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SANFILIPPO JOHN B & SON INC - Quarter Report: 2014 March (Form 10-Q)

10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 27, 2014

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)

 

 

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.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

As of April 21, 2014, 8,444,205 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 MARCH 27, 2014

INDEX

 

     Page  

PART I. FINANCIAL INFORMATION

  

Item 1. Financial Statements (Unaudited)

  

Consolidated Statements of Comprehensive Income for the Quarter and Thirty-nine Weeks Ended March 27,  2014 and March 28, 2013

     3   

Consolidated Balance Sheets as of March 27, 2014, June 27, 2013 and March 28, 2013

     4   

Consolidated Statements of Cash Flows for the Thirty-nine Weeks Ended March 27, 2014 and March  28, 2013

     6   

Notes to Consolidated Financial Statements

     7   

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

     15   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     25   

Item 4. Controls and Procedures

     25   

PART II. OTHER INFORMATION

  

Item 1. Legal Proceedings

     26   

Item 1A. Risk Factors

     26   

Item 6. Exhibits

     26   

SIGNATURE

     27   

 

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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 per share amounts)

 

     For the Quarter Ended     For the Thirty-nine
Weeks Ended
 
     March 27,
2014
    March 28,
2013
    March 27,
2014
    March 28,
2013
 

Net sales

   $ 174,291      $ 163,815      $ 576,102      $ 556,941   

Cost of sales

     151,492        140,936        486,986        466,813   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     22,799        22,879        89,116        90,128   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Selling expenses

     10,283        11,565        35,338        36,342   

Administrative expenses

     6,378        7,990        20,559        22,167   

Gain on assets held for sale, net

     —          —          (1,641     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     16,661        19,555        54,256        58,509   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     6,138        3,324        34,860        31,619   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other expense:

        

Interest expense including $284, $289, $855 and $873 to related parties

     1,077        1,171        3,225        3,521   

Rental and miscellaneous expense, net

     453        364        1,777        1,183   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     1,530        1,535        5,002        4,704   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     4,608        1,789        29,858        26,915   

Income tax expense

     927        1,447        10,178        10,738   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 3,681      $ 342      $ 19,680      $ 16,177   

Other comprehensive income:

        

Amortization of prior service cost and actuarial gain included in net periodic pension cost

     222        239        667        718   

Income tax expense related to pension adjustments

     (89     (96     (267     (287
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income, net of tax:

     133        143        400        431   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 3,814      $ 485      $ 20,080      $ 16,608   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share-basic

   $ 0.33      $ 0.03      $ 1.79      $ 1.49   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share-diluted

   $ 0.33      $ 0.03      $ 1.77      $ 1.47   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash dividends declared per share

   $ —        $ —        $ 1.50      $ 1.00   
  

 

 

   

 

 

   

 

 

   

 

 

 

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 BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except per share amounts)

 

     March 27,
2014
     June 27,
2013
     March 28,
2013
 

ASSETS

        

CURRENT ASSETS:

        

Cash

   $ 1,197       $ 834       $ 1,506   

Accounts receivable, less allowances of $3,684, $2,628 and $3,538

     52,446         49,509         51,355   

Inventories

     198,067         158,706         166,754   

Deferred income taxes

     3,496         3,723         4,913   

Prepaid expenses and other current assets

     7,069         4,843         5,558   

Assets held for sale

     —           6,175         6,175   
  

 

 

    

 

 

    

 

 

 

TOTAL CURRENT ASSETS

     262,275         223,790         236,261   
  

 

 

    

 

 

    

 

 

 

PROPERTY, PLANT AND EQUIPMENT:

        

Land

     9,285         9,285         9,285   

Buildings

     102,796         102,424         102,424   

Machinery and equipment

     171,271         166,549         166,005   

Furniture and leasehold improvements

     4,363         4,363         4,340   

Vehicles

     532         524         527   

Construction in progress

     2,379         1,207         933   
  

 

 

    

 

 

    

 

 

 
     290,626         284,352         283,514   

Less: Accumulated depreciation

     179,947         172,928         169,807   
  

 

 

    

 

 

    

 

 

 
     110,679         111,424         113,707   

Rental investment property, less accumulated depreciation of $7,064, $6,470 and $6,272

     21,829         22,423         22,621   
  

 

 

    

 

 

    

 

 

 

TOTAL PROPERTY, PLANT AND EQUIPMENT

     132,508         133,847         136,328   
  

 

 

    

 

 

    

 

 

 

Cash surrender value of officers’ life insurance and other assets

     8,580         8,405         7,945   

Deferred income taxes

     804         827         —     

Intangible assets, net

     5,903         7,875         8,643   
  

 

 

    

 

 

    

 

 

 

TOTAL ASSETS

   $ 410,070       $ 374,744       $ 389,177   
  

 

 

    

 

 

    

 

 

 

 

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 BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except per share amounts)

 

     March 27,
2014
    June 27,
2013
    March 28,
2013
 

LIABILITIES & STOCKHOLDERS’ EQUITY

      

CURRENT LIABILITIES:

      

Revolving credit facility borrowings

   $ 55,829      $ 31,867      $ 42,047   

Current maturities of long-term debt, including related party debt of $341, $321 and $315

     3,345        8,690        12,130   

Accounts payable, including related party payables of $66, $290 and $309

     54,746        43,741        42,532   

Book overdraft

     6,886        1,052        9,112   

Accrued payroll and related benefits

     6,910        15,855        10,923   

Other accrued expenses

     7,251        7,593        13,468   

Income taxes payable

     —          —          1,192   
  

 

 

   

 

 

   

 

 

 

TOTAL CURRENT LIABILITIES

     134,967        108,798        131,404   
  

 

 

   

 

 

   

 

 

 

LONG-TERM LIABILITIES:

      

Long-term debt, less current maturities, including related party debt of $12,006, $12,264 and $12,347

     36,506        33,665        34,351   

Retirement plan

     12,844        12,615        13,531   

Deferred income taxes

     —          —          959   

Other

     5,220        4,362        923   
  

 

 

   

 

 

   

 

 

 

TOTAL LONG-TERM LIABILITIES

     54,570        50,642        49,764   
  

 

 

   

 

 

   

 

 

 

TOTAL LIABILITIES

     189,537        159,440        181,168   
  

 

 

   

 

 

   

 

 

 

COMMITMENTS AND CONTINGENCIES

      

STOCKHOLDERS’ EQUITY:

      

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

     26        26        26   

Common Stock, non-cumulative voting rights of one vote per share, $.01 par value; 17,000,000 shares authorized, 8,562,105, 8,440,409 and 8,385,580 shares issued

     85        84        84   

Capital in excess of par value

     107,880        106,132        105,152   

Retained earnings

     116,510        113,430        107,847   

Accumulated other comprehensive loss

     (2,764     (3,164     (3,896

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

     (1,204     (1,204     (1,204
  

 

 

   

 

 

   

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

     220,533        215,304        208,009   
  

 

 

   

 

 

   

 

 

 

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

   $ 410,070      $ 374,744      $ 389,177   
  

 

 

   

 

 

   

 

 

 

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 Thirty-nine Weeks Ended  
     March 27, 2014     March 28, 2013  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income

   $ 19,680      $ 16,177   

Depreciation and amortization

     12,136        12,607   

Gain on disposition of properties, net

     (1,520     (608

Deferred income tax expense

     250        409   

Stock-based compensation expense

     833        682   

Change in assets and liabilities:

    

Accounts receivable, net

     (2,937     (1,488

Inventories

     (39,361     (20,370

Prepaid expenses and other current assets

     (1,478     (2,460

Accounts payable

     10,204        9,488   

Accrued expenses

     (9,292     (1,742

Income taxes payable

     (748     1,378   

Other long-term liabilities

     858        (83

Other, net

     481        11   
  

 

 

   

 

 

 

Net cash (used in) provided by operating activities

     (10,894     14,001   
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Purchases of property, plant and equipment

     (8,152     (6,406

Proceeds from dispositions of assets, net

     7,839        984   

Other

     (28     (142
  

 

 

   

 

 

 

Net cash used in investing activities

     (341     (5,564
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Borrowings under revolving credit facility

     238,252        252,586   

Repayments of revolving credit borrowings

     (214,290     (256,387

Principal payments on long-term debt

     (2,504     (2,449

Increase in book overdraft

     5,834        7,165   

Dividends paid

     (16,599     (10,889

Issuance of Common Stock under equity award plans

     523        481   

Tax benefit of equity award exercises

     382        103   
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     11,598        (9,390
  

 

 

   

 

 

 

NET INCREASE (DECREASE) IN CASH

     363        (953

Cash, beginning of period

     834        2,459   
  

 

 

   

 

 

 

Cash, end of period

   $ 1,197      $ 1,506   
  

 

 

   

 

 

 

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 “Company”, “we”, “us”, “our” or “our Company” collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiaries, JBSS Real Estate, LLC, JBSS Ventures, LLC and Sanfilippo (Shanghai) Trading Co. Ltd. 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 2014 and fiscal 2013 are to the fiscal year ending June 26, 2014 and the fiscal year ended June 27, 2013, respectively.

