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Table of Contents
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
|
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
(I.R.S. Employer
Identification No.)
|
|
|
|
|
|
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
|
|
Title of Each Class
|
Trading
Symbol
|
Name of Each Exchange
on Which Registered
|
||
|
|
|
(NASDAQ Global Select Market)
|
|
|
☒ | Accelerated filer | ☐ | |||
|
Non-accelerated
filer
|
☐ | Smaller reporting company |
|
|||
| Emerging growth company |
|
|||||
Table of Contents
JOHN B. SANFILIPPO & SON, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 29, 2022
INDEX
Table of Contents
|
|
|
For the Quarter Ended
|
|
|||||
|
|
|
September 29,
2022
|
|
|
September 23,
2021
|
|
||
|
Net sales
|
$ |
|
$ |
|
||||
|
Cost of sales
|
|
|
||||||
|
|
|
|
|
|||||
|
Gross profit
|
|
|
||||||
|
|
|
|
|
|||||
|
Operating expenses:
|
||||||||
|
Selling expenses
|
|
|
||||||
|
Administrative expenses
|
|
|
||||||
|
Gain on sale of facility, net
|
|
(
|
) | |||||
|
|
|
|
|
|||||
|
Total operating expenses
|
|
|
||||||
|
|
|
|
|
|||||
|
Income from operations
|
|
|
||||||
|
|
|
|
|
|||||
|
Other expense:
|
||||||||
|
Interest expense including $
|
|
|
||||||
|
Rental and miscellaneous expense, net
|
|
|
||||||
|
Pension expense (excluding service costs)
|
|
|
||||||
|
|
|
|
|
|||||
|
Total other expense, net
|
|
|
||||||
|
|
|
|
|
|||||
|
Income before income taxes
|
|
|
||||||
|
Income tax expense
|
|
|
||||||
|
|
|
|
|
|||||
|
Net income
|
$ |
|
$ |
|
||||
|
Other comprehensive income:
|
||||||||
|
Amortization of actuarial loss included in net periodic cost
|
|
|
||||||
|
Income tax expense related to pension adjustments
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
Other comprehensive income, net of tax:
|
|
|
||||||
|
|
|
|
|
|||||
|
Comprehensive income
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
|
Net income per common share-basic
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
|
Net income per common share-diluted
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
|
September 29,
2022
|
June 30,
2022
|
September 23,
2021
|
||||||||||
|
ASSETS
|
||||||||||||
|
CURRENT ASSETS:
|
||||||||||||
|
Cash
|
$ |
|
$ |
|
$ |
|
||||||
|
Accounts receivable, less allowance for doubtful accounts of $
|
|
|
|
|||||||||
|
Inventories
|
|
|
|
|||||||||
|
Prepaid expenses and other current assets
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
TOTAL CURRENT ASSETS
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
PROPERTY, PLANT AND EQUIPMENT:
|
||||||||||||
|
Land
|
|
|
|
|||||||||
|
Buildings
|
|
|
|
|||||||||
|
Machinery and equipment
|
|
|
|
|||||||||
|
Furniture and leasehold improvements
|
|
|
|
|||||||||
|
Vehicles
|
|
|
|
|||||||||
|
Construction in progress
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
|
|
|
||||||||||
|
Less: Accumulated depreciation
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
|
|
|
||||||||||
|
Rental investment property, less accumulated depreciation of $
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
TOTAL PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
Intangible assets, net
|
|
|
|
|||||||||
|
Life insurance and other assets
|
|
|
|
|||||||||
|
Deferred income taxes
|
|
|
|
|||||||||
|
Goodwill
|
|
|
|
|||||||||
|
Operating lease
right-of-use
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
TOTAL ASSETS
|
$ |
|
$ |
|
$ |
|
||||||
|
|
|
|
|
|
|
|||||||
|
September 29,
2022
|
June 30,
2022
|
September 23,
2021
|
||||||||||
|
LIABILITIES & STOCKHOLDERS’ EQUITY
|
||||||||||||
|
CURRENT LIABILITIES:
|
||||||||||||
|
Revolving credit facility borrowings
|
$ |
|
$ |
|
$ |
|
||||||
|
Current maturities of long-term debt,
net,
including related party debt of $
|
|
|
|
|||||||||
|
Accounts payable
|
|
|
|
|||||||||
|
Bank overdraft
|
|
|
|
|||||||||
|
Accrued payroll and related benefits
|
|
|
|
|||||||||
|
Other accrued expenses
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
TOTAL CURRENT LIABILITIES
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
LONG-TERM LIABILITIES:
|
||||||||||||
|
Long-term debt, less current maturities,
n
including related party debt of $
e
t,
|
|
|
|
|||||||||
|
Retirement plan
|
|
|
|
|||||||||
|
Long-term operating lease liabilities, net of current portion
|
|
|
|
|||||||||
|
Other
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
TOTAL LONG-TERM LIABILITIES
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
TOTAL LIABILITIES
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
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, $
|
|
|
|
|||||||||
|
Common Stock,
non-cumulative
voting rights of one vote per share, $
|
|
|
|
|||||||||
|
Capital in excess of par value
|
|
|
|
|||||||||
|
Retained earnings
|
|
|
|
|||||||||
|
Accumulated other comprehensive loss
|
(
|
) |
(
|
) |
(
|
) | ||||||
|
Treasury stock, at cost;
|
(
|
) |
(
|
) |
(
|
) | ||||||
|
|
|
|
|
|
|
|||||||
|
TOTAL STOCKHOLDERS’ EQUITY
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
|
$ |
|
$ |
|
