Quarterly Comparison Overview:
- Net sales decreased by 19.6%
- Sales volume decreased by 10.8%
- Gross profit increased by 11.1%
- Net income increased by 105.8%
John B. Sanfilippo & Son, Inc. (NASDAQ: JBSS)
(hereinafter the “Company”) today announced operating results for
its fiscal 2017 third quarter. Net income for the third quarter of
fiscal 2017 was $6.3 million, or $0.55 per share diluted, compared
to net income of $3.1 million, or $0.27 per share diluted, for the
third quarter of fiscal 2016. Net income for the first three
quarters of fiscal 2017 was $29.4 million, or $2.58 per share
diluted, compared to net income of $23.1 million, or $2.04 per
share diluted, for the first three quarters of fiscal 2016.
Net sales decreased to $173.4 million for the third quarter of
fiscal 2017 from $215.7 million for the third quarter of fiscal
2016. The decrease in net sales was attributable to a 10.8%
decrease in sales volume, which is defined as pounds sold to
customers, and a 9.9% decline in the weighted average selling price
per pound resulting primarily from lower selling prices for
almonds. Sales volume decreased for all major nut product types,
and sales volume declined in all distribution channels.
The decrease in sales volume in the consumer channel primarily
resulted from a decline in sales of cashews and mixed nuts to
private brand customers. Sales volume also declined for our branded
products in the quarterly comparison as follows:
Fisher recipe nuts
(3.2)%
Fisher snack nuts
(9.4)%
Orchard Valley Harvest and Sunshine Country produce products
(5.5)%
The sales volume decline for Fisher recipe nuts primarily
resulted from inventory reduction initiatives implemented by some
customers during the current third quarter. The sales volume
decline for Fisher snack nuts was due to lower merchandising
activity. The sales volume decline for our Orchard Valley Harvest
and Sunshine Country produce brands was attributable to a decline
in sales for our Sunshine Country produce brand, which resulted
from lost distribution. The decline in the Sunshine Country sales
volume was partially offset by a 4.6% increase in sales volume for
our Orchard Valley Harvest produce brand due to increased
merchandising activity.
The decrease in sales volume in the contract packaging channel
was attributable to a reduction in merchandising activity
implemented by one customer in this channel. The sales volume
decline in the commercial ingredients channel resulted mainly from
lost business with a bulk almond butter customer, which occurred in
the second quarter of fiscal 2017.
Net sales decreased to $645.0 million for the first three
quarters of fiscal 2017 from $720.5 million for the first three
quarters of fiscal 2016. The decline in net sales was attributable
to an 8.8% reduction in the weighted average selling price per
pound, which primarily occurred as a result of lower selling prices
for almonds and walnuts, and a 1.9% decrease in sales volume. The
sales volume decline was mainly attributable to lower sales volume
for almonds and mixed nuts, which was offset in part by sales
volume increases for peanuts, snack and trail mixes and walnuts.
Sales volume increased in the consumer and contract packaging
distribution channels and declined in the commercial ingredients
distribution channel. The sales volume increase in the consumer
distribution channel came mainly from increased sales of Fisher
recipe nuts, Orchard Valley Harvest produce products and private
brand snack nuts. The sales volume increase in the contract
packaging channel resulted primarily from increased sales of snack
and trail mixes, peanuts, cashews and almonds to existing
customers. The decline in sales volume in the commercial
ingredients distribution channel was primarily attributable to the
loss of a bulk almond butter customer, decreased sales of bulk
inshell walnuts to international customers and lower sales of
peanuts to other peanut shellers.
Gross profit margin increased to 16.4% of net sales for the
third quarter of fiscal 2017 from 11.9% for the third quarter of
fiscal 2016, and gross profit increased by 11.1%. The increases in
gross profit margin and gross profit were primarily attributable to
lower acquisition costs for almonds and improved alignment of
selling prices and acquisition costs for pecans and walnuts.
Gross profit margin for the first three quarters of fiscal 2017
increased to 16.8% of net sales from 14.4% for the first three
quarters of fiscal 2016, while gross profit increased by 4.3%. The
increases in gross profit margin and gross profit primarily
occurred for the same reasons cited in the quarterly
comparison.
Total operating expenses in the quarterly comparison declined by
$2.1 million, and total operating expenses in the year to date
comparison declined by $3.3 million. The declines in total
operating expenses in both comparisons were due to lower
advertising, compensation and broker commission expenses, which
were partially offset by increases in shipping expense due to an
increase in delivered sales pounds. The decline in advertising
expense was primarily due to the later Easter holiday. Total
operating expenses for the current third quarter increased to 10.4%
of net sales from 9.3% of net sales for the third quarter of fiscal
2016. Total operating expenses for the first three quarters of
fiscal 2017 increased to 9.5% of net sales from 9.0% of net sales
for the first three quarters of fiscal 2016. The increases in total
operating expenses, as a percentage of net sales, for both
comparisons were attributable to a lower net sales base.
