SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-K
(Mark One)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED,
EFFECTIVE OCTOBER 7, 1996)
[ X ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from January 1, 1997 to June 26, 1997
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 (I.R.S. Employer
of Incorporation or Organization) Identification Number)
2299 Busse Road
Elk Grove Village, Illinois 60007
(Address of Principal Executive Offices, Zip Code)
Registrant's telephone number, including area code: (847) 593-2300
_________________________
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No___
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ].
As of September 15, 1997, 5,578,140 shares of the Company's
Common Stock, $.01 par value ("Common Stock"), including 117,900
treasury shares, and 3,687,426 shares of the Company's Class A
Common Stock, $.01 par value ("Class A Stock"), were outstanding.
On that date, the aggregate market value of voting stock (based
upon the last sale price of the registrant's Common Stock on
September 15, 1997) held by non-affiliates of the registrant was
$40,966,761 (5,372,690 shares at $7.625 per share).
Documents Incorporated by Reference: None
PART I
Item 1 -- Description of Business
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a. General Development of Business
(i) Background
John B. Sanfilippo & Son, Inc. (the "Company" or "JBSS") was
incorporated under the laws of the State of Delaware in 1979 as the successor
by merger to an Illinois corporation that was incorporated in 1959.
As used herein, unless the context otherwise indicates, the terms
"Company" or "JBSS" refer collectively to John B. Sanfilippo & Son,
Inc., its Illinois predecessor corporation and its wholly owned
subsidiaries, including Sunshine Nut Co., Inc. ("Sunshine").
See Note 1 to the Consolidated Financial Statements.
On April 30, 1997 the Company's Board of Directors voted to, upon the
approval of its lendors, change the Company's fiscal year from a
calendar year end to a fiscal year that ends on the final Thursday
of June of each year. The directors believe that the new fiscal year
will more closely match the Company's business cycle.
The Company is a processor, packager, marketer and distributor of
shelled and inshell nuts. These nuts are sold under a variety of private
labels and under the Company's Evon's, Fisher, Flavor Tree, Sunshine Country
and Texas Pride brand names. The Company also markets and distributes, and in
most cases manufactures or processes, a diverse product line of food and
snack items, including peanut butter, candy and confections, natural snacks
and trail mixes, sunflower seeds, corn snacks and sesame sticks and other
sesame snack products.
The Company's headquarters and executive offices are located at 2299
Busse Road, Elk Grove Village, Illinois 60007 and its telephone number for
investor relations is (847) 593-2300, extension 212.
b. Narrative Description of Business
(i) General
The Company is a processor, packager, marketer and distributor of
shelled and inshell nuts. The Company also markets and distributes, and in
most cases manufactures or processes, a diverse product line of food and snack
items including peanut butter, candy and confections, natural snacks and
trail mixes, corn snacks, sesame sticks and other sesame snack products and
coconut products.
(ii) Principal Products
(A) Raw and Processed Nuts
The Company's principal products are raw and processed nuts. These
products accounted for approximately 85.6%, 83.8%, 84.9% and 85.5% of the
Company's gross sales for the twenty-six weeks ended June 26, 1997 (the
"Transition Period"), and for the years ended December 31, 1996, 1995 and
1994, respectively. The nut product line includes peanuts, almonds, Brazil
nuts, pecans, pistachios, filberts, cashews, English walnuts, black
walnuts, pinenuts and macadamia nuts. The Company's nut products are sold
in numerous package styles and sizes, from poly-cellophane packages,
composite cans, vacuum packed tins and glass jars for retail sales, to
large cases and sacks for bulk sales to industrial, food service and
government customers. In addition, the Company offers its nut products in
a variety of different styles and seasonings, including natural (with
skins), blanched (without skins), oil roasted, dry roasted, unsalted, honey
roasted and cinnamon toasted. The Company sells its products domestically
to retailers and wholesalers as well as to industrial, food service and
government customers. The Company also sells certain of its products to
foreign customers in the retail, food service and industrial markets.