$ |
|
||||||
|
|
|
|
|
|
|
|||||||
|
|
|
Class A Common
Stock |
|
|
Common Stock
|
|
|
Capital in
Excess of Par Value |
|
|
Retained
Earnings |
|
|
Accumulated
Other Comprehensive Loss |
|
|
Treasury
Stock |
|
|
Total
|
|
|||||||||||||||
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
||||||||||||||||||||||||
|
Balance, June 30, 2022
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
||||||||||||||||||
|
Net income
|
|
|
||||||||||||||||||||||||||||||||||
|
Cash dividends ($
|
(
|
) |
(
|
) | ||||||||||||||||||||||||||||||||
|
Pension liability amortization, net of
income tax expense of $ |
|
|
||||||||||||||||||||||||||||||||||
|
Stock-based compensation expense
|
|
|
||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Balance, September 29, 2022
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common
Stock |
|
|
Common Stock
|
|
|
Capital in
Excess of Par Value |
|
|
Retained
Earnings |
|
|
Accumulated
Other Comprehensive Loss |
|
|
Treasury
Stock |
|
|
Total
|
|
|||||||||||||||
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
||||||||||||||||||||||||
|
Balance, June 24, 2021
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
||||||||||||||||||
|
Net income
|
|
|
||||||||||||||||||||||||||||||||||
|
Cash dividends ($
|
(
|
) |
(
|
) | ||||||||||||||||||||||||||||||||
|
Pension liability amortization, net of
income tax expense of $ |
|
|
||||||||||||||||||||||||||||||||||
|
Equity award exercises, net of shares
withheld for employee taxes |
|
|
(
|
) |
(
|
) | ||||||||||||||||||||||||||||||
|
Stock-based compensation expense
|
|
|
||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Balance, September 23, 2021
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended
|
|
|||||
|
|
|
September 29,
2022 |
|
|
September 23,
2021 |
|
||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income
|
$ |
|
$ |
|
||||
|
Depreciation and amortization
|
|
|
||||||
|
Loss (gain) on disposition of assets, net
|
|
(
|
) | |||||
|
Deferred income tax expense
|
|
|
||||||
|
Stock-based compensation expense
|
|
|
||||||
|
Change in assets and liabilities:
|
||||||||
|
Accounts receivable, net
|
(
|
) |
(
|
) | ||||
|
Inventories
|
|
(
|
) | |||||
|
Prepaid expenses and other current assets
|
|
(
|
) | |||||
|
Accounts payable
|
|
(
|
) | |||||
|
Accrued expenses
|
(
|
) |
(
|
) | ||||
|
Income taxes payable
|
|
|
||||||
|
Other long-term assets and liabilities
|
|
|
||||||
|
Other, net
|
(
|
) |
|
|||||
|
|
|
|
|
|||||
|
Net cash provided by operating activities
|
|
|
||||||
|
|
|
|
|
|||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Purchases of property, plant and equipment
|
(
|
) |
(
|
) | ||||
|
Proceeds from disposition of assets, net
|
|
|
||||||
|
Other, net
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
Net cash used in investing activities
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Net short-term borrowings
|
|
|
||||||
|
Principal payments on long-term debt
|
(
|
) |
(
|
) | ||||
|
Increase (decrease) in bank overdraft
|
|
(
|
) | |||||
|
Dividends paid
|
(
|
) |
(
|
) | ||||
|
Taxes paid related to net share settlement of equity awards
|
|
(
|
) | |||||
|
|
|
|
|
|||||
|
Net cash (used in) provided by financing activities
|
(
|
) |
|
|||||
|
|
|
|
|
|||||
|
NET DECREASE IN CASH
|
(
|
) |
(
|
) | ||||
|
Cash, beginning of period
|
|
|
||||||
|
|
|
|
|
|||||
|
Cash, end of period
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
| • |
References herein to fiscal 2023 and fiscal 2022 are to the 52 week fiscal year ending June 29, 2023 and the 53 week fiscal year ended June 30, 2022, respectively.
|
| • |
References herein to the first quarter of fiscal 2023 and fiscal 2022 are to the quarters ended September 29, 2022 and September 23, 2021, respectively.
|
|
For the Quarter Ended
|
||||||||
|
Distribution Channel
|
September 29,
2022
|
September 23,
2021
|
||||||
|
Consumer
|
$ |
|
$ |
|
||||
|
Commercial Ingredients
|
|
|
||||||
|
Contract Packaging
|
|
|
||||||
|
|
|
|
|
|||||
|
Total
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
|
September 29,
2022
|
June 30,
2022
|
September 23,
2021
|
Affected Line Item in
Consolidated Balance Sheet
|
|||||||||||
|
Assets
|
||||||||||||||
|
Operating lease
right-of-use
|
$ |
|
$ |
|
$ |
|
Operating lease
right-of-use
|
|||||||
|
|
|
|
|
|
|
|||||||||
|
Total lease
right-of-use
|
$ |
|
$ |
|
$ |
|
||||||||
|
|
|
|
|
|
|
|||||||||
|
Liabilities
|
||||||||||||||
|
Current:
|
||||||||||||||
|
Operating leases
|
$ |
|
$ |
|
$ |
|
Other accrued expenses
|
|||||||
|
Noncurrent:
|
||||||||||||||
|
Operating leases
|
|
|
|
Long-term operating lease liabilities
|
||||||||||
|
|
|
|
|
|
|
|||||||||
|
Total lease liabilities
|
$ |
|
$ |
|
$ |
|
||||||||
|
|
|
|
|
|
|
|||||||||
|
For the Quarter Ended
|
||||||||
|
September 29,
2022
|
September 23,
2021
|
|||||||
|
Operating lease costs
(a)
|
$ |
|
$ |
|
||||
|
Variable lease costs
(b)
|
|
|
||||||
|
|
|
|
|
|||||
|
Total lease cost
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
|
(a)
|
Includes short-term leases which are immaterial.