 

    References herein to the third quarters of fiscal 2014 and fiscal 2013 are to the quarters ended March 27, 2014 and March 28, 2013, respectively.

 

    References herein to the first three quarters or first thirty-nine weeks of fiscal 2014 and fiscal 2013 are to the thirty-nine weeks ended March 27, 2014 and March 28, 2013, respectively.

We are one of the leading processors and distributors of peanuts and tree nuts in the United States. These nuts are sold under a variety of private brands and under the Fisher, Orchard Valley Harvest and Sunshine Country brand names. 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, candy and confections, snacks and trail mixes, sunflower seeds, dried fruit, corn snacks, sesame sticks and other sesame snack products under private brands and brand names. Our products are sold through the major distribution channels to significant buyers of nuts, including food retailers, commercial ingredient users, contract packaging customers and international customers.

The accompanying unaudited financial statements fairly present the consolidated statements of comprehensive income, consolidated balance sheets 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.

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, 2013 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. 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 2013 Annual Report on Form 10-K for the fiscal year ended June 27, 2013.

Note 2 – Inventories

Inventories are stated at the lower of cost (first in, first out) or market which approximates actual cost. Raw materials and supplies include costs of nut and nut related products. Work-in-process and finished goods include labor and manufacturing overhead costs. Inventories consist of the following:

 

     March 27,
2014
     June 27,
2013
     March 28,
2013
 

Raw material and supplies

   $ 123,155       $ 80,925       $ 100,988   

Work-in-process and finished goods

     74,912         77,781         65,766   
  

 

 

    

 

 

    

 

 

 

Total

   $ 198,067       $ 158,706       $ 166,754   
  

 

 

    

 

 

    

 

 

 

 

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Note 3 – Intangible Assets

Intangible assets subject to amortization consist of the following:

 

     March 27,
2014
    June 27,
2013
    March 28,
2013
 

Customer relationships

   $ 10,600      $ 10,600      $ 10,600   

Non-compete agreement

     5,400        5,400        5,400   

Brand names

     8,090        8,090        8,090   
  

 

 

   

 

 

   

 

 

 

Total intangible assets, gross

     24,090        24,090        24,090   
  

 

 

   

 

 

   

 

 

 

Less accumulated amortization:

      

Customer relationships

     (5,824     (4,689     (4,310

Non-compete agreement

     (4,312     (3,501     (3,120

Brand names

     (8,051     (8,025     (8,017
  

 

 

   

 

 

   

 

 

 

Total accumulated amortization

     (18,187     (16,215     (15,447
  

 

 

   

 

 

   

 

 

 

Net intangible assets

   $ 5,903      $ 7,875      $ 8,643   
  

 

 

   

 

 

   

 

 

 

Customer relationships and the non-compete agreement relate wholly to the Orchard Valley Harvest (“OVH”) acquisition completed in 2010. Customer relationships are being amortized on a straight line basis over seven years. The non-compete agreement is being amortized based upon the expected pattern of cash flow annual benefit over a five year period. The brand names consist primarily of the Fisher brand name, which we acquired in a 1995 acquisition. The Fisher brand name became fully amortized in fiscal 2011. The remaining brand name relates to the OVH acquisition and is being amortized on a straight line basis over five years.

Note 4 – Primary Financing Facilities

On February 7, 2008, we entered into a Credit Agreement with a bank group (the “Bank Lenders”) providing a $117,500 revolving loan commitment and letter of credit subfacility and subsequently amended the Credit Agreement in March 2010, July 2011, October 2011, January 2013 and December 2013 (as amended, the “Credit Facility”). At March 27, 2014, we had $57,721 of available credit under the Credit Facility which reflects borrowings of $55,829 and reduced availability as a result of $3,950 in outstanding letters of credit. As of March 27, 2014, we were in compliance with all covenants under the Credit Facility. We would still be in compliance with all restrictive covenants under the Credit Facility if the entire available amount were borrowed.

Also on February 7, 2008, we entered into a Loan Agreement with an insurance company (the “Mortgage Lender”) providing us with two term loans, one in the amount of $36,000 (“Tranche A”) and the other in the amount of $9,000 (“Tranche B”), for an aggregate amount of $45,000 (the “Mortgage Facility”). As of March 27, 2014, we were in compliance with all covenants under the Mortgage Facility. We have classified $19,600 under Tranche A and $4,900 under Tranche B as long-term debt at March 27, 2014, which represents scheduled principal payments due beyond twelve months. As of the second quarter of fiscal 2014, amounts outstanding under Tranche B are no longer classified entirely as short-term debt since the Mortgage Lender waived its option to use the proceeds from the sale of the Old Elgin Site (as defined below) to reduce the amount outstanding under Tranche B. At March 28, 2013 and June 27, 2013 the entire Tranche B balance was classified within current maturities of long-term debt. See Note 11- Sale of Real Property below for additional details.

Note 5 – Income Taxes

During the third quarter of fiscal 2014 we recorded discrete tax items which resulted in approximately $677 of income tax benefit. Consequently, we recognized income tax expense of $927 for the third quarter of fiscal 2014 which resulted in an effective tax rate of 20.1%. The discrete tax items recorded in the third quarter of fiscal 2014 primarily relate to the tax benefit of losses realized from the divestiture of an equity investment in ARMA Energy, Inc. (“ARMA”), and the cancellation of a secured promissory note receivable due from ARMA. A portion of the loss on disposal of the investment is available as a carryforward capital loss. Since the capital loss is not expected to be realized in the foreseeable future, a valuation allowance has been recorded.

 

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We recorded approximately $776 of discrete income tax items during the third quarter of fiscal 2013, which resulted in income tax expense of $1,447 and an effective tax rate of 80.9%. The discrete tax items recorded in the third quarter of fiscal 2013 primarily related to the to the impact of a full valuation allowance recorded against deferred tax assets that were created as a result of our initial transactions with ARMA.

At the beginning of fiscal year 2014, based on our final fiscal 2013 tax returns, we had gross state tax net operating losses of approximately $6,053 that will expire between 2017 and 2030 if not utilized.

As of March 27, 2014, unrecognized tax benefits and accrued interest and penalties were not material. There were no material changes to the amount of unrecognized tax benefits during the first three quarters of fiscal 2014. We do not anticipate that total unrecognized tax benefits will significantly change in the next twelve months.

We file income tax returns with federal and state tax authorities within the United States of America. Our federal tax returns are open for audit for fiscal 2011 and later. Our Illinois tax returns are currently under audit for fiscal 2011 and 2012. Our Illinois tax returns are open for audit for fiscal 2009 and 2010. Our California tax returns are open for audit for fiscal 2008 and later. No other tax jurisdictions are material to us.

Note 6 – Earnings Per Common Share

Basic earnings per common share are calculated using the weighted average number of shares of Common Stock and Class A Common Stock outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue Common Stock (i) were exercised or converted into Common Stock or (ii) resulted in the issuance of Common Stock. The following table presents the reconciliation of the weighted average shares outstanding used in computing basic and diluted earnings per share:

 

     For the Quarter Ended      For the Thirty-nine Weeks
Ended
 
     March 27,
2014
     March 28,
2013
     March 27,
2014
     March 28,
2013
 

Weighted average number of shares outstanding – basic

     11,073,669         10,898,304         11,016,926         10,844,341   

Effect of dilutive securities:

     

Stock options and restricted stock units

     82,560         126,434         99,565         129,688   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of shares outstanding – diluted

     11,156,229         11,024,738         11,116,491         10,974,029   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents a summary of anti-dilutive awards excluded from the computation of diluted earnings per share:

 

     For the Quarter Ended      For the Thirty-nine
Weeks Ended
 
     March 27,
2014
     March 28,
2013
     March 27,
2014
     March 28,
2013
 

Weighted average number of anti-dilutive shares:

     —           2,250         20,203         53,917   

Weighted average exercise price:

   $ —         $ 32.30       $ 25.36       $ 18.29   

 

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Note 7 – Stock-Based Compensation Plans

The following is a summary of stock option activity for the first three quarters of fiscal 2014:

 

Options

   Shares     Weighted
Average
Exercise
Price
     Weighted
Average
Remaining
Contractual
Term
     Aggregate
Intrinsic
Value
 

Outstanding at June 27, 2013

     115,250      $ 13.68         

Activity:

          

Granted

     —          —           

Exercised

     (42,500     12.32         

Forfeited

     (2,250     32.30         
  

 

 

   

 

 

       

Outstanding at March 27, 2014

     70,500      $ 13.91         2.28       $ 624   
  

 

 

   

 

 

    

 

 

    

 

 

 

Exercisable at March 27, 2014

     68,625      $ 13.87         2.13       $ 609   
  

 

 

   

 

 

    

 

 

    

 

 

 

For the thirty-nine weeks ended March 27, 2014, the total intrinsic value of options exercised was $507 and the total cash received was $523. The change in non-vested stock option activity was insignificant during the first three quarters of fiscal 2014.