The Company acquires a substantial portion of its peanut, pecan,
almond and walnut requirements directly from growers. The balance of the
Company's raw nut supply is purchased from importers and domestic
processors. In 1996 and during the Transition Period, the majority of the
Company's peanuts, pecans and walnuts were shelled by the Company at its
four shelling facilities while the remainder were purchased shelled from
processors and growers. See "Raw Materials and Supplies," below, and Item
2 -- "Properties -- Manufacturing Capability, Technology and Engineering."
(B) Peanut Butter
The Company manufactures and markets peanut butter in several sizes and
varieties, including creamy, crunchy and natural. Peanut butter accounted
for approximately 4.9%, 5.3%, 5.0% and 3.9% of the Company's gross sales
for the Transition Period, and for the years ended December 31, 1996, 1995
and 1994, respectively. Approximately 4.9%, 16.5% and 51.3% of the
Company's peanut butter products were sold during the years ended December
31,1996, 1995 and 1994, respectively, to the United States Department of
Agriculture ("USDA") and other government agencies, with the remaining
percentage sold under private labels. The Company did not sell peanut
butter to any government agency during the Transition Period.
(C) Candy and Confections
The Company markets and distributes a wide assortment of candy and
confections, including such items as wrapped hard candy, gummies, ju-ju's,
brand name candies, chocolate peanut butter cups, peanut clusters, pecan
patties and sugarless candies. Candy and confections accounted for
approximately 4.4%, 4.6%, 4.4% and 2.5% of the Company's gross sales for
the Transition Period, and for the years ended December 31, 1996, 1995 and
1994, respectively. Most of these products are purchased from various
candy manufacturers and sold to retailers in bulk or retail packages under
private labels or the Evon's brand.
(D) Other Products
The Company also markets and distributes, and in many cases processes
and manufactures, a wide assortment of other food and snack products.
These products accounted for approximately 5.1%, 6.3%, 5.7%, and 8.1% of the
Company's gross sales for the Transition Period, and for the years ended
December 31, 1996, 1995 and 1994, respectively. These other products
include: natural snacks, trail mixes and chocolate- and yogurt-coated
products sold to retailers and wholesalers; baking ingredients (including
chocolate chips, peanut butter chips, flaked coconut and chopped, diced,
crushed and sliced nuts) sold to retailers, wholesalers and industrial and
food service customers; bulk food products sold to retail and food service
customers; an assortment of corn snacks, sunflower seeds, party mixes and
sesame sticks and other sesame snack products sold to retail supermarkets,
vending companies, mass merchandisers and industrial customers; and a wide
variety of toppings for ice cream and yogurt sold to food service
customers.
(iii) Customers
The Company sells its products to over 8,485 retail, wholesale,
industrial, government and food service customers on a national level.
Retailers of the Company's products include grocery chains, mass
merchandisers and membership clubs. The Company markets many of its Evon's
brand products directly to over 3,250 retail stores in Illinois and eight
other states through its store-door delivery system discussed below.
Wholesale grocery companies purchase products from the Company for resale
to regional retail grocery chains and convenience stores.
The Company's industrial customers include bakeries, ice cream and
candy manufacturers and other food and snack processors. The Company's
principal government customers are the Agricultural Stabilization and
Conservation Service of the USDA and the Defense Personnel Support Center.
Food service customers include hospitals, schools, universities, airlines,
retail and wholesale restaurant businesses and national food service
franchises. In addition, the Company packages and distributes products
manufactured or processed by others. Sales to Preferred Products, Inc. ("PPI")
accounted for approximately $34.8 and $29.3 million, or 11.7% and 10.4%, of the
Company's gross sales for the years ended December 31, 1996 and 1995,
respectively. No single customer accounted for more than 10% of the
Company's gross sales for the Transition Period or for the year ended
December 31, 1994. In addition, sales to Sam's Club and Walmart accounted
for approximately $27.7 million, or 9.9%, of the Company's gross sales for
1995. The Company was outbid for Sam's Club business (which accounted for
approximately $23.4 million of the Company's gross sales for 1995) during
the first quarter of 1996. See Item 7 -- "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- 1996 Compared
to 1995."