|
|
(b)
|
Variable lease costs consist of sales tax and lease overtime charges.
|
|
|
|
For the Quarter Ended
|
|
|||||
|
|
|
September 29,
2022
|
|
|
September 23,
2021
|
|
||
|
Operating cash flows information:
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in measurements for lease liabilities
|
$ |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
Non-cash
activity:
|
||||||||
|
Right-of-use
|
$ |
|
$ |
|
||||
|
|
|
September 29,
2022 |
|
|
June 30,
2022
|
|
|
September 23,
2021 |
|
|||
|
Weighted average remaining lease term (in years)
|
|
|
|
|||||||||
|
Weighted average discount rate
|
|
% |
|
% |
|
% | ||||||
|
Fiscal Year Ending
|
|
|
|
|
|
June 29, 2023 (excluding the quarter ended September 29, 2022)
|
$ |
|
||
|
June 27, 2024
|
|
|||
|
June 26, 2025
|
|
|||
|
June 25, 2026
|
|
|||
|
June 24, 2027
|
|
|||
|
June 29, 2028
|
|
|||
|
Thereafter
|
|
|||
|
|
|
|||
|
Total lease payments
|
|
|||
|
Less imputed interest
|
(
|
) | ||
|
|
|
|||
|
Present value of operating lease liabilities
|
$ |
|
||
|
|
|
|||
|
For the Quarter Ended
|
||||||||
|
September 29,
2022 |
September 23,
2021 |
|||||||
|
Lease income related to lease payments
|
$ |
|
$ |
|
||||
|
Fiscal Year Ending
|
|
|
|
|
|
June 29, 2023 (excluding the quarter ended September 29, 2022)
|
$ |
|
||
|
June 27, 2024
|
|
|||
|
June 26, 2025
|
|
|||
|
June 25, 2026
|
|
|||
|
June 24, 2027
|
|
|||
|
June 29, 2028
|
|
|||
|
|
|
|||
|
Total
|
$ |
|
||
|
|
|
|
|
|
|
September 29,
2022
|
June 30,
2022
|
September 23,
2021
|
||||||||||
|
Raw material and supplies
|
$ |
|
$ |
|
$ |
|
||||||
|
Work-in-process
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
Total
|
$ |
|
$ |
|
$ |
|
||||||
|
|
|
|
|
|
|
|||||||
|
September 29,
2022 |
June 30,
2022 |
September 23,
2021 |
||||||||||
|
Customer relationships
|
$ |
|
$ |
|
$ |
|
||||||
|
Brand names
|
|
|
|
|||||||||
|
Non-compete
agreement
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|||||||
|
|
|
|
||||||||||
|
Less accumulated amortization:
|
||||||||||||
|
Customer relationships
|
(
|
) |
(
|
) |
(
|
) | ||||||
|
Brand names
|
(
|
) |
(
|
) |
(
|
) | ||||||
|
Non-compete
agreement
|
(
|
) |
(
|
) |
(
|
) | ||||||
|
|
|
|
|
|
|
|||||||
|
(
|
) |
(
|
) |
(
|
) | |||||||
|
|
|
|
|
|
|
|||||||
|
Net intangible assets
|
$ |
|
$ |
|
$ |
|
||||||
|
|
|
|
|
|
|
|||||||
|
Fiscal Year Ending
|
||||
|
June 27, 2024
|
|
|||
|
June 26, 2025
|
|
|||
|
June 25, 2026
|
|
|||
|
June 24, 2027
|
|
|||
|
June 29, 2028
|
|
|||
|
For the Quarter Ended
|
||||||||
|
September 29,
2022
|
September 23,
2021
|
|||||||
|
Weighted average number of shares outstanding – basic
|
|
|
||||||
|
Effect of dilutive securities:
|
||||||||
|
Restricted
stock units
|
|
|
||||||
|
|
|
|
|
|||||
|
Weighted average number of shares outstanding – diluted
|
|
|
||||||
|
|
|
|
|
|||||
|
For the Quarter Ended
|
||||||||
|
September 29,
2022
|
September 23,
2021
|
|||||||
|
Service cost
|
$ |
|
$ |
|
||||
|
Interest cost
|
|
|
||||||
|
Amortization of loss
|
|
|
||||||
|
|
|
|
|
|||||
|
Net periodic benefit cost
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
|
Changes to AOCL
(a)
|
|
For the Quarter Ended
|
|
|||||
|
|
September 29,
2022 |
|
|
September 23,
2021 |
|
|||
|
Balance at beginning of period
|
$ |
(
|
) |
|
$ |
(
|
)
|
|
|
Other comprehensive income before reclassifications
|
|
|
|
|||||
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
|
|||||
|
Tax effect
|
(
|
) |
(
|
)
|
||||
|
|
|
|
|
|
||||
|
Net current-period other comprehensive income
|
|
|
|
|||||
|
|
|
|
|
|
||||
|
Balance at end of period
|
$ |
(
|
) | $ |
(
|
)
|
||
|
|
|
|
|
|
||||
|
(a)
|
Amounts in parenthesis indicate debits/expense.