The following is a summary of restricted stock unit activity for the first three quarters of fiscal 2014:

 

Restricted Stock Units

   Shares     Weighted
Average
Grant
Date Fair
Value
 

Outstanding at June 27, 2013

     215,294      $ 11.99   

Activity:

    

Granted

     68,710        25.32   

Vested

     (79,196     12.74   

Forfeited

     (3,500     12.77   
  

 

 

   

 

 

 

Outstanding at March 27, 2014

     201,308      $ 16.23   
  

 

 

   

 

 

 

Restricted stock units (“RSUs”) granted to employees and non-employee outside directors vest over a three-year and one-year period, respectively. At March 27, 2014 there are 40,098 RSUs outstanding that are vested but deferred. The non-vested RSUs will vest over a weighted average period of 1.6 years.

The following table summarizes compensation cost charged to earnings for all equity compensation plans for the periods presented:

 

     For the Quarter Ended      For the Thirty-nine Weeks
Ended
 
     March 27,
2014
     March 28,
2013
     March 27,
2014
     March 28,
2013
 

Stock-based compensation cost

   $ 272       $ 232       $ 833       $ 682   

As of March 27, 2014, there was $1,822 of total unrecognized compensation cost related to non-vested, share-based compensation arrangements granted under our stock-based compensation plans. We expect to recognize that cost over a weighted average period of 1.6 years.

 

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Note 8 – Special Cash Dividend

On October 29, 2013, our Board of Directors, after considering the financial position of our Company and other factors, declared a special cash dividend of $1.50 per share on all issued and outstanding shares of Common Stock and Class A Stock of the Company (the “Special Dividend”). The Special Dividend was paid on December 5, 2013 to stockholders of record at the close of business on November 21, 2013. The ex-dividend date was the close of business on November 19, 2013. The Company obtained the appropriate consent from the Bank Lenders in order to declare and pay this Special Dividend. The total amount of cash paid to stockholders under the Special Dividend was $16,599.

Note 9 – Retirement Plan

On August 2, 2007, our Compensation, Nominating and Corporate Governance Committee approved a restated Supplemental Retirement Plan (the “SERP”) for certain of our executive officers and key employees, effective as of August 25, 2005. The purpose of the SERP is to provide an unfunded, non-qualified deferred compensation benefit upon retirement, disability or death to certain executive officers and key employees. The monthly benefit is based upon each individual’s earnings and his or her number of years of service. Administrative expenses include the following net periodic benefit costs:

 

     For the Quarter Ended      For the Thirty-nine Weeks
Ended
 
     March 27,
2014
    March 28,
2013
     March 27,
2014
    March 28,
2013
 

Service cost

   $ 81      $ 86       $ 242      $ 257   

Interest cost

     159        142         476        427   

Amortization of prior service cost

     239        239         718        718   

Amortization of gain

     (17     —           (51     —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Net periodic benefit cost

   $ 462      $ 467       $ 1,385      $ 1,402   
  

 

 

   

 

 

    

 

 

   

 

 

 

Note 10 – Accumulated Other Comprehensive Loss

The table below sets forth the changes to accumulated other comprehensive loss (“AOCL”) for the thirty-nine weeks ended March 27, 2014. These changes are all related to our defined benefit pension plan.

 

     Accumulated other
comprehensive loss (a)
 

Balance—June 27, 2013

   $ (3,164

Other comprehensive income before reclassifications

     —     

Amounts reclassified from accumulated other comprehensive loss

     667   

Tax effect

     (267
  

 

 

 

Net current-period other comprehensive income

     400   
  

 

 

 

Balance—March 27, 2014

   $ (2,764
  

 

 

 

 

(a)  Amounts in parenthesis indicate debits/expense.

 

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Table of Contents

The reclassifications out of accumulated other comprehensive loss for the quarter and thirty-nine weeks ended March 27, 2014 were as follows:

 

Reclassifications from AOCL to earnings (b)

   Quarter Ended
March 27, 2014
    Thirty-Nine
Weeks Ended
March 27, 2014
    Affected line item in the
Consolidated Statements of
Comprehensive Income

Amortization of defined benefit pension items:

    

Unrecognized prior service cost

   $ (239   $ (718   Administrative expenses

Unrecognized net gain

     17        51      Administrative expenses
  

 

 

   

 

 

   

 

Total before tax

     (222     (667  

Tax effect

     89        267      Income tax expense
  

 

 

   

 

 

   

Amortization of defined pension items, net of tax

   $ (133     (400  
  

 

 

   

 

 

   

 

(b)  Amounts in parenthesis indicate debits to expense. See Note 9-Retirement Plan above for additional details.

Note 11 – Sale of Real Property

On December 26, 2013, we completed the sale of land and a building that was originally purchased for our facility consolidation project (the “Old Elgin Site”). The sales price was $8,000 and resulted in a gain of $1,037, net of $604 income tax expense, for the thirty-nine weeks ended March 27, 2014.

Note 12 – Distribution Channel and Product Type Sales Mix

We operate in a single reportable segment through which we sell various nut and nut related products through multiple distribution channels.

The following summarizes net sales by distribution channel:

 

     For the Quarter Ended      For the Thirty-nine
Weeks Ended
 

Distribution Channel

   March 27,
2014
     March 28,
2013
     March 27,
2014
     March 28,
2013
 

Consumer*

   $ 98,588       $ 89,052       $ 337,460       $ 336,946   

Commercial Ingredients

     45,273         43,594         140,961         130,113   

Contract Packaging

     21,867         21,233         71,823         62,738   

Export

     8,563         9,936         25,858         27,144   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 174,291       $ 163,815       $ 576,102       $ 556,941   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

* Sales of branded products were approximately 27% and 24% of total consumer sales during the third quarter of fiscal 2014 and fiscal 2013, respectively. Sales of branded products were approximately 33% of total consumer sales during the first thirty-nine weeks of both fiscal 2014 and fiscal 2013.

 

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Table of Contents

The following summarizes sales by product type as a percentage of total gross sales. The information is based upon gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product type.

 

     For the Quarter Ended     For the Thirty-nine
Weeks Ended
 

Product Type

   March 27,
2014
    March 28,
2013
    March 27,
2014
    March 28,
2013
 

Peanuts

     15.8     19.8     14.7     18.5

Pecans

     10.6        10.6        14.8        17.4   

Cashews & Mixed Nuts

     20.7        19.8        19.1        18.8   

Walnuts

     11.6        12.2        12.2        12.6   

Almonds

     24.2        17.9        21.7        15.1   

Other

     17.1        19.7        17.5        17.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100.0     100.0     100.0     100.0
  

 

 

   

 

 

   

 

 

   

 

 

 

For all periods presented, the largest component of the “Other” product type is trail and snack mixes which include nut products.

Note 13 – Commitments and Contingent Liabilities

We are currently a party to various legal proceedings in the ordinary course of business. While management presently believes that the ultimate outcomes of these proceedings, individually and in the aggregate, will not materially affect our Company’s financial position, results of operations or cash flows, legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur. Unfavorable outcomes could include substantial monetary damages in excess of any appropriate accruals which management has established. 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.

Note 14 – Fair Value of Financial Instruments

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

 

        Level 1     Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities.
        Level 2     Observable inputs other than quoted prices in active markets. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
        Level 3     Unobservable inputs for which there is little or no market data available.