(iv) Sales, Marketing and Distribution
The Company markets its products through its own sales department and
through a network of over 275 independent brokers and various independent
distributors and suppliers. The Company's sales department of 38 employees
includes 7 regional managers, 10 sales specialists and 6 telemarketers.
The Company's marketing and promotional campaigns include regional and
national trade shows and limited newspaper advertisements done from time to
time in cooperation with certain of the Company's retail customers. The
Company also designs and manufactures point of purchase displays and bulk
food dispensers for use by certain of its retail customers. These
displays, and other shelving and pegboard displays purchased by the
Company, are installed by Company personnel. The Company believes that
controlling the type, style and format of display fixtures benefits the
customer and ultimately the Company by presenting the Company's products in
a consistent, attractive point of sale presentation.
The Company distributes its products from its Illinois, Georgia,
California, North Carolina and Texas production facilities and from public
warehouse and distribution facilities located in various other states. The
majority of the Company's products are shipped from the Company's
production, warehouse and distribution facilities by contract and common
carriers.
In Illinois and eight other states, JBSS distributes its Evon's brand
products to over 3,250 convenience stores, supermarkets and other retail
customer locations through its store-door delivery system. Under this
system, JBSS uses its own fleet of Evon's step-vans to market and
distribute Evon's brand nuts, snacks and candy directly to retail customers
on a store-by-store basis. Presently, the store-door delivery system
consists of approximately 56 route salespeople covering routes located in
Illinois, Indiana, Iowa, Wisconsin, Ohio, Minnesota, Michigan, Kentucky,
and Missouri. District and regional route managers, as well as sales and
marketing personnel operating out of JBSS's corporate offices, are
responsible for monitoring and managing the route salespeople.
In the Chicago area, JBSS operates two thrift stores at its production
facilities and five other retail stores. These stores sell bulk foods and
other products produced by JBSS and other vendors.
(v) Competition
Snack food markets are highly competitive. The Company's nuts and
other snack food products compete against products manufactured and sold by
numerous other companies in the snack food industry, some of which are
substantially larger and have greater resources than the Company. In the
nut industry, the Company competes with, among others, Planters Lifesavers
Company (a subsidiary of RJR Nabisco, Inc.) and numerous regional snack
food processors. Competitive factors in the Company's markets include
price, product quality, customer service, breadth of product line, brand
name awareness, method of distribution and sales promotion.
(vi) Raw Materials and Supplies
The Company purchases nuts from domestic and foreign sources. Most of
the Company's peanuts are purchased from the southeastern United States and
most of its walnuts and almonds are purchased from California. The Company
purchases most of its pecans from the southern United States and Mexico.
Cashew nuts are imported from India, Africa, Brazil and Southeast Asia.
The availability of nuts is subject to market conditions and crop size
fluctuations caused by weather conditions, plant diseases and other factors
beyond the Company's control. These fluctuations can adversely impact the
Company's profitability. For the year ended December 31, 1996, less than
10% of the Company's nut purchases were from foreign sources. Since the
great majority of the Company's nut purchases occur during the third and
fourth quarters of the calendar year, the percentage of the Company's nut
purchases from foreign sources for the Transition Period is not meaningful.
The Company generally purchases and shells peanuts, pecans and walnuts
instead of buying shelled nuts from shellers. Due, in part, to the
seasonal nature of the industry, the Company maintains significant
inventories of peanuts, pecans, walnuts and almonds at certain times of the
year. Fluctuations in the market price of peanuts, pecans, walnuts,
almonds and other nuts may affect the value of the Company's inventory and
thus the Company's gross profit and gross profit margin. See "General",
"the Transition Period Compared to the Twenty-six Weeks Ended June 27, 1996
- - Gross Profit", "1996 Compared to 1995 -- Gross Profit" and "1995 Compared
to 1994 -- Gross Profit" under Item 7 -- "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
The Company purchases supplies, such as roasting oils, seasonings,
glass jars, labels, composite cans and other packaging materials from third
parties. The Company sponsors a seed exchange program under which it
provides peanut seed to growers in return for a commitment to repay the
dollar value of that seed, plus interest, in the form of farmer stock
(i.e., peanuts at harvest). Approximately 75% of the farmer stock peanuts
purchased by the Company in 1996 were grown from seed provided by the
Company. The Company also contracts for the growing of a limited number of
generations of peanut seeds to increase seed quality and maintain desired
genetic characteristics of the peanut seed used in processing.