|
|
|
|
For the Quarter Ended
|
|
|
Affected Line Item in the
Consolidated Statements of Comprehensive Income |
|||||
|
|
|
|
|
|||||||
|
Reclassifications from AOCL to Earnings
(b)
|
|
September 29,
2022 |
|
|
September 23,
2021 |
|
||||
|
Amortization of defined benefit pension items:
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net loss
|
(
|
) |
(
|
) |
Pension expense (excluding
service costs)
|
|||||
|
Tax effect
|
|
|
Income tax expense | |||||||
|
|
|
|
|
|||||||
|
Amortization of defined pension items,
|
$ |
(
|
) | $ |
(
|
) | ||||
|
|
|
|
|
|||||||
|
(b)
|
Amounts in parenthesis indicate debits to expense. See Note 9 – “Retirement Plan” above for additional details.
|
|
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.
|
|
|
|
September 29,
2022 |
|
|
June 30,
2022
|
|
|
September 23,
2021 |
|
|||
|
Carrying value of current and long-term debt:
|
$ |
|
$ |
|
$ |
|
||||||
|
Fair value of current and long-term debt:
|
|
|
|
|||||||||
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 2023 and fiscal 2022 are to the 52-week fiscal year ending June 29, 2023 and the 53-week fiscal year ended June 30, 2022, respectively. |
| • |
References herein to the first quarter of fiscal 2023 and fiscal 2022 are to the quarters ended September 29, 2022 and September 23, 2021, respectively. |
As used herein, unless the context otherwise indicates, the terms “we”, “us”, “our” or “Company” collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiary, JBSS Ventures, LLC.
We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States. These nuts are sold under our Fisher, Orchard Valley Harvest, Squirrel Brand and Southern Style Nuts brand names and under a variety of private brands. We also market and distribute, and in most cases, manufacture or process, a diverse product line of food and snack products, including peanut butter, almond butter, cashew butter, candy and confections, snack and trail mixes, snack bites, sunflower kernels, dried fruit, corn snacks, chickpea snacks, sesame sticks and other sesame snack products under our brand names and private brands. We distribute our products in the consumer, commercial ingredients and contract packaging distribution channels.
During fiscal 2022, we created a Long-Range Plan to define our future growth priorities. Our Long-Range Plan focuses on growing our non-branded business across key customers, transforming Fisher, Orchard Valley Harvest and Squirrel Brand into leading brands while increasing distribution and diversifying our portfolio into high growth snacking segments. This Long-Range Plan also contemplates increasing our sales through product innovation and targeted, opportunistic acquisitions. We plan to execute on our Long-Range Plan by providing our non-branded customers with value-added solutions based on our extensive industry and consumer expertise. We will grow our branded business by reaching new consumers via product expansion and packaging innovation, expanding distribution across current and alternative channels, diversifying our product offerings and focusing on new ways for consumers to buy our products, including sales via e-commerce platforms.
We will continue to focus our promotional and advertising activity to invest in our brands to achieve growth. We intend to execute an omnichannel approach to win in key categories including recipe nuts, nut flours, snack nuts, trail mix and snacking. We continue to see strong e-commerce performance across our branded portfolio and anticipate taking various actions with the goal of accelerating that growth across a variety of established and emerging platforms. 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 for branded and private label products. See the information referenced in Part II, Item 1A — “Risk Factors” of this report for additional information about our risks, challenges and uncertainties.
We face a number of challenges in the future, which include significant inflation, potential for economic downturn, supply chain challenges and the continued impacts of COVID-19. We have also experienced a tightening in the labor market for those employed at our production facilities, which has led to increased labor costs.
Inflation and Consumer Trends
We face changing industry trends as consumer purchasing preferences evolve. Due to significant inflation, including higher commodity acquisition costs in fiscal 2022, we have seen higher selling prices at retail. With higher prices across our categories and the broader food market, consumers may purchase fewer snack products, shift their preferences to private brands or lower priced nuts or purchase snack products outside the nut and trail mix category. With the inflationary environment, we are also seeing signs of consumers shifting to more value-focused channels, such as mass merchandising retailers, club stores and dollar stores. E-commerce platforms showed growth during the first quarter of fiscal 2023 but at a lower rate than we saw during the first quarter of fiscal 2022.
16
Table of Contents
Supply Chain and Transportation
In recent quarters, we have faced challenges with shortages and cost increases for shipping pallets, packaging, imported ingredients, transportation and shipping availability. The conflict in Ukraine has further exacerbated supply chain disruptions, especially related to sunflower oil used in roasting our nut products and aluminum which is used in certain of our product packaging.