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

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

 

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

 

     March 27,
2014
     June 27,
2013
     March 28,
2013
 

Carrying value of long-term debt:

   $ 39,851       $ 42,355       $ 46,481   

Fair value of long-term debt:

     43,724         46,059         51,469   

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 15 – Recent Accounting Pronouncements

In February 2013, the FASB issued ASU No. 2013-02, “Comprehensive Income (Topic 220)—Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” The update requires presentation by the respective line items of net income, either on the face of the statement where net income is presented or in the notes, information about significant amounts required under U.S. GAAP to be reclassified out of accumulated other comprehensive income in their entirety. For amounts not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. This update is effective for fiscal years beginning on or after December 15, 2012, and interim periods within those annual periods. We adopted this update in the first quarter of fiscal 2014. The update only affects the presentation of comprehensive income and does not impact what is included in comprehensive income, and therefore the adoption of this update did not have an impact on our financial position, results of operations, or cash flows.

In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”. This update changes the threshold for reporting discontinued operations and adds new disclosures. The update defines a discontinued operation as a disposal of a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” For disposals of individually significant components that do not qualify as discontinued operations, an entity must disclose pre-tax earnings of the disposed component. For public business entities, this guidance is effective prospectively for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The Company does not expect the adoption of this update to have a material impact on our financial position, results of operations, or cash flows.

 

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Table of Contents

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 2014 and fiscal 2013 are to the fiscal year ending June 26, 2014 and the fiscal year ended June 27, 2013, respectively.

 

    References herein to the third quarters of fiscal 2014 and fiscal 2013 are to the quarters ended March 27, 2014 and March 28, 2013, respectively.

 

    References herein to the first three quarters or first thirty-nine weeks of fiscal 2014 and fiscal 2013 are to the thirty-nine weeks ended March 27, 2014 and March 28, 2013, respectively.

As used herein, unless the context otherwise indicates, the terms “Company”, “we”, “us”, “our” or “our Company” collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiaries, JBSS Real Estate, LLC, JBSS Ventures, LLC and Sanfilippo (Shanghai) Trading Co. Ltd. Our Company’s Credit Facility and Mortgage Facility, as defined below, are sometimes collectively referred to as “our financing arrangements.”

We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States. These nuts are sold under a variety of private brands and under the Fisher, Orchard Valley Harvest, and Sunshine Country brand names. 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, candy and confections, snacks and trail mixes, sunflower seeds, dried fruit, corn snacks, sesame sticks and other sesame snack products under private brands and brand names. We distribute our products in the consumer, commercial ingredients, contract packaging and export distribution channels.

During the fourth quarter of fiscal 2013 we updated our strategic plan (the “Strategic Plan”), the goal of which is to drive profitable growth. Our long-term goals include:

 

  i. Growing Fisher and Orchard Valley Harvest into leading nut brands by focusing on consumers demanding quality nuts in the snacking, recipe and produce categories,

 

  ii. Expanding globally and building our Company into a leading international branded and private brand snack nut company, and

 

  iii. Providing integrated nut solutions to grow non-branded business at existing key customers in each distribution channel.

We continue to execute this strategy during fiscal 2014. In the first quarter of fiscal 2014 we were recognized as a top supplier to one of our largest commercial ingredient food service customers. During the second half of fiscal 2013 we were recognized as the “supplier of the year” by two significant customers, one of which is our largest. We continue to develop our Fisher brand business in China by improving our distributor network and leveraging our presence in China through Sanfilippo (Shanghai) Trading Co. Ltd to support our long-term business strategy.

We face a number of challenges in the future. Specific challenges, among others, include: high tree nut commodity costs (due to the continued high demand for pecans and walnuts in China) and intensified competition for market share from both private brand and name brand nut products. We will continue to focus on seeking profitable business opportunities to further utilize our additional production capacity at our primary manufacturing, processing and distribution facility located in Elgin, Illinois (the “Elgin Site”). We expect to maintain our recent level of promotional and advertising activity of our Fisher and Orchard Valley Harvest brands, and to develop new products for all product lines. We will continue to face the ongoing challenges specific to our business, such as food safety and regulatory issues and the maintenance and growth of our customer base. See the information referenced in Part II, Item 1A — “Risk Factors” of this report for additional information about our risks, challenges and uncertainties.

 

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Table of Contents

QUARTERLY HIGHLIGHTS

Our net sales of $174.3 million for the third quarter of fiscal 2014 increased 6.4% from our net sales of $163.8 million for the third quarter of fiscal 2013. Net sales for the first thirty-nine weeks of fiscal 2014 increased by $19.2 million, or 3.4%, to $576.1 million from net sales of $556.9 million for the first thirty-nine weeks of fiscal 2013.

Sales volume, measured as pounds sold to customers, was relatively consistent, decreasing 0.9 million pounds, or 1.6% compared to the third quarter of fiscal 2013. Sales volume increased 13.3 million pounds, or 8.0%, compared to the first thirty-nine weeks of fiscal 2013.

Gross profit decreased by $0.1 million and our gross profit margin, as a percentage of net sales, decreased to 13.1% for the third quarter of fiscal 2014 compared to 14.0% for the third quarter of fiscal 2013. Gross profit decreased by $1.0 million and our gross profit margin, as a percentage of net sales, decreased to 15.5% from 16.2% for the first thirty-nine weeks of fiscal 2014 compared to the first thirty-nine weeks of fiscal 2013.

Total operating expenses for the third quarter of fiscal 2014 decreased by $2.9 million, or 14.8%, to 9.6% of net sales from 11.9% of net sales for the third quarter of fiscal 2013. For the first three quarters of fiscal 2014, total operating expenses decreased by $4.3 million to 9.4% of net sales compared to 10.5% of net sales for the first three quarters of fiscal 2013. Operating expenses during the thirty-nine weeks ended March 27, 2014 were favorably impacted by a $1.6 million pretax gain from the sale of the Old Elgin Site.

The total value of inventories on hand at the end of the third quarter of fiscal 2014 increased by $31.3 million, or 18.8%, in comparison to the total value of inventories on hand at the end of the third quarter of fiscal 2013.

We have seen acquisition costs for domestic tree nuts increase in the 2013 crop year (which falls into our current 2014 fiscal year). We completed procurement of inshell walnuts during the first half of fiscal 2014, and the total payments due to our walnut growers were determined in the current quarter. The final prices to be paid to the walnut growers were based upon current market prices and other factors, such as crop size and export demand. A large majority of payments to walnut growers were completed in the third quarter of fiscal 2014. Remaining amounts to be paid to walnut growers as of March 27, 2014 are final and are not subject to revision. We increased our walnut grower liability by approximately $3.2 million during the third quarter of fiscal 2014, as the final payments to walnut growers were slightly higher than the amounts estimated at the end of last quarter. This increase is insignificant compared to our total inshell walnut procurement costs for the year.

Although there was significantly reduced acreage planted for the 2013 crop year, we have recently observed a decline in peanut prices back to normal levels this year due to the lingering impact of the large carryover from the record 2012 crop (which fell into our 2013 fiscal year). We expect prices to remain relatively stable as the planted acreage for the 2014 crop is expected to increase to normal levels.

RESULTS OF OPERATIONS

Net Sales

Our net sales increased to $174.3 million in the third quarter of fiscal 2014 compared to net sales of $163.8 million for the third quarter of fiscal 2013, while sales volume, which is defined as pounds sold to customers, decreased by 1.6%. The increase in net sales was attributable primarily to an 8.1% increase in the weighted average sales price per pound, driven mainly by selling price increases for almonds, mixed nuts (which contain almonds) and walnuts.

Our net sales increased by $19.2 million, or 3.4%, to $576.1 million for the first thirty-nine weeks of fiscal 2014 compared to the same period of fiscal 2013. The increase in net sales was primarily attributable to an 8.0% increase in sales volume. Sales volume increased significantly in the consumer, commercial ingredients and contract packaging channels in the year to date comparison.

 

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Table of Contents

The following summarizes sales by product type as a percentage of total gross sales. The information is based upon gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product type.

 

     For the Quarter Ended     For the Thirty-nine
Weeks Ended
 

Product Type

   March 27,
2014
    March 28,
2013
    March 27,
2014
    March 28,
2013
 

Peanuts

     15.8     19.8     14.7     18.5

Pecans

     10.6        10.6        14.8        17.4   

Cashews & Mixed Nuts

     20.7        19.8        19.1        18.8   

Walnuts

     11.6        12.2        12.2        12.6   

Almonds

     24.2        17.9        21.7        15.1   

Other

     17.1        19.7        17.5        17.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100.0     100.0     100.0     100.0
  

 

 

   

 

 

   

 

 

   

 

 

 

The following table shows a comparison of net sales by distribution channel (dollars in thousands):

 

     For the Quarter Ended     

 

    For the Thirty-nine
Weeks Ended
    

 

 

Distribution Channel

   March 27,
2014
     March 28,
2013
     Percent
Change
    March 27,
2014
     March 28,
2013
     Percent
Change
 

Consumer*

   $ 98,588       $ 89,052         10.7   $ 337,460       $ 336,946         0.2

Commercial Ingredients

     45,273         43,594         3.9     140,961         130,113         8.3

Contract Packaging

     21,867         21,233         3.0     71,823         62,738         14.5

Export

     8,563         9,936         -13.8     25,858         27,144         -4.7
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

   $ 174,291       $ 163,815         6.4   $ 576,102       $ 556,941         3.4
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

* Sales of branded products were approximately 27% and 24% of total consumer sales during the third quarter of fiscal 2014 and fiscal 2013, respectively. Sales of branded products were approximately 33% of total consumer sales during the first thirty-nine weeks of both fiscal 2014 and fiscal 2013.