The availability and cost of raw materials for the production of the
Company's products, including peanuts, pecans, walnuts, almonds, other
nuts, dried fruit, coconut and chocolate, are subject to crop size and
yield fluctuations caused by factors beyond the Company's control, such as
weather conditions and plant diseases. Additionally, the supply of edible
nuts and other raw materials used in the Company's products could be
reduced upon any determination by the USDA or any other government agency
that certain pesticides, herbicides or other chemicals used by growers have
left harmful residues on portions of the crop or that the crop has been
contaminated by aflatoxin or other agents. Furthermore, the supply of
peanuts is currently subject to federal regulation that restricts peanut
imports and the tonnage of peanuts farmers may market domestically. See
"Federal Regulation" below.
(vii) Trademarks
The Company markets its products primarily under private labels and the
Evon's, Fisher, Flavor Tree, Sunshine Country and Texas Pride brand names,
which are registered with the U.S. Patent and Trademark Office.
(viii) Employees
As of June 26, 1997 the Company had approximately 1,529 active
employees, including 220 corporate staff employees and 1,309 production and
distribution employees. As a result of the seasonal nature of the
Company's business, the number of employees peaked to approximately 1,786
in the last four months of calendar 1996 and dropped to an average of
approximately 1,503 during the Transition Period. Approximately 20 of the
Company's salespeople are covered by a collective bargaining agreement
which expires on June 30, 1998.
(ix) Seasonality
The Company's business is seasonal. Demand for peanut and other nut
products is highest during the months of October, November and December.
Peanuts, pecans, walnuts and almonds, the Company's principal raw
materials, are primarily purchased between August and February and are
processed throughout the year until the following harvest. As a result of
this seasonality, the Company's personnel, working capital requirements and
inventories peak during the last four months of the calendar year. See
Item 8 -- "Financial Statements and Supplementary Data -- Quarterly
Consolidated Financial Data." See also Item 7 -- "Management's Discussion
and Analysis of Financial Condition and Results of Operations --
General."
(x) Backlog
Because the time between order and shipment is usually less than three
weeks, the Company believes that backlog as of a particular date is not
indicative of annual sales.
(xi) Federal Regulation
Peanuts are an important part of the Company's product line. The
Company processed approximately 40.4 million pounds of peanuts during the
Transition Period, which represents approximately 45% of the total pounds
of products processed by the Company for the period. The production and
marketing of peanuts are regulated by the USDA under the Agricultural
Adjustment Act of 1938 (the "Agricultural Adjustment Act"). The
Agricultural Adjustment Act, and regulations promulgated thereunder,
support the peanut crop by: (i) limiting peanut imports, (ii) limiting the
amount of peanuts that American farmers are allowed to take to the domestic
market each year, and (iii) setting a minimum price that a sheller must
pay for peanuts which may be sold for domestic consumption. The amount of
peanuts that American farmers can sell each year is determined by the
Secretary of Agriculture and is based upon the prior year's peanut
consumption in the United States. Only peanuts that qualify under the
quota may be sold for domestic food products and seed. The peanut quota for
the 1997 calendar year is 1,236 million tons. Peanuts in excess of the
quota are called "additional peanuts" and generally may only be exported or
used domestically for crushing into oil or meal. Current regulations
permit additional peanuts to be domestically processed and exported as
finished goods to any foreign country. The quota support price for the
1997 calendar year is $610 per ton.