We have also experienced supply chain issues related to a shortage in capacity in the transportation industry. Compounding the driver shortage was an increase in demand driven by additional spending on consumer goods during fiscal 2021 and fiscal 2022, which led to periodic shortages of shipping containers, container chassis, space on container ships and trains and capacity constraints at U.S. ports. This tightening in transportation capacity began to ease during the third quarter of fiscal 2022 and has continued to ease into fiscal 2023 as inflation resulted in rising costs which decreased demand in the freight market. However, intermodal capacity still remains tight. Fuel prices that were at record highs during spring and summer 2022 have begun to decrease, yet still remain volatile. While there are indicators of transportation cost improvement, and while we have mitigated some of the transportation shortages and maintained high service levels, we may continue to face an unpredictable transportation environment. There is no guarantee that our mitigation strategies will continue to be effective, or that any transportation capacity easing will continue or transportation prices will return to more normalized levels.
These shortages and related challenges have impacted our operations and resulted in increased expenses and manufacturing inefficiencies that have adversely impacted (and may continue to impact) our net income. We anticipate pricing relief in some of these areas in the coming quarters if and as shortages decrease and supply chains normalize; however, we expect that some costs may remain elevated or unpredictable for a longer period of time, particularly as the conflict in Ukraine continues.
We are working, and will continue to work, with our vendors, customers and suppliers to source additional raw materials and packaging supplies and to remain flexible in obtaining the transportation and labor services we need. If these shortages and other supply chain issues continue and we cannot secure adequate supplies to fulfill customer orders or cannot obtain the transportation and labor services we need, such shortages and supply chain issues could have an unfavorable impact on net sales and our operations during the remainder of fiscal year 2023. In addition, as costs increase due to these issues or due to inflationary pressures in general, there is an additional risk of not being able to pass (in part or in full) such potential cost increases onto our customers or in a timely manner. If we cannot align costs with prices for our products, our operating performance could be adversely impacted.
COVID-19
During fiscal 2023, we may continue to face challenges as a result of the COVID-19 pandemic and the uncertainty of future local, state and federal restrictions aimed to mitigate and control the pandemic. During fiscal 2022, as various COVID-19 vaccines and therapeutic measures became more widely distributed and accepted by the public and indoor dining restrictions were again loosened, we saw a significant improvement in sales volume with our foodservice, restaurant, convenience store and non-essential retail customers.
17
Table of Contents
QUARTERLY HIGHLIGHTS
Our net sales of $252.6 million for the first quarter of fiscal 2023 increased 11.6% from our net sales of $226.3 million for the first quarter of fiscal 2022.
Sales volume, measured as pounds sold to customers, increased 1.8% compared to the first quarter of fiscal 2022.
Gross profit decreased $1.2 million, and our gross profit margin, as a percentage of net sales, decreased to 20.0% for the first quarter of fiscal 2023 compared to 22.9% for the first quarter of fiscal 2022.
Total operating expenses for the first quarter of fiscal 2023 increased $3.8 million, or 15.4%, compared to the first quarter of fiscal 2022, primarily due to a non-recurring gain on the sale of a facility that occurred in the first quarter of fiscal 2022. As a percentage of net sales, total operating expenses in the first quarter of fiscal 2023 increased to 11.2% from 10.8% for the first quarter of fiscal 2022.
The total value of inventories on hand at the end of the first quarter of fiscal 2023 increased $39.5 million, or 25.9%, in comparison to the total value of inventories on hand at the end of the first quarter of fiscal 2022.
We expect acquisition costs for most major tree nuts to be flat or decrease and acquisition costs for peanuts to increase modestly in the 2022 crop year (which falls into our current 2023 fiscal year). We also expect acquisition costs for dried fruit to increase modestly. While we began to procure inshell walnuts during the first quarter of fiscal 2023, the total payments due to our walnut growers will not be determined until the second and/or third quarters of fiscal 2023. We will determine the final prices to be paid to the walnut growers based upon current market prices and other factors such as crop size and export demand. We have estimated the liability to our walnut growers and our walnut inventory costs using currently available information. Any difference between our estimated liability and the actual payments will be determined during the second and/or third quarters of fiscal 2023 and will be recognized in our financial results at that time.
18
Table of Contents
RESULTS OF OPERATIONS
Net Sales
Our net sales increased 11.6% to $252.6 million in the first quarter of fiscal 2023 compared to net sales of $226.3 million for the first quarter of fiscal 2022. The increase in net sales was primarily attributable to a 9.6% increase in the weighted average sales price per pound and a 1.8% increase in sales pounds, which is defined as pounds sold to customers. The increase in the weighted average selling price per pound was attributable to price increases implemented in the third quarter of fiscal 2022 in response to higher commodity acquisition costs for all major tree nuts and peanuts.