Net sales in the consumer distribution channel increased by 10.7% in dollars and 4.2% in sales volume in the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013. Private brand consumer sales volume increased 3.6% in the quarterly comparison due primarily to increased sales of snack nut products at two significant customers. Fisher recipe nut sales volume increased 50.2% due primarily to increased in-store merchandising activity and product line expansion to larger package sizes by total weight. Fisher snack nut sales volume declined 24.5% in the quarterly comparison primarily as a result of reduced distribution of inshell peanuts at a major Fisher snack nut customer due to competitive pricing pressure.

In the first thirty-nine weeks of fiscal 2014, net sales in the consumer distribution channel increased by 0.2% in dollars, and 7.1% in sales volume compared to the same period of fiscal 2013. The increase in sales volume in the first thirty-nine weeks of fiscal 2014 was mostly offset by a decrease in average selling price. Private brand consumer sales volume increased by 7.6% in the first thirty-nine weeks of fiscal 2014 compared to the same period of fiscal 2013 due to increased sales of snack nuts and trail mixes. Fisher brand recipe nut sales volume increased by 22.9% in the year to date comparison due primarily to the favorable impact of lower selling prices at a major customer. Fisher brand snack nut sales volume decreased 21.0% for the reasons discussed above.

Net sales in the commercial ingredients distribution channel increased by 3.9% in dollars but decreased 6.8% in sales volume in the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013. In the first thirty-nine weeks of fiscal 2014, net sales in the commercial ingredients distribution channel increased by 8.3% in dollars and 7.7% in sales volume compared to the same period of fiscal 2013. The sales volume decrease in the quarterly comparison is primarily attributable to decreased bulk peanut volume due to a smaller crop compared to the same quarter of the prior year. The sales volume increase for the thirty-nine week period was primarily due to increased sales of almonds to a major existing customer, and increased sales of pecans due to product line expansion at an existing customer.

 

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Table of Contents

Net sales in the contract packaging distribution channel increased by 3.0% in dollars but decreased 0.4% in sales volume in the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013. In the first thirty-nine weeks of fiscal 2014, net sales in the contract packaging distribution channel increased by 14.5% in dollars and 19.7% in sales volume compared to the same period of fiscal 2013. The sales volume increase for the thirty-nine week period was due primarily to increased sales of almonds, trail mixes and chocolate and yogurt coated products due to new product launches executed by key customers in this channel. The increase in sales volume in the first thirty-nine weeks of fiscal 2014 was partially offset by a decrease in average selling price.

Net sales in the export distribution channel decreased by 13.8% in dollars and 26.1% in sales volume in the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013. Net sales in the export distribution channel in the first thirty-nine weeks of fiscal 2014 decreased 4.7% in dollars and 11.7% in sales volume compared to the first thirty-nine weeks of fiscal 2013. The decrease in both the quarterly and year to date comparisons is due primarily to decreased amounts of bulk inshell walnuts available for export, and decreased sales of peanut products.

Gross Profit

Gross profit decreased by $0.1 million, or 0.3%, to $22.8 million for the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013. Our gross profit margin, as a percentage of net sales, decreased to 13.1% for the third quarter of fiscal 2014 compared to 14.0% for the third quarter of fiscal 2013. Gross profit decreased by $1.0 million, or 1.1%, to $89.1 million for the first nine months of fiscal 2014 from $90.1 million for the first nine months of fiscal 2013. Our gross profit margin, as a percentage of net sales, decreased to 15.5% for the first nine months of fiscal 2014 compared to 16.2% for the first nine months of fiscal 2013. The decline in gross profit margin in the quarterly comparison occurred because selling price increases for almonds, mixed nuts and walnuts were not fully implemented until the end of January, while higher commodity acquisition costs for these products affected the entire month of January. The decline in gross profit margin in the year to date comparison was primarily due to competitive pricing pressures that existed in the first two quarters of fiscal 2014, and the delay in implementing selling price increases that was discussed in the quarterly comparison. The decline in gross profit margin in the year to date comparison was offset, in part, by manufacturing efficiency improvements achieved during the current fiscal year to date.

Operating Expenses

Total operating expenses for the third quarter of fiscal 2014 decreased by $2.9 million to $16.7 million. Operating expenses for the third quarter of fiscal 2014 decreased to 9.6% of net sales from 11.9% of net sales for the third quarter of fiscal 2013.

Selling expenses for the third quarter of fiscal 2014 were $10.3 million, a decrease of $1.3 million, or 11.1%, from the third quarter of fiscal 2013. The decrease was driven primarily by a decrease in advertising expense due in part to the Easter holiday not occurring until our fourth quarter this year.

Administrative expenses for the third quarter of fiscal 2014 were $6.4 million, a decrease of $1.6 million, or 20.2%, from the third quarter of fiscal 2013 due primarily to a decrease in incentive compensation expense.

Total operating expenses for the first thirty-nine weeks of fiscal 2014 decreased by $4.3 million to $54.3 million, or 9.4% of net sales, compared to 10.5% of net sales in the same period of last year. This decrease is due in part to the gain on the sale of the Old Elgin Site that occurred in the second quarter of fiscal 2014.

Selling expenses for the first thirty-nine weeks of fiscal 2014 were $35.3 million, a decrease of $1.0 million, or 2.8%, from the amount recorded for the first thirty-nine weeks of fiscal 2013 due primarily to a $1.1 million decrease in advertising expense and a $1.0 million decrease in incentive compensation expense. These reductions in selling expenses were partially offset by a $0.9 million increase in shipping expense due primarily to increased sales volume.

 

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Table of Contents

Administrative expenses for the first thirty-nine weeks of fiscal 2014 were $20.6 million, a decrease of $1.6 million or 7.3% compared to the first thirty-nine weeks of fiscal 2013. The decrease in administrative expenses is primarily due to a decrease in compensation related expenses of $1.8 million in the first thirty-nine weeks of fiscal 2014, due to reduced incentive compensation expense, compared to the same period of fiscal 2013.

Income from Operations

Due to the factors discussed above, income from operations increased to $6.1 million, or 3.5% of net sales, for the third quarter of fiscal 2014 from $3.3 million, or 2.0% of net sales, for the third quarter of fiscal 2013.

Due to the factors discussed above, income from operations increased to $34.9 million, or 6.1% of net sales, for the first thirty-nine weeks of fiscal 2014 from $31.6 million, or 5.7% of net sales, for the first thirty-nine weeks of fiscal 2013.

Interest Expense

Interest expense was $1.1 million for the third quarter of fiscal 2014 compared to $1.2 million in fiscal 2013. Interest expense decreased 8.4% to $3.2 million for the first thirty-nine weeks of fiscal 2014 compared to the same period of fiscal 2013. The decrease in interest expense, for both the quarterly and thirty-nine week periods, was due primarily to lower average borrowing levels.

Rental and Miscellaneous Expense, Net

Net rental and miscellaneous expense was $0.5 million for the third quarter of fiscal 2014 compared to $0.4 million in the third quarter of fiscal 2013.

Net rental and miscellaneous expense was $1.8 million for the first thirty-nine weeks of fiscal 2014 compared to $1.2 million for the first thirty-nine weeks of fiscal 2013. This increase was primarily due to increased maintenance expense on the exterior of the office building. This maintenance project is approximately 16% complete and we expect the project to conclude in fiscal 2015.

Income Tax Expense

Income tax expense was $0.9 million, or 20.1% of income before income taxes (the “effective tax rate”), for the third quarter of fiscal 2014 compared to $1.4 million, or 80.9% of income before income taxes for the third quarter of fiscal 2013. For the first thirty-nine weeks of fiscal 2014, income tax expense was $10.2 million, or 34.1% of income before income taxes, compared to $10.7 million, or 39.9% of income before income taxes for the comparable period last year. The decrease in the effective tax rate, for both the quarterly and thirty-nine week periods of fiscal 2014, is mainly due to the tax benefit of losses realized since the Company divested its equity investment in ARMA, and cancelled a secured promissory note due from ARMA, in the third quarter of fiscal 2014.