The 1996 Farm Bill extended the federal support and subsidy program
for peanuts for seven years. However, there are no assurances that Congress
will not change or eliminate the program prior to its scheduled expiration.
Changes in the federal peanut program could significantly affect the
supply of, and price for, peanuts. While JBSS has successfully operated in
a market shaped by the federal peanut program for many years, JBSS believes
that it could adapt to a market without federal regulation if that were to
become necessary. However, JBSS has no experience in operating in such a
peanut market, and no assurances can be given that the elimination or
modification of the federal peanut program would not adversely affect
JBSS's business. Future changes in import quota limitations or the quota
support price for peanuts at a time when the Company is maintaining a
significant inventory of peanuts or has significant outstanding purchase
commitments could adversely affect the Company's business by lowering the
market value of the peanuts in its inventory or the peanuts which it is
committed to buy. While the Company believes that its ability to use its
raw peanut inventories in its own processing operations gives it greater
protection against these changes than is possessed by certain competitors
whose operations are limited to either shelling or processing, no
assurances can be given that future changes in, or the elimination of, the
federal peanut program or import quotas will not adversely affect the
Company's business.
The North American Free Trade Agreement ("NAFTA"), effective
January 1, 1994, committed the United States, Mexico and Canada to the
elimination of quantitative restrictions and tariffs on the cross-border
movement of industrial and agricultural products. Under NAFTA, United States
import restrictions on Mexican shelled and inshell peanuts are replaced by a
tariff rate quota, initially set at 3,377 tons, which will increase by a 3%
compound rate each year until 2001. Shipments within the quota's
parameters enter the U.S. duty-free, while imports above-quota parameters
from Mexico face tariff rates equivalent to approximately 120% on shelled
and 185% on inshell peanuts. The tariffs will be phased-out gradually by
2001.
The Uruguay Round Agreement of the General Agreement on Trade and
Tariffs ("GATT") took effect on July 1, 1995. Under GATT, the United States
must allow peanut imports to grow to 5% of domestic consumption by 2001.
Import quotas on peanuts have been replaced by high ad valorem tariffs, which
must be reduced by 15% annually for each of the next six years. Also under
GATT, the United States may limit imports of peanut butter, but must establish
a tariff rate quota for peanut butter imports based on 1993 import levels.
Peanut butter imports above the quota will be subject to an over-quota ad
valorem tariff, which also will be reduced by 15% annually for each of the
next six years.
Although NAFTA and GATT do not directly affect the federal peanut
program, the federal government may, in future legislative initiatives,
reconsider the federal peanut program in light of these agreements. The
Company does not believe that NAFTA and GATT have had a material impact on
the Company's business or will have a material impact on the Company's
business in the near term.
(xii) Operating Hazards and Uninsured Risks
The sale of food products for human consumption involves the risk of
injury to consumers as a result of product contamination or spoilage,
including the presence of foreign objects, substances, chemicals, aflatoxin
and other agents, or residues introduced during the growing, storage,
handling or transportation phases. While the Company maintains rigid
quality control standards, inspects its products by visual examination,
metal detectors or electronic monitors at various stages of its shelling
and processing operations for all of its nut and other food products,
permits the USDA to inspect all lots of peanuts shipped to and from the
Company's production facilities, and complies with the Nutrition Labeling
and Education Act, by labeling each product that it sells with labels that
disclose the nutritional value and content of each of the Company's
products, no assurance can be given that some nut or other food products
sold by the Company may not contain or develop harmful substances. The
Company currently maintains product liability insurance of $1 million per
occurrence and umbrella coverage up to $35 million which it and its
insurance carriers believe to be adequate.
Item 2 -- Properties
- --------------------
The Company presently owns or leases eight principal production
facilities. Two of these facilities are located in Elk Grove Village,
Illinois. The Busse Road facility serves as the Company's corporate
headquarters and main production facility. The other Elk Grove Village
facility is located on Arthur Avenue adjacent to the Busse Road facility.