The following table 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 | ||||||||
|
Product Type |
September 29,
2022 |
September 23,
2021 |
||||||
|
Peanuts |
19.3 | % | 17.7 | % | ||||
|
Pecans |
10.3 | 8.6 | ||||||
|
Cashews & Mixed Nuts |
20.1 | 22.4 | ||||||
|
Walnuts |
5.7 | 5.7 | ||||||
|
Almonds |
9.0 | 10.6 | ||||||
|
Trail & Snack Mixes |
28.9 | 28.2 | ||||||
|
Other |
6.7 | 6.8 | ||||||
|
|
|
|
|
|||||
|
Total |
100.0 | % | 100.0 | % | ||||
|
|
|
|
|
|||||
The following table shows a comparison of net sales by distribution channel (dollars in thousands):
| For the Quarter Ended | ||||||||||||||||||||||||
|
Distribution Channel |
September 29,
2022 |
Percentage
of Total |
September 23,
2021 |
Percentage
of Total |
$
Change |
Percent
Change |
||||||||||||||||||
|
Consumer (1) |
$ | 196,547 | 77.8 | % | $ | 179,761 | 79.4 | % | $ | 16,786 | 9.3 | % | ||||||||||||
|
Commercial Ingredients |
31,507 | 12.5 | 28,156 | 12.4 | 3,351 | 11.9 | ||||||||||||||||||
|
Contract Packaging |
24,547 | 9.7 | 18,412 | 8.2 | 6,135 | 33.3 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 252,601 | 100.0 | % | $ | 226,329 | 100.0 | % | $ | 26,272 | 11.6 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) |
Sales of branded products were approximately 21% and 19% of total consumer channel sales during the first quarters of fiscal 2023 and fiscal 2022, respectively. Fisher branded products were approximately 65% and 61% of branded sales during the first quarters of fiscal 2023 and fiscal 2022, respectively, with Orchard Valley Harvest branded products accounting for the majority of the remaining branded product sales. |
Net sales in the consumer distribution channel increased 9.3% in dollars and decreased 0.6% in sales volume in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022. The sales volume decrease was driven by lost private brand distribution at a grocery customer that occurred in the fourth quarter of fiscal 2022, which was largely offset by increased distribution and a new product offering at a mass merchandising retailer. Sales volume for Fisher snack nuts decreased 3.0% primarily due to an item discontinuance with a customer. Sales volume for Fisher recipe nuts increased 20.0% due to increased distribution at a mass merchandising retailer and at two grocery store customers. Sales volume of Orchard Valley Harvest produce products increased 15.7% from increased distribution at a major customer in the non-food sector as this retailer continues to recover from COVID-19 restrictions and increased distribution at a customer in the club channel.
19
Table of Contents
Net sales in the commercial ingredients distribution channel increased 11.9% in dollars and 2.4% in sales volume in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022. The sales volume increase was due to a 15.0% increase in sales volume to foodservice customers, which was related to new distribution at existing customers and the continued recovery in the restaurant industry from the impacts of COVID-19 restrictions. These increases were partially offset by a decrease in sales of peanut crushing stock to peanut oil processors and lower sales of bulk products to other food manufacturers.
Net sales in the contract packaging distribution channel increased 33.3% in dollars and 19.3% in sales volume in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022. The increase in sales volume was primarily attributable to the timing of promotional activity by a major customer and business with a new customer.
Gross Profit
Gross profit decreased $1.2 million, or 2.2%, to $50.6 million for the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022, primarily due to higher acquisition costs for all major tree nuts and peanuts and other inflationary cost increases, including labor and manufacturing supplies. Our gross profit margin, as a percentage of net sales, decreased to 20.0% for the first quarter of fiscal 2023 compared to 22.9% for the first quarter of fiscal 2022, driven by the reasons noted above, which were substantially offset by an increase in the weighted average selling price per pound and increased sales volume.
Operating Expenses
Total operating expenses for the first quarter of fiscal 2023 increased $3.8 million to $28.2 million. Operating expenses for the first quarter of fiscal 2023 increased to 11.2% of net sales from 10.8% of net sales for the first quarter of fiscal 2022 as the increase in total expense was largely offset by a higher net sales base.
Selling expenses for the first quarter of fiscal 2023 were $18.0 million, an increase of $0.2 million, or 1.3%, from the first quarter of fiscal 2022. The increase was driven primarily by a $0.9 million increase in base and incentive compensation expense, primarily related to incentive compensation, which was largely offset by a $0.7 million decrease in advertising, consumer insight research and related consulting expenses.
Administrative expenses for the first quarter of fiscal 2023 were $10.2 million, an increase of $1.2 million, or 13.0%, from the first quarter of fiscal 2022. The increase was driven by a $1.2 million increase in base and incentive compensation expense, primarily related to incentive compensation.
The $2.3 million gain on sale of facility in the first quarter of fiscal 2022 was the result of the sale of our Garysburg, North Carolina facility.
Income from Operations
Due to the factors discussed above, income from operations decreased to $22.4 million, or 8.9% of net sales, for the first quarter of fiscal 2023 from $27.3 million, or 12.1% of net sales, for the first quarter of fiscal 2022.
Interest Expense
Interest expense was $0.7 million for the first quarter of 2023 compared to $0.4 million for the first quarter of 2022. The increase in interest expense was primarily due to higher weighted average interest rates combined with higher average short-term debt levels.
Rental and Miscellaneous Expense, Net
Net rental and miscellaneous expense was $0.4 million for the first quarter of 2023 compared to $0.3 million for the first quarter of 2022.
Pension Expense (Excluding Service Costs)
Pension expense (excluding service costs) was $0.3 million for the first quarter of 2023 compared to $0.6 million for the first quarter of fiscal 2022. The decrease in pension expense (excluding service costs) is primarily due to a decrease in the unrecognized net loss remaining to be amortized, which was a result of a large actuarial gain in the prior fiscal year.
20
Table of Contents
Income Tax Expense
Income tax expense was $5.5 million, or 26.0% of income before income taxes for the first quarter of fiscal 2023 compared to $6.8 million, or 26.0% of income before income taxes, for the first quarter of fiscal 2022.
Net Income
Net income was $15.5 million, or $1.35 per common share basic and $1.34 per share diluted, for the first quarter of fiscal 2023, compared to $19.2 million, or $1.67 per common share basic and $1.66 per share diluted, for the first quarter of fiscal 2022.