Interest expense for the current third quarter of $0.9 million
was unchanged compared to interest expense for last year’s third
quarter. Interest expense for the current year to date period was
$2.1 million compared to $2.6 million for the first three quarters
of fiscal 2016. The decrease in interest expense in the year to
date comparison primarily resulted from lower debt levels during
the first half of the current fiscal year.
The value of total inventories on hand at the end of the current
third quarter decreased by $5.9 million, or 2.9%, when compared to
the value of total inventories on hand at the end of the third
quarter of fiscal 2016. The decrease in the value of total
inventories was primarily due to lower quantities of finished goods
combined with a lower weighted average cost per pound. Higher
acquisition costs for pecans, which were largely offset by lower
acquisition costs for almonds, led to a 1.4% increase in the
weighted average cost per pound of raw nut and dried fruit input
stocks on hand in the quarterly comparison.
“As we have discussed in previous quarterly releases, commodity
price decreases and the loss of a bulk almond butter customer in
our commercial ingredients channel had an unfavorable impact on net
sales during this quarter. To offset the negative impact on net
income from this sales decline, we recognized early in the current
fiscal year that we would have to increase gross profit margin,
capture savings in our selling and administrative expenses and grow
sales volume,” stated Jeffrey T. Sanfilippo, Chief Executive
Officer. “Since last year’s third quarter, we made significant
improvements in managing our walnut inventory, aligning our selling
prices and acquisition costs and leveraging our commodity
procurement expertise to drive the considerable increase in our
gross profit margin that occurred in the quarterly comparison. We
were also successful in reducing selling and administrative
expenses,” Mr. Sanfilippo noted. “Though sales volume was generally
down for our brands, at retail, our Fisher recipe nut and Orchard
Valley Harvest brands outperformed in their respective categories
in the quarterly comparison according to IRi market data,” Mr.
Sanfilippo stated. “Fisher recipe nut pound volume increased by 3%,
while total category pound volume declined by 7%. Pound volume for
our Orchard Valley Harvest brand grew by 55%, while the total
produce category pound volume only grew by 12%,” Mr. Sanfilippo
noted. “Pound volume for Fisher snack nuts declined by 3%, which
mirrored the pound volume decline for the entire snack nut
category,” Mr. Sanfilippo stated. “Going forward, we will continue
our efforts to grow sales volume, especially for our brands and in
alternative distribution channels. We also anticipate that the
recent sales volume growth trends in our contract packaging channel
should resume with the launch of new products by several of our
customers in that channel, which are expected to occur in our
fiscal 2017 fourth quarter,” Mr. Sanfilippo concluded.
The Company will host an investor conference call and webcast on
Thursday, May 4, 2017, at 10:00 a.m. Eastern (9:00 a.m. Central) to
discuss these results. To participate in the call via telephone,
dial 1-844-536-5471 from the U.S. or 1-614-999-9317 internationally
and enter the participant passcode of 13634433. This call is being
webcast by NASDAQ OMX and can be accessed at the Company’s website
at www.jbssinc.com.
Some of the statements in this release are forward-looking.
These forward-looking statements may be generally identified by the
use of forward-looking words and phrases such as “will”, “intends”,
“may”, “believes”, “anticipates”, “should” and “expects” and are
based on the Company’s current expectations or beliefs concerning
future events and involve risks and uncertainties. Consequently,
the Company’s actual results could differ materially. The Company
undertakes no obligation to update publicly or otherwise revise any
forward-looking statements, whether as a result of new information,
future events or other factors that affect the subject of these
statements, except where expressly required to do so by law. Among
the factors that could cause results to differ materially from
current expectations are: (i) the risks associated with our
vertically integrated model with respect to pecans, peanuts and
walnuts; (ii) sales activity for the Company’s products, such as a
decline in sales to one or more key customers, a decline in sales
of private brand products or changing consumer preferences; (iii)
changes in the availability and costs of raw materials and the
impact of fixed price commitments with customers; (iv) the ability
to pass on price increases to customers if commodity costs rise and
the potential for a negative impact on demand for, and sales of,
our products from price increases; (v) the ability to measure and
estimate bulk inventory, fluctuations in the value and quantity of
the Company’s nut inventories due to fluctuations in the market
prices of nuts and bulk inventory estimation adjustments,
respectively; (vi) the Company’s ability to appropriately respond
to, or lessen the negative impact of, competitive and pricing
pressures; (vii) losses associated with product recalls, product
contamination, food labeling or other food safety issues, or the
potential for lost sales or product liability if customers lose
confidence in the safety of the Company’s products or in nuts or
nut products in general, or are harmed as a result of using the
Company’s products; (viii) the ability of the Company to retain key
personnel; (ix) the effect of the actions and decisions of the
group that has the majority of the voting power with regard to the
Company’s outstanding common equity (which may make a takeover or
change in control more difficult), including the effect of any
agreements pursuant to which such group has pledged a substantial
amount of its securities of the Company; (x) the potential negative
impact of government regulations and laws and regulations
pertaining to food safety, such as the Food Safety Modernization
Act; (xi) uncertainty in economic conditions, including the
potential for economic downturn; (xii) the timing and occurrence
(or nonoccurrence) of other transactions and events which may be
subject to circumstances beyond the Company’s control; (xiii) the
adverse effect of labor unrest or disputes, litigation and/or legal
settlements, including potential unfavorable outcomes exceeding any
amounts accrued; (xiv) losses due to significant disruptions at any
of our production or processing facilities; (xv) the inability to
implement our Strategic Plan or realize efficiency measures,
including controlling medical and personnel costs; (xvi) technology
disruptions or failures; (xvii) the inability to protect the
Company’s brand value, intellectual property or avoid intellectual
property disputes; (xviii) the Company’s ability to manage
successfully the price gap between its private brand products and
those of its branded competitors; and (xix) potential increased
industry-specific regulation pending the U.S. Food and Drug
Administration assessment of the risk of Salmonella contamination
associated with tree nuts.