The remaining principal production facilities are located in Bainbridge,
Georgia; Garysburg, North Carolina; Selma, Texas; Walnut, California;
Gustine, California; and Arlington Heights, Illinois. The Company also
leases a warehousing facility in Des Plaines, Illinois. The Company also
presently operates thrift stores out of the Busse Road facility and the Des
Plaines facility, and owns one retail store and leases four additional
retail stores in various Chicago suburbs. In addition, the Company leases
space in public warehouse facilities in various states.
a. Principal Facilities
The following table provides certain information regarding the
Company's principal facilities:
Date
Company Approx.
Type Constructed, Utilization
Square of Description Acquired or at June 26,
Location Footage Interest of Use First Occupied 1997
- ------------------------------------------------------------------------------
Processing,
Packaging,
Elk Grove warehousing,
Village, distribution,
Illinois(1) JBSS corporate
(Busse Road Leased/ offices and
facility) 300,000 Owned thrift store 1981 50%
- ------------------------------------------------------------------------------
Elk Grove
Village, Processing,
Illinois(2) packaging,
(Arthur Avenue warehousing
facility) 83,000 Owned and distribution 1989 38%
- ------------------------------------------------------------------------------
Des Plaines Warehousing and
Illinois(3) 68,000 Leased thirft store 1974 N/A
- ------------------------------------------------------------------------------
Peanut shelling,
purchasing,
processing,
packaging,
Bainbridge, warehousing and
Georgia(4) 230,000 Owned distibution 1987 62%
- ------------------------------------------------------------------------------
Peanut shelling,
purchasing,
processing,
packaging,
Garysburg, warehousing and
North Carolina 120,000 Owned distribution 1994 35%
- ------------------------------------------------------------------------------
Pecan shelling,
processing,
packaging,
warehousing,
distribution and
Selma, Sunshine corporate
Texas 200,000 Owned offices 1992 74%
- ------------------------------------------------------------------------------
Processing,
packaging,
Walnut, warehousing and
California(5) 50,000 Leased distribution 1991 30%
- ------------------------------------------------------------------------------
Walnut shelling,
processing,
packaging,
Gustine, warehousing and
California 75,000 Owned distribution 1993 37%
- ------------------------------------------------------------------------------
Processing,
Arlington packaging,
Heights, warehousing and
Illinois(6) 83,000 Owned distribution 1994 63%
- ------------------------------------------------------------------------------
(1) Approximately 240,000 square feet of the Busse Road facility is
leased from the Busse Land Trust under a lease which expires on May 31,
2015. Under the terms of the lease, the Company has a right of first
refusal and a right of first offer with respect to this portion of the Busse
Road facility. The remaining 60,000 square feet of space at the Busse
Road facility (the "Addition") was constructed by the Company in 1994 on
property owned by the Busse Land Trust and on property owned by the
Company. Accordingly, (i) the Company and the Busse Land Trust entered
into a ground lease with a term beginning January 1, 1995 pursuant to
which the Company leases from the Busse Land Trust the land on which a
portion of the Addition is situated (the "Busse Addition Property"), and
(ii) the Company, the Busse Land Trust and the sole beneficiary of the
Busse Land Trust entered into a party wall agreement effective as of
January 1, 1995, which sets forth the respective rights and obligations
of the Company and the Busse Land Trust with respect to the common wall
which separates the existing Busse Road facility and the Addition. The
ground lease has a term which expires on May 31, 2015 (the same date on
which the Company's lease for the Busse Road facility expires). The
Company has an option to extend the term of the ground lease for one
five-year term, an option to purchase the Busse Addition Property at its
then appraised fair market value at any time during the term of the
ground lease, and a right of first refusal with respect to the Busse
Addition Property. See Item 13 -- "Certain Relationships and Related
Transactions - Lease Arrangements" .
(2) This facility is subject to a mortgage dated March 1989 securing a
note in the original principal amount of $1.8 million with a maturity
date of May 1, 1999.
(3) The Des Plaines facility is leased under a lease which expires on
October 31, 2010. The Des Plaines facility is also subject to a mortgage
securing a loan from an unrelated third party lender to the related-party
lessor in the original principal amount of approximately $1.6 million.