LIQUIDITY AND CAPITAL RESOURCES
General
The primary uses of cash are to fund our current operations, fulfill contractual obligations, pursue our Long-Range Plan through growing our branded and private label nut programs and repay indebtedness. Also, various uncertainties, including cost uncertainties, could result in additional uses of cash. The primary sources of cash are results of operations and availability under our Credit Facility. 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. Our available credit under our Credit Facility has allowed us to devote more funds to promote our products, increase consumer insight capabilities and promotional efforts, reinvest in the Company through capital expenditures, develop new products, pay cash dividends, consummate strategic investments and business acquisitions and explore other growth strategies outlined in our Long-Range Plan.
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.
The following table sets forth certain cash flow information for the first quarter of fiscal 2023 and 2022, respectively (dollars in thousands):
|
September 29,
2022 |
September 23,
2021 |
$ Change | ||||||||||
|
Operating activities |
$ | 30,646 | $ | 903 | $ | 29,743 | ||||||
|
Investing activities |
(5,974 | ) | (1,237 | ) | (4,737 | ) | ||||||
|
Financing activities |
(24,789 | ) | 201 | (24,990 | ) | |||||||
|
|
|
|
|
|
|
|||||||
|
Net decrease in cash |
$ | (117 | ) | $ | (133 | ) | $ | 16 | ||||
|
|
|
|
|
|
|
|||||||
Operating Activities Net cash provided by operating activities was $30.6 million for the first quarter of fiscal 2023 compared to $0.9 million for the first quarter of fiscal 2022. The increase in operating cash flow is due primarily to a decreased use of working capital, mainly for inventory. Inventories decreased $12.8 million in fiscal 2023 compared to a $4.6 million increase in inventories in fiscal 2022, which resulted in a net source of cash of $17.4 million.
Total inventories were $192.1 million at September 29, 2022, a decrease of $12.8 million, or 6.2%, from the inventory balance at June 30, 2022, and an increase of $39.5 million, or 25.9%, from the inventory balance at September 23, 2021. The decrease in inventory at September 29, 2022 compared to June 30, 2022 was primarily due to lower quantities of pecans and walnuts on hand, which was partially offset by increased quantities of finished goods. The increase in inventory at September 29, 2022 compared to September 23, 2021 was primarily due to greater quantities of finished goods, work in process and inshell pecans on hand combined with higher commodity acquisition costs for pecans.
Raw nut and dried fruit input stocks, some of which are classified as work in process, increased 0.6 million pounds, or 1.9%, at September 29, 2022 compared to September 23, 2021. The weighted average cost per pound of raw nut and dried fruit input stocks on hand at the end of the first quarter of fiscal 2023 increased 20.6% compared to the end of the first quarter of fiscal 2022 primarily due to higher commodity acquisition costs for pecans.
21
Table of Contents
Investing Activities Cash used in investing activities was $6.0 million during the first quarter of fiscal 2023 compared to $1.2 million for the same period last year. The increase in cash used in investing activities was mainly attributable to the $3.9 million of net proceeds received from the disposition of the Garysburg, North Carolina facility which occurred in the first quarter of fiscal 2022 and did not recur in the current quarter. Capital expenditures were $5.9 million during the first quarter of fiscal 2023 and $5.1 million during fiscal 2022. We expect total capital expenditures for new equipment, facility upgrades, and food safety enhancements for fiscal 2023 to be approximately $18.0 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 used in financing activities was $24.8 million during the first quarter of fiscal 2023 compared to cash provided of $0.2 million for the same period last year. Net short-term borrowings under our Credit Facility were $2.2 million during the first quarter of fiscal 2023 compared to net borrowings of $36.6 million for the first quarter of fiscal 2022. The decrease in short term borrowings was primarily due to a decreased use of working capital in the current quarter. The dividends paid in fiscal 2023 were approximately $8.6 million less than the same period of fiscal 2022.
Real Estate Matters
In August 2008, we completed the consolidation of our Chicago-based facilities into our Elgin headquarters (“Elgin Site”). The Elgin Site includes both an office building and a warehouse. We are currently attempting to find additional tenants for the available space in the office building at the Elgin Site. Until additional tenant(s) are found, we will not receive the benefit of rental income associated with such space. Approximately 70% of the rentable area in the office building is currently vacant. Approximately 29% of the rentable area has not been built-out. There can be no assurance that we will be able to lease the unoccupied space and further capital expenditures will likely be necessary to lease the remaining space.
Financing Arrangements
On February 7, 2008, we entered into the Former Credit Agreement (as defined below) 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 (as amended, the “Mortgage Facility”).
On March 5, 2020, we entered into an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) which amended and restated our Credit Agreement dated as of February 7, 2008 (the “Former Credit Agreement”). The Amended and Restated Credit Agreement provides for a $117.5 million senior secured revolving credit facility with the same borrowing capacity, interest rates and applicable margin as the Former Credit Agreement and extends the term of the Former Credit Agreement from July 7, 2021 to March 5, 2025.
The Amended and Restated Credit Facility is secured by substantially all of our assets other than machinery and equipment, real property, and fixtures and matures on March 5, 2025. The Mortgage Facility is secured by mortgages on essentially all of our owned real property located in Elgin, Illinois and Gustine, California (the “Encumbered Properties”).
Credit Facility
At our election, borrowings under the Credit Facility currently 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 0.25% to 0.75% or (ii) a rate based upon the London interbank offered rate (“LIBOR”) plus an applicable margin based upon the borrowing base calculation, ranging from 1.25% to 1.75%.