Net Income

Net income was $3.7 million, or $0.33 per common share (basic and diluted), for the third quarter of fiscal 2014, compared to $0.3 million, or $0.03 per common share (basic and diluted), for the third quarter of fiscal 2013.

Net income was $19.7 million, or $1.79 per common share (basic) and $1.77 per common share (diluted), for the first thirty-nine weeks of fiscal 2014, compared to net income of $16.2 million, or $1.49 per common share (basic) and $1.47 per common share (diluted), for the first thirty-nine weeks of fiscal 2013.

 

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LIQUIDITY AND CAPITAL RESOURCES

General

The primary uses of cash are to fund our current operations, fulfill contractual obligations, pursue our Strategic Plan and repay indebtedness. Also, various uncertainties could result in additional uses of cash. The primary sources of cash are results of operations and availability under our Credit Agreement, dated February 7, 2008 and subsequently amended in March 2010, July 2011, October 2011, January 2013 and December 2013 (as amended, the “Credit Facility”), that provides a revolving loan commitment and letter of credit subfacility. We anticipate that expected net cash flow generated from operations and amounts available pursuant to the Credit Facility will be sufficient to fund our operations for the next twelve months. Increases in our available credit under our Credit Facility, due to our improved financial performance in the past, have allowed us to consummate business acquisitions, devote more funds to promote our products, (especially our Fisher and Orchard Valley Harvest brands), develop new products, pay a special cash dividend in December 2013 and December 2012, and explore other growth strategies outlined in our Strategic Plan, which includes expansion into existing markets and international markets such as China.

Cash flows from operating activities have historically been driven by net income but are also significantly influenced by inventory requirements, which can change based upon fluctuations in both quantities and market prices of the various nuts and nut products we buy and sell. Current market trends in nut prices and crop estimates also impact nut procurement.

Operating Activities Net cash used in operating activities was $10.9 million for the first thirty-nine weeks of fiscal 2014 compared to $14.0 million of cash provided by operating activities for the first thirty-nine weeks of fiscal 2013. This decrease was primarily due to increased use of working capital for inventory. Our nut commodity purchases were $42.1 million higher during the first thirty-nine weeks of fiscal 2014 than the same period of fiscal 2013, primarily due to the procurement of larger quantities of almonds at higher prices and increasing walnut commodity costs.

Net accounts receivable were $52.4 million at March 27, 2014, an increase of $2.9 million, or 5.9%, from the balance at June 27, 2013, and an increase of $1.1 million, or 2.1%, from the balance at March 28, 2013. The increase in net accounts receivable from June 27, 2013 to March 27, 2014 is due primarily to higher dollar sales in March 2014 compared to June 2013.

Total inventories were $198.1 million at March 27, 2014, an increase of $39.4 million, or 24.8%, from the inventory balance at June 27, 2013, and an increase of $31.3 million, or 18.8%, from the inventory balance at March 28, 2013. The increase at March 27, 2014 compared to June 27, 2013 was primarily driven by the receipt of the current year crop of inshell walnuts and pecans. The increase at March 27, 2014 compared to March 28, 2013 is due mainly to higher acquisition costs for walnuts, almonds and pecans.

Raw nut input stocks decreased by 3.2 million pounds, or 4.8%, at March 27, 2014 compared to March 28, 2013. The decrease was attributable mainly to decreased quantities of pecans and peanuts. The weighted average cost per pound of raw nut input stocks on hand at the end of the third quarter of fiscal 2014 increased by 23.3% as compared to the third quarter of fiscal 2013 mainly driven by higher acquisition costs for walnuts, almonds and pecans.

Investing Activities Cash used in investing activities decreased $5.2 million during the first three quarters of fiscal 2014 compared to same period last year. We spent $1.7 million more on capital expenditures in the first three quarters of fiscal 2014 compared to the first three quarters of fiscal 2013. Offsetting this increase in capital expenditures was an increase in proceeds from the sale of assets of $6.9 million during the first three quarters of fiscal 2014 compared to the same period of last year. This increase in proceeds was driven primarily by the sale of the Old Elgin Site which occurred in the second quarter of fiscal 2014. We expect total capital expenditures for new equipment and upgrades, facility maintenance and food safety enhancements for fiscal 2014 to be approximately $12.0 million. Absent any material acquisitions or other significant investments, we believe that cash on hand, combined with cash provided by operations and borrowings available under the Credit Facility, will be sufficient to meet the cash requirements for planned capital expenditures.

Financing Activities Cash provided by financing activities was $11.6 million during the first thirty-nine weeks of fiscal 2014 compared to cash used in financing activities of $9.4 million for the same period last year. The dividend paid in fiscal 2014 was $5.7 million larger than that paid in fiscal 2013. Short term borrowings outstanding under

 

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our Credit Facility increased $20.2 million during the first thirty-nine weeks of fiscal 2014 compared to the first thirty-nine weeks of fiscal 2013. The increase in short-term borrowings occurred primarily as a result of significantly higher acquisition costs for tree nuts purchased from domestic growers during the third quarter of fiscal 2014 compared to acquisition costs for these commodities purchased from domestic growers during the prior fiscal year’s third quarter.

Real Estate Matters

In August 2008, we completed the consolidation of our Chicago-based facilities into the Elgin Site. As part of the facility consolidation project, on April 15, 2005, we closed on the $48.0 million purchase of the Elgin Site. The Elgin Site includes both an office building and a warehouse, and affords us increased production capacity, such that we are currently able to offer our services to existing and new customers on an expanded basis.

We are currently attempting to find additional tenants for the available space in the office building at the Elgin Site. Until replacement tenant(s) are found, we will not receive the benefit of rental income associated with such space. Approximately 74% of the office building is currently vacant. There can be no assurance that we will be able to lease the unoccupied space and further capital expenditures may be necessary to lease the remaining space, including the space previously rented by the seller of the Elgin Site.

On March 28, 2006, our wholly-owned subsidiary JBSS Properties, LLC, acquired title by quitclaim deed to the Old Elgin Site for our facility consolidation project and also entered into an Assignment and Assumption Agreement (the “Agreement”) with the City of Elgin (the “City”). In the third quarter of fiscal 2013, JBSS Properties, LLC transferred all of its property and agreements to JBSS Real Estate, LLC. Under the terms of the Agreement, the City assigned to us its remaining rights and obligations under a development agreement entered into by and among the Company, certain related party partnerships, and the City. During the second quarter of fiscal 2014 we sold the assets at the Old Elgin Site.

Financing Arrangements

On February 7, 2008, we entered into the Credit Facility with a bank group (the “Bank Lenders”) providing a $117.5 million revolving loan commitment and letter of credit subfacility. Also on February 7, 2008, we entered into a Loan Agreement with an insurance company (the “Mortgage Lender”) providing us with two term loans, one in the amount of $36.0 million (“Tranche A”) and the other in the amount of $9.0 million (“Tranche B”), for an aggregate amount of $45.0 million (the “Mortgage Facility”).

The Credit Facility, as amended, is secured by substantially all our assets other than real property and fixtures. The Mortgage Facility is secured by mortgages on essentially all of our owned real property located in Elgin, Illinois, Gustine, California and Garysburg, North Carolina (the “Encumbered Properties”).

Credit Facility

The Credit Facility, as amended, matures on July 15, 2016. At our election, borrowings under the Credit Facility accrue interest at either (i) a rate determined pursuant to the administrative agent’s prime rate plus an applicable margin determined by reference to the amount of loans which may be advanced under the borrowing base calculation, ranging from 0.75% to 1.25% or (ii) a rate based upon the London interbank offered rate (“LIBOR”) plus an applicable margin based upon the borrowing base calculation, ranging from 1.75% to 2.25%.

The portion of the borrowing base calculation under the Credit Facility based upon machinery and equipment decreased by $1.5 million per year for the first five years to coincide with amortization of the machinery and equipment collateral. At March 27, 2014, the weighted average interest rate for the Credit Facility was 2.22%. The terms of the Credit Facility contain covenants that, among other things, require us to restrict investments, indebtedness, capital expenditures, acquisitions and certain sales of assets, cash dividends, transactions with affiliates, redemptions of capital stock and prepayment of indebtedness (if such prepayment, among other things, is of a subordinate debt). If loan availability under the borrowing base calculation falls below $25.0 million, we will be required to maintain a specified fixed charge coverage ratio, tested on a monthly basis, until loan availability equals or exceeds $25.0 million for three consecutive months. All cash received from customers is required to be applied against the Credit Facility. The Bank Lenders have the option to accelerate and demand immediate repayment of our obligations under the Credit Facility in the event of default on the payments required under the Credit Facility, a

 

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change in control in the ownership of the Company, non-compliance with the financial covenants or upon the occurrence of other defaults by us under the Credit Facility (including a default under the Mortgage Facility). As of March 27, 2014, we were in compliance with all covenants under the Credit Facility and we currently expect to be in compliance with the financial covenant in the Credit Facility for the foreseeable future. At March 27, 2014, we had $57.7 million of available credit under the Credit Facility. We would still be in compliance with all restrictive covenants under the Credit Facility if this entire amount were borrowed.