The rights of the Company under the lease are subject and subordinate to
the rights of the lender. Accordingly, a default by the lessor under the
loan could result in foreclosure on the facility and thereby adversely
affect the Company's leasehold interest. The Company subleases
approximately 29,000 square feet of space at the Des Plaines facility to
two related party lessees. See Item 13 -- "Certain Relationships and
Related Transactions -- Supplier, Vendor, Broker and Other Arrangements."
(4) The Bainbridge facility is subject to a mortgage and deed of trust
securing $8.0 million (excluding accrued and unpaid interest) in
industrial development bonds. See Item 7 -- "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity
and Capital Resources."
(5) The Walnut, California facility is leased under a lease which, as
amended, expires on July 31, 1999. The Company has two renewal options
under the lease: an option to extend the lease term until July 31, 2001;
and, upon expiration of such extended term, an option to extend the term
of the lease for an additional five years.
(6) The Arlington Heights facility is subject to a mortgage dated
September 27, 1995 securing a loan of $2.5 million with a maturity date of
October 1, 2015.
b. Manufacturing Capability, Technology and Engineering
The Company's principal production facilities are equipped with modern
processing and packaging machinery and equipment. The physical structure
and the layout of the production line at the Busse Road facility were
designed so peanuts and other nuts can be processed, jarred and packed in
cases for distribution on a completely automated basis. The facility also
has production lines for chocolate chips, candies, peanut butter and other
products processed or packaged by the Company.
The Selma facility contains the Company's automated pecan shelling and
bulk packaging operation. The facility's pecan shelling production lines
currently have the capacity to shell in excess of 60 million inshell pounds
of pecans annually. For the 1996 crop year, the Company processed
approximately 35 million inshell pounds of pecans at the Selma, Texas
facility. The Selma facility currently contains an almond processing line
with the capacity to process over 10 million pounds of almonds annually.
For the 1996 crop year, the Selma facility processed approximately 10
million pounds of almonds. See Item 7 -- "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- General."
The Bainbridge facility is located in the largest peanut producing
region in the United States. This facility takes direct delivery of farmer
stock peanuts and cleans, shells, sizes, inspects, blanches, roasts and
packages them for sale to the Company's customers. The production line at the
Bainbridge facility is almost entirely automated and has the capacity to
shell approximately 120 million inshell pounds of peanuts annually. During
the 1996 peanut crop year, the Bainbridge facility shelled approximately 78
million inshell pounds of peanuts.
The North Carolina facility has the capacity to process approximately
90 million inshell pounds of farmer stock peanuts annually. For the 1996 crop
year, the North Carolina facility processed approximately 35 million pounds
of inshell peanuts.
The Gustine facility, which was purchased in 1993, is used for walnut
shelling, processing and marketing operations. This facility was expanded
during 1994 to increase the capacity to shell from approximately 12 million
inshell pounds of walnuts annually to approximately 35 million inshell
pounds of walnuts annually. For the 1996 crop year, the Gustine facility
shelled approximately 18 million inshell pounds of walnuts.
The Arlington Heights facility was originally leased by the Company
from an unrelated third party and renovated and equipped by the Company for use
in the processing of Fisher Nut products in pursuant to the Company's
contract manufacturing arrangement with the Fisher Nut Company. In
September 1995, the Company exercised its option to purchase the facility
for a purchase price of approximately $2.2 million and currently uses the
facility for the production and packaging of its Fisher Nut products as
well as the "stand-up pouch" packaging for its Flavor Tree brand products.
Item 3 -- Legal Proceedings
- ---------------------------
The Company is party to various routine lawsuits, proceedings and
disputes arising out of the conduct of its business. The Company presently
believes that the resolution of any pending matters will not materially
affect its business, financial condition or results of operations.
