursuant to which
such group has pledged a substantial amount of its securities of the
Company; (x) the potential negative impact of government regulations and
laws and regulations pertaining to food safety, such as the Food Safety
Modernization Act; (xi) uncertainty in economic conditions, including
the potential for economic downturn; (xii) the timing and occurrence (or
nonoccurrence) of other transactions and events which may be subject to
circumstances beyond the Company’s control; (xiii) the adverse effect of
labor unrest or disputes, litigation and/or legal settlements, including
potential unfavorable outcomes exceeding any amounts accrued; (xiv)
losses due to significant disruptions at any of our production or
processing facilities; (xv) the inability to implement our Strategic
Plan or realize efficiency measures, including controlling medical and
personnel costs; (xvi) technology disruptions or failures; (xvii) the
inability to protect the Company’s brand value, intellectual property or
avoid intellectual property disputes; (xviii) the Company’s ability to
manage successfully the price gap between its private brand products and
those of its branded competitors; and (xix) potential increased
industry-specific regulation pending the U.S. Food and Drug
Administration assessment of the risk of Salmonella contamination
associated with tree nuts.

John B. Sanfilippo & Son, Inc. is a processor, packager, marketer and
distributor of nut and dried fruit based products that are sold under a
variety of private brands and under the Company’s Fisher®, Orchard
Valley Harvest
®, Fisher® Nut Exactly™ and Sunshine
Country
® brand names.

   

JOHN B. SANFILIPPO & SON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per share amounts)

 
For the Quarter Ended For the Thirty-nine Weeks Ended
March 30,   March 24, March 30,   March 24,
2017 2016 2017 2016
Net sales $ 173,376 $ 215,742 $ 645,044 $ 720,521
Cost of sales 144,950 190,154 536,754 616,717
Gross profit 28,426 25,588 108,290 103,804
Operating expenses:
Selling expenses 10,299 11,358 36,940 39,114
Administrative expenses 7,697 8,761 24,622 25,784
Total operating expenses 17,996 20,119 61,562 64,898
Income from operations 10,430 5,469 46,728 38,906
Other expense:
Interest expense 864 897 2,094 2,616
Rental and miscellaneous expense, net 367 313 1,076 1,181
Total other expense, net 1,231 1,210 3,170 3,797
Income before income taxes 9,199 4,259 43,558 35,109
Income tax expense 2,863 1,181 14,157 11,991
Net income $ 6,336 $ 3,078 $ 29,401 $ 23,118
Basic earnings per common share $ 0.56 $ 0.27 $ 2.60 $ 2.06
Diluted earnings per common share $ 0.55 $ 0.27 $ 2.58 $ 2.04
Cash dividends declared per share $ $ $ 5.00 $ 2.00
 
Weighted average shares outstanding
— Basic   11,347,920   11,255,894   11,306,251   11,223,268
— Diluted   11,424,798   11,344,625   11,392,903   11,322,463
 
JOHN B. SANFILIPPO & SON, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)

 
March 30, 2017 June 30,

2016

March 24, 2016

ASSETS
CURRENT ASSETS:
Cash $ 1,848 $ 2,220 $ 2,923
Accounts receivable, net 59,402 78,088 71,500
Inventories 201,398 156,573 207,319
Prepaid expenses and other current assets 4,625 5,292 11,310
267,273 242,173 293,052
 
PROPERTIES, NET: 127,234 129,803 131,760
 
OTHER LONG-TERM ASSETS:
Intangibles, net 233 1,369 1,798
Deferred income taxes 7,894 8,590 6,161
Other 9,683 9,227 9,448
17,810 19,186 17,407
TOTAL ASSETS $ 412,317 $ 391,162 $ 442,219
 
LIABILITIES & STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Revolving credit facility borrowings $ 61,337 $ 12,084 $ 55,133
Current maturities of long-term debt 3,408 3,342 3,331
Accounts payable 40,173 43,719 59,299
Bank overdraft 2,979 811 3,561
Accrued expenses 22,297 23,238 21,724
130,194 83,194 143,048
 
LONG-TERM LIABILITIES:
Long-term debt 26,069 28,704 29,544
Retirement plan 22,729 22,137 18,395
Other 6,527 5,934 6,013
55,325 56,775 53,952
 
STOCKHOLDERS’ EQUITY:
Class A Common Stock 26 26 26
Common Stock 88 87 87
Capital in excess of par value 117,232 115,136 114,388
Retained earnings 116,466 143,573 136,296
Accumulated other comprehensive loss (5,810 ) (6,425 ) (4,374 )
Treasury stock (1,204 ) (1,204 ) (1,204 )
TOTAL STOCKHOLDERS’ EQUITY 226,798 251,193 245,219
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY $ 412,317 $ 391,162 $ 442,219

Contacts

John B. Sanfilippo & Son, Inc.
Michael J. Valentine
Chief
Financial Officer

847-214-4509