Mortgage Facility

We are subject to interest rate resets for each of Tranche A and Tranche B. Specifically, on March 1, 2018 (the “Tranche A Reset Date”) and March 1, 2016 and every two years thereafter (each, a “Tranche B Reset Date”), the Mortgage Lender may reset the interest rates for each of Tranche A and Tranche B, respectively, in its sole and absolute discretion. If the reset interest rate for either Tranche A or Tranche B is unacceptable to us and we (i) do not have sufficient funds to repay amounts due with respect to Tranche A or Tranche B on the Tranche A Reset Date or Tranche B Reset Date, in each case, as applicable, or (ii) are unable to refinance amounts due with respect to Tranche A or Tranche B on the Tranche A Reset Date or Tranche B Reset Date, in each case, as applicable, on terms more favorable than the reset interest rates, then, depending on the extent of the changes in the reset interest rates, our interest expense could increase materially.

The Mortgage Facility matures on March 1, 2023. Tranche A under the Mortgage Facility accrues interest at a fixed interest rate of 7.63% per annum, payable monthly. As mentioned above, such interest rate may be reset by the Mortgage Lender on the Tranche A Reset Date. Monthly principal payments in the amount of $0.2 million commenced on June 1, 2008. Tranche B under the Mortgage Facility accrues interest, as reset on March 1, 2014, at a floating rate of the greater of (i) one month LIBOR plus 3.75% per annum or (ii) 4.50%, payable monthly (the “Floating Rate”). The margin on such Floating Rate may be reset by the Mortgage Lender on each Tranche B Reset Date; provided, however, that the Mortgage Lender may also change the underlying index on each Tranche B Reset Date occurring on or after March 1, 2016. Monthly principal payments in the amount of $0.1 million commenced on June 1, 2008. We do not currently anticipate that any change in the Floating Rate or the underlying index will have a material adverse effect upon our business, financial condition or results of operations.

The terms of the Mortgage Facility contain covenants that require us to maintain a specified net worth of $110.0 million and maintain the Encumbered Properties. The Mortgage Facility was secured, in part, by the Old Elgin Site, that was sold in the second quarter of fiscal 2014. We obtained the consent of the Mortgage Lender prior to the sale of the Old Elgin Site. The Mortgage Lender is entitled to require immediate repayment of our obligations under the Mortgage Facility in the event we default in the payments required under the Mortgage Facility, non-compliance with the covenants or upon the occurrence of certain other defaults by us under the Mortgage Facility. As of March 27, 2014, we were in compliance with all covenants under the Mortgage Facility. We currently believe that we will be in compliance with the financial covenant in the Mortgage Facility for the foreseeable future and therefore $19.6 million of Tranche A and $4.9 million of Tranche B has been classified as long-term debt which represents scheduled principal payments that are due at least twelve months beyond March 27, 2014. Prior to the sale of the assets at Old Elgin Site, all amounts outstanding under Tranche B were classified as short-term debt since the Mortgage Lender had the option, which was waived, to use proceeds of any sale of the real estate to reduce the amount outstanding under Tranche B.

Selma Property

In September 2006, we sold our Selma, Texas properties (the “Selma Properties”) to two related party partnerships for $14.3 million and are leasing them back. The selling price was determined by an independent appraiser to be the fair market value which also approximated our carrying value. The lease for the Selma Properties has a ten-year term at a fair market value rent with three five-year renewal options. Also, we currently have an option to purchase the Selma Properties from the partnerships at 95% (100% in certain circumstances) of the then fair market value, but not less than the original $14.3 million purchase price. The provisions of the arrangement are not eligible for sale-leaseback accounting and the $14.3 million was recorded as a debt obligation. No gain or loss was recorded on the Selma Properties transaction. As of March 27, 2014, $12.3 million of the debt obligation was outstanding.

 

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Critical Accounting Policies and Estimates

For information regarding our Critical Accounting Policies and Estimates, see the “Critical Accounting Policies and Estimates” section of “Item 7- Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K for the fiscal year ended June 27, 2013.

Recent Accounting Pronouncements

In February 2013, the FASB issued ASU No. 2013-02, “Comprehensive Income (Topic 220)—Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” The update requires presentation by the respective line items of net income, either on the face of the statement where net income is presented or in the notes, information about significant amounts required under U.S. GAAP to be reclassified out of accumulated other comprehensive income in their entirety. For amounts not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. This update is effective for fiscal years beginning on or after December 15, 2012, and interim periods within those annual periods. We adopted this update in the first quarter of fiscal 2014. The update only affects the presentation of comprehensive income and does not impact what is included in comprehensive income, and therefore the adoption of this update did not have an impact on our financial position, results of operations, or cash flows.

In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”. This update changes the threshold for reporting discontinued operations and adds new disclosures. The update defines a discontinued operation as a disposal of a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” For disposals of individually significant components that do not qualify as discontinued operations, an entity must disclose pre-tax earnings of the disposed component. For public business entities, this guidance is effective prospectively for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The Company does not expect the adoption of this update to have a material impact on our financial position, results of operations, or cash flows.

 

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FORWARD LOOKING STATEMENTS

The statements contained in this report that are not historical (including statements concerning our expectations regarding market risk) are “forward looking statements.” These forward-looking statements may be generally identified by the use of forward-looking words and phrases such as “will”, “anticipates”, “intends”, “may”, “believes”, “should” and “expects” and are based on our current expectations or beliefs concerning future events and involve risks and uncertainties. We caution that such statements are qualified by important factors, including the factors referred to in Part II, Item 1A — “Risk Factors”, and other factors, risks and uncertainties that are beyond our control. Consequently, our actual results could differ materially. We undertake 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 our 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 our nut inventories due to fluctuations in the market prices of nuts and bulk inventory estimation adjustments, respectively, and decreases in the value of inventory held for other entities, where we are financially responsible for such losses; (vi) our 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 our products or in nuts or nut products in general, or are harmed as a result of using our products; (viii) our ability 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 our 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, including the Public Health Security and Bioterrorism Preparedness and Response Act and laws and regulations pertaining to food safety, such as the Food Safety Modernization Act; (xi) our ability to do business in emerging markets while protecting our intellectual property in such markets; (xii) uncertainty in economic conditions, including the potential for economic downturn; (xiii) our ability to obtain additional capital, if needed; (xiv) the timing and occurrence (or nonoccurrence) of other transactions and events which may be subject to circumstances beyond our control; (xv) the adverse effect of labor unrest or disputes, litigation and/or legal settlements, including potential unfavorable outcomes exceeding any amounts accrued; (xvi) losses associated with our status as a licensed nut warehouse operator under the United States Warehouse Act; (xvii) the inability to implement our Strategic Plan or realize other efficiency measures including controlling medical and personnel costs; (xviii) technology disruptions or failures; (xix) the inability to protect our intellectual property or avoid intellectual property disputes; (xx) our ability to manage successfully the price gap between our private brand products and those of our branded competitors; and (xxi) potential increased industry-specific regulation pending the U.S. Food and Drug Administration assessment of the risk of Salmonella contamination associated with tree nuts.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in our assessment of our sensitivity to market risk since our presentation set forth in Part I—Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the fiscal year ended June 27, 2013.

Item 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of March 27, 2014. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 27, 2014, the Company’s disclosure controls and procedures were effective.

In connection with the evaluation by our management, including our Chief Executive Officer and Chief Financial Officer, there were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended March 27, 2014 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of legal proceedings, see “Note 13—Commitments and Contingent Liabilities” in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors

In addition to the other information set forth in this report on Form 10-Q, you should also consider the factors, risks and uncertainties which could materially affect our Company’s business, financial condition or future results as discussed in Part I, Item 1A – “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 27, 2013. There were no significant changes to the risk factors identified on the Form 10-K for the fiscal year ended June 27, 2013 during the third quarter of fiscal 2014.

See Part I, Item 2 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in this Form 10-Q, and see Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2013.

Item 6. Exhibits

The exhibits filed herewith are listed in the exhibit index that follows the signature page and immediately precedes the exhibits filed.