John B. Sanfilippo & Son, Inc. is a processor, packager,
marketer and distributor of nut and dried fruit based products that
are sold under a variety of private brands and under the Company’s
Fisher®, Orchard Valley Harvest®, Fisher® Nut Exactly™ and Sunshine
Country® brand names.
JOHN B. SANFILIPPO & SON,
INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share
amounts)
For the Quarter Ended For the Thirty-nine Weeks
Ended March 30, March 24, March 30,
March 24, 2017 2016 2017
2016 Net sales $ 173,376 $ 215,742 $ 645,044 $ 720,521 Cost
of sales 144,950 190,154 536,754 616,717 Gross profit 28,426 25,588
108,290 103,804 Operating expenses: Selling expenses 10,299 11,358
36,940 39,114 Administrative expenses 7,697 8,761 24,622 25,784
Total operating expenses 17,996 20,119 61,562 64,898 Income from
operations 10,430 5,469 46,728 38,906 Other expense: Interest
expense 864 897 2,094 2,616 Rental and miscellaneous expense, net
367 313 1,076 1,181 Total other expense, net 1,231 1,210 3,170
3,797 Income before income taxes 9,199 4,259 43,558 35,109 Income
tax expense 2,863 1,181 14,157 11,991 Net income $ 6,336 $ 3,078 $
29,401 $ 23,118 Basic earnings per common share $ 0.56 $ 0.27 $
2.60 $ 2.06 Diluted earnings per common share $ 0.55 $ 0.27 $ 2.58
$ 2.04 Cash dividends declared per share $ - $ - $ 5.00 $ 2.00
Weighted average shares outstanding -- Basic
11,347,920 11,255,894 11,306,251 11,223,268 --
Diluted 11,424,798 11,344,625 11,392,903
11,322,463
JOHN B. SANFILIPPO & SON, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
March 30, 2017 June 30,
2016
March 24, 2016
ASSETS CURRENT ASSETS: Cash $ 1,848 $ 2,220 $ 2,923 Accounts
receivable, net 59,402 78,088 71,500 Inventories 201,398 156,573
207,319 Prepaid expenses and other current assets 4,625 5,292
11,310 267,273 242,173 293,052 PROPERTIES, NET: 127,234
129,803 131,760 OTHER LONG-TERM ASSETS: Intangibles, net 233
1,369 1,798 Deferred income taxes 7,894 8,590 6,161 Other 9,683
9,227 9,448 17,810 19,186 17,407 TOTAL ASSETS $ 412,317 $ 391,162 $
442,219
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES: Revolving credit facility borrowings $ 61,337
$ 12,084 $ 55,133 Current maturities of long-term debt 3,408 3,342
3,331 Accounts payable 40,173 43,719 59,299 Bank overdraft 2,979
811 3,561 Accrued expenses 22,297 23,238 21,724 130,194 83,194
143,048 LONG-TERM LIABILITIES: Long-term debt 26,069 28,704
29,544 Retirement plan 22,729 22,137 18,395 Other 6,527 5,934 6,013
55,325 56,775 53,952 STOCKHOLDERS' EQUITY: Class A Common
Stock 26 26 26 Common Stock 88 87 87 Capital in excess of par value
117,232 115,136 114,388 Retained earnings 116,466 143,573 136,296
Accumulated other comprehensive loss (5,810 ) (6,425 ) (4,374 )
Treasury stock (1,204 ) (1,204 ) (1,204 ) TOTAL STOCKHOLDERS'
EQUITY 226,798 251,193 245,219 TOTAL LIABILITIES &
STOCKHOLDERS’ EQUITY $ 412,317 $ 391,162 $ 442,219
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version on businesswire.com: http://www.businesswire.com/news/home/20170503006614/en/
John B. Sanfilippo & Son, Inc.Michael J.
ValentineChief Financial Officer847-214-4509
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