At September 29, 2022, the weighted average interest rate for the Credit Facility was 5.4%. The terms of the Credit Facility contain covenants that, among other things, require us to restrict investments, indebtedness, acquisitions and certain sales of assets and limit annual cash dividends or distributions, 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 change in control in the
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ownership of the Company, non-compliance with the financial covenant or upon the occurrence of other defaults by us under the Credit Facility (including a default under the Mortgage Facility). As of September 29, 2022, 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 September 29, 2022, we had $70.7 million of available credit under the Credit Facility. If this entire amount were borrowed at September 29, 2022, we would still be in compliance with all restrictive covenants under the Credit Facility.
Mortgage Facility
The Mortgage Facility matures on March 1, 2023. On March 1, 2018 the interest rate on the Mortgage Facility was fixed at 4.25% per annum. Monthly principal payments on the Mortgage Facility in the amount of $0.3 million commenced on June 1, 2008.
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. In September 2015, we exercised two of the five-year renewal options which extended the lease term to September 2026. The lease extension also reduced the monthly lease payment on the Selma Properties, beginning in September 2016, to reflect then current market conditions. At the end of each five-year renewal option, the base monthly lease amounts are reassessed, and the monthly payments increased to $114 beginning in September 2021. One five-year renewal option remains. Also, we have an option to purchase the Selma Properties from the owner 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 September 29, 2022, $8.2 million of the debt obligation was outstanding.
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 30, 2022.
Recent Accounting Pronouncements
Refer to Note 14 – “Recent Accounting Pronouncements” of the Notes to Consolidated Financial Statements, contained in Part I, Item 1 of this form 10-Q, for a discussion of recently issued and adopted accounting pronouncements.
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FORWARD LOOKING STATEMENTS
Some of the statements in this report 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) sales activity for the Company’s products, such as a decline in sales to one or more key customers (of branded products, private label products or otherwise), or to customers generally, in some or all channels, a change in product mix to lower price products, a decline in sales of private brand products or changing consumer preferences, including a shift from higher margin products to lower margin products; (ii) changes in the availability and costs of raw materials and ingredients and the impact of fixed price commitments with customers; (iii) 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; (iv) 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; (v) the Company’s ability to appropriately respond to, or lessen the negative impact of, competitive and pricing pressures, including competition in the recipe nut category; (vi) 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; (vii) the ability of the Company to control costs (including inflationary costs) and manage shortages in areas such as inputs, transportation and labor; (viii) uncertainty in economic conditions, including the potential for inflation or economic downturn, particularly in light of COVID-19 or armed hostilities; (ix) the timing and occurrence (or nonoccurrence) of other transactions and events which may be subject to circumstances beyond the Company’s control; (x) the adverse effect of labor unrest or disputes, litigation and/or legal settlements, including potential unfavorable outcomes exceeding any amounts accrued; (xi) losses due to significant disruptions at any of our production or processing facilities or employee unavailability due to labor shortages, illness or quarantine; (xii) the ability to implement our Long-Range Plan, including growing our branded and private brand product sales and expanding into alternative sales channels; (xiii) technology disruptions or failures; (xiv) the inability to protect the Company’s brand value, intellectual property or avoid intellectual property disputes; (xv) our ability to manage the impacts of changing weather patterns on raw material availability due to climate change; and (xvi) the ability of the Company to respond to or manage the outbreak of COVID-19 or other infectious diseases and the various implications thereof.
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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 30, 2022.
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 September 29, 2022. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 29, 2022, 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 September 29, 2022 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of legal proceedings, see Note 11 – “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 30, 2022. There were no significant changes to the risk factors identified on the Form 10-K for the fiscal year ended June 30, 2022 during the first quarter of fiscal 2023.
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 30, 2022.
Item 6. Exhibits
The exhibits filed herewith are listed in the exhibit index below.
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EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
|
Exhibit No. |
Description |
|
| 3.1 | ||
| 3.2 | ||
| *10.1 | ||
| *10.2 | ||
| *10.3 | ||
| *10.4 | ||
| *10.5 | ||
| *10.6 | ||
| *10.7 | Form of Non-Employee Director Restricted Stock Unit Award Agreement (non-deferral) under 2014 Omnibus Plan (fiscal 2020, 2021 and 2022 awards cycle) (incorporated by reference from Exhibit 10.38 to the Form 10-Q for the quarter ended December 24, 2015) | |
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|
Exhibit No. |
Description |
|
| 10.15 | ||
| 10.16 | ||
| *10.17 | Executive Transition Agreement, dated November 3, 2021, by and between John B. Sanfilippo & Son, Inc. and Christopher Gardier | |
| 31.1 | Certification of Jeffrey T. Sanfilippo pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended | |
| 31.2 | Certification of Frank S. Pellegrino pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended | |
| 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 | |
| 32.2 | Certification of Frank S. Pellegrino pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended | |
| 101.INS | Inline eXtensible Business Reporting Language (XBRL) Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
| * |
Indicates a management contract or compensatory plan or arrangement. |
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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 November 3, 2022.
| JOHN B. SANFILIPPO & SON, INC. | ||
| By | ||
|
/s/ FRANK S. PELLEGRINO |
||
| Frank S. Pellegrino | ||
| Chief Financial Officer, Executive Vice President, Finance and Administration | ||
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