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on April 30, 2014.

 

JOHN B. SANFILIPPO & SON, INC.
By   /s/ MICHAEL J. VALENTINE
  Michael J. Valentine
  Chief Financial Officer, Group President and Secretary

 

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EXHIBIT INDEX

(Pursuant to Item 601 of Regulation S-K)

 

Exhibit
Number

  

Description

1-2    Not applicable
3.1    Restated Certificate of Incorporation of John B. Sanfilippo & Son, Inc. (the “Registrant” or the “Company”)(13)
3.2    Amended and Restated Bylaws of Registrant(12)
4.1    Specimen Common Stock Certificate(3)
4.2    Specimen Class A Common Stock Certificate(3)
5-9    Not applicable
10.1    Tax Indemnification Agreement between Registrant and certain Stockholders of Registrant prior to its initial public offering(2)
10.2    Indemnification Agreement between Registrant and certain Stockholders of Registrant prior to its initial public offering(2)
*10.3    The Registrant’s 1998 Equity Incentive Plan(4)
*10.4    First Amendment to the Registrant’s 1998 Equity Incentive Plan(5)
*10.5    Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number One among John E. Sanfilippo, as trustee of the Jasper and Marian Sanfilippo Irrevocable Trust, dated September 23, 1990, Jasper B. Sanfilippo, Marian R. Sanfilippo and Registrant, dated December 31, 2003(6)
*10.6    Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number Two among Michael J. Valentine, as trustee of the Valentine Life Insurance Trust, Mathias Valentine, Mary Valentine and Registrant, dated December 31, 2003(6)
*10.7    Amendment, dated February 12, 2004, to Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number One among John E. Sanfilippo, as trustee of the Jasper and Marian Sanfilippo Irrevocable Trust, dated September 23, 1990, Jasper B. Sanfilippo, Marian R. Sanfilippo and Registrant, dated December 31, 2003(7)
*10.8    Amendment, dated February 12, 2004, to Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number Two among Michael J. Valentine, as trustee of the Valentine Life Insurance Trust, Mathias Valentine, Mary Valentine and Registrant, dated December 31, 2003(7)
10.9    Development Agreement, dated as of May 26, 2004, by and between the City of Elgin, an Illinois municipal corporation, the Registrant, Arthur/Busse Limited Partnership, an Illinois limited partnership, and 300 East Touhy Avenue Limited Partnership, an Illinois limited partnership(8)
10.10    Agreement For Sale of Real Property, dated as of June 18, 2004, by and between the State of Illinois, acting by and through its Department of Central Management Services, and the City of Elgin(8)
*10.11    The Registrant’s Restated Supplemental Retirement Plan(10)
*10.12    Form of Option Grant Agreement under 1998 Equity Incentive Plan(9)
*10.13    Amended and Restated Sanfilippo Value Added Plan, dated August 31, 2011(21)
10.14    Credit Agreement, dated as of February 7, 2008, by and among the Company, the financial institutions named therein as lenders, Wells Fargo Foothill, LLC (“WFF”), as the arranger and administrative agent for the lenders, and Wachovia Capital Finance Corporation (Central), in its capacity as documentation agent(11)    

 

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Exhibit
Number

 

Description

10.15   Security Agreement, dated as of February 7, 2008, by the Company in favor of WFF, as administrative agent for the lenders(11)
10.16   Loan Agreement, dated as of February 7, 2008, by and between the Company and Transamerica Financial Life Insurance Company (“TFLIC”)(11)
10.17   Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as of February 7, 2008, made by the Company related to its Elgin, Illinois property for the benefit of TFLIC(11)
10.18   Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as of February 7, 2008, made by JBSS Properties, LLC related to its Elgin, Illinois property for the benefit of TFLIC(11)
10.19   Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as of February 7, 2008, made by the Company related to its Gustine, California property for the benefit of TFLIC(11)
10.20   Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as of February 7, 2008, made by the Company related to its Garysburg, North Carolina property for the benefit of TFLIC(11)
10.21   Promissory Note (Tranche A), dated February 7, 2008, in the principal amount of $36.0 million executed by the Company in favor of TFLIC(11)
10.22   Promissory Note (Tranche B) dated February 7, 2008, in the principal amount of $9.0 million executed by the Company in favor of TFLIC(11)
*10.23   The Registrant’s 2008 Equity Incentive Plan, as amended(1)
*10.24   First Amendment to the Registrant’s 2008 Equity Incentive Plan(14)
*10.25   The Registrant’s Employee Restricted Stock Unit Award Agreement(15)
*10.26   The Registrant’s First Form of Non-Employee Director Restricted Stock Unit Award Agreement(15)
*10.27   The Registrant’s Second Form of Non-Employee Director Restricted Stock Unit Award Agreement(18)
10.28   Form of Indemnification Agreement(16)
**10.29   First Amendment to Credit Agreement, dated as of March 8, 2010, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as a lender and administrative agent and Burdale Financial Limited, as a lender(17)
10.30   Form of Change-of-Control Employment Security Agreement and Non-Compete(19)
10.31   Second Amendment to Credit Agreement, dated as of July 15, 2011, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender(20)
10.32   Third Amendment to Credit Agreement, dated as of October 31, 2011, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender(22)
10.33   Consent and Fourth Amendment to Credit Agreement, dated as of January 22, 2013, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender(23)
10.34   Consent and Fifth Amendment to Credit Agreement, dated as of December 16, 2013, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender(24)    

 

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Exhibit
Number

  

Description

11-30    Not applicable
31.1    Certification of Jeffrey T. Sanfilippo pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended, filed herewith
31.2    Certification of Michael J. Valentine pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended, filed herewith
32.1    Certification of Jeffrey T. Sanfilippo pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended, filed herewith
32.2    Certification of Michael J. Valentine pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended, filed herewith
33-100    Not applicable
101.INS    XBRL Instance Document, filed herewith
101.SCH    XBRL Taxonomy Extension Schema Document, filed herewith
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document, filed herewith
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document, filed herewith
101.LAB    XBRL Taxonomy Extension Label Linkbase Document, filed herewith
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document, filed herewith

 

* Indicates a management contract or compensatory plan or arrangement.
** Confidential treatment has been requested for portions of this exhibit. These portions have been omitted and submitted separately to the Securities and Exchange Commission.
(1) Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 28, 2012 (Commission File No. 0-19681).
(2) Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (Commission File No. 0-19681).
(3) Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (Amendment No. 3), Registration No. 33-43353, as filed with the Commission on November 25, 1991 (Commission File No. 0-19681).
(4) Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the first quarter ended September 24, 1998 (Commission File No. 0-19681).
(5) Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the second quarter ended December 28, 2000 (Commission File No. 0-19681).
(6) Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the second quarter ended December 25, 2003 (Commission File No. 0-19681).
(7) Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the third quarter ended March 25, 2004 (Commission File No. 0-19681).
(8) Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 24, 2004 (Commission File No. 0-19681).
(9) Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2005 (Commission File No. 0-19681).

 

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Table of Contents
(10) Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended June 28, 2007 (Commission File No. 0-19681).
(11) Incorporated by reference to the Registrant’s Current Report on Form 8-K dated February 8, 2008 (Commission File No. 0-19681).
(12) Incorporated by reference to the Registrant’s Current Report on Form 8-K dated February 3, 2014 (Commission File No. 0-19681).
(13) Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the third quarter ended March 24, 2005 (Commission File No. 0-19681).
(14) Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the second quarter ended December 25, 2008 (Commission File No. 0-19681).
(15) Incorporated by reference to the Registrant’s Current Report on Form 8-K dated November 12, 2009 (Commission File No. 0-19681).
(16) Incorporated by reference to the Registrant’s Current Report on Form 8-K dated May 5, 2009 (Commission File No. 0-19681).
(17) Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 12, 2010 (Commission File No. 0-19681).
(18) Incorporated by reference to the Registrant’s Current Report on Form 8-K dated November 8, 2010 (Commission File No. 0-19681).
(19) Incorporated by reference to the Registrant’s Current Report on Form 8-K dated January 31, 2011 (Commission File No. 0-19681).
(20) Incorporated by reference to the Registrant’s Current Report on Form 8-K dated July 18, 2011 (Commission File No. 0-19681).
(21) Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011 (Commission File No. 0-19681).
(22) Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the first quarter ended September 29, 2011 (Commission File No. 0-19681).
(23) Incorporated by reference to the Registrant’s Current Report on Form 8-K dated February 1, 2013 (Commission File No. 0-19681).
(24) Incorporated by reference to the Registrant’s Current Report on Form 8-K dated December 17, 2013 (Commission File No. 0-19681).

 

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