Item 4 -- Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
The only matters submitted to a vote of the Company's stockholders
during the Transition Period were (i) the election of directors, and
(ii) the ratification of the appointment of Price Waterhouse LLP by the
Company's Board of Directors as the Company's certified public accountants
for 1997. The matters were submitted to the Company's stockholders in
connection with, and voted upon at the Company's 1997 Annual Meeting of
Stockholders, which was held April 30, 1997. The information called for by
this Item 4 with respect to such matters was previously reported in, and is
hereby answered by reference to the information set forth under, Item 5 -
"Other Information" to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 27, 1997.
PART II
Item 5 -- Market for Registrant's Common Equity and Related Stockholder Matters
- -------------------------------------------------------------------------------
The Company has two classes of stock: Class A Common Stock ("Class A
Stock") and Common Stock. The holders of Common Stock are entitled to
elect 25% of the members of the Board of Directors and the holders of Class
A Stock are entitled to elect the remaining directors. With respect to
matters other than the election of directors or any matters for which class
voting is required by law, the holders of Common Stock are entitled to one
vote per share while the holders of Class A Stock are entitled to 10 votes
per share. The Company's Class A Stock is not registered under the
Securities Act of 1933 and there is no established public trading market
for the Class A Stock. However, each share of Class A Stock is convertible
at the option of the holder at any time and from time to time (and, upon
the occurrence of certain events specified in the Company's Restated
Certificate of Incorporation, automatically converts) into one share of
Common Stock.
The Common Stock of the Company is quoted on the Nasdaq National Market
and its trading symbol is "JBSS". The following table sets forth, for the
quarters indicated, the high and low reported last sales prices for the
Common Stock as reported on the Nasdaq National Market.
Price Range of
Quarter Ended: Common Stock
- --------------------------------------------------------------------------
High Low
---- ----
September 25, 1997 (through September 15, 1997) $8.50 $6.50
June 26, 1997 7.63 5.75
March 27, 1997 6.25 4.63
December 31, 1996 7.00 4.88
September 26, 1996 7.25 4.75
June 27, 1996 7.50 6.13
March 28, 1996 9.75 7.00
December 31, 1995 10.75 8.75
September 28, 1995 10.50 8.25
June 29, 1995 10.50 6.75
March 30, 1995 9.25 5.38
As of September 15, 1997, there were approximately 247 holders and 15
holders of record of the Company's Common Stock and Class A Stock,
respectively.
Under the Company's Restated Certificate of Incorporation, the Class A
Stock and the Common Stock are entitled to share equally on a share for
share basis in any dividends declared by the Board of Directors on the
Company's common equity.
No dividends were declared during the Transition Period, in 1996 or in
1995. The declaration and payment of future dividends will be at the sole
discretion of the Board of Directors and will depend on the Company's
profitability, financial condition, cash requirements, future prospects and
other factors deemed relevant by the Board of Directors. The Company's
current loan agreements restrict the payment of annual dividends to amounts
specified in the loan agreements. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation-Liquidity and
Capital Resources."
For purposes of the calculation of the aggregate market value of the
Company's voting stock held by nonaffiliates of the Company as set forth on
the cover page of this Report, the Company did not consider any of the
siblings of Jasper B. Sanfilippo, or any of the lineal descendants (all of
whom are adults and some of whom are employed by the Company) of either
Jasper B. Sanfilippo, Mathias A. Valentine or such siblings (other than
those who are officers of the Company), as an affiliate of the Company.
See Item 10 -- "Directors and Executive Officers of the Registrant," Item
11 -- "Executive Compensation," Item 12 -- "Security Ownership of Certain
Beneficial Owners and Management," and Item 13 -- "Certain Relationships
and Related Transactions."
Item 6 -- Selected Financial Data
- ---------------------------------
The following historical consolidated financial data as of and for the
Transition Period, the twenty-six weeks ended June 27, 1996 and the years
ended December 31, 1996, 1995, 1994, 1993 and 1992 were derived from the
Company's audited consolidated financial statements. The financial data
should be read in conjunction with the Company's audited consolidated
financial statements and notes thereto, which are included elsewhere
herein, and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The information below is not
necessarily indicative of the results of future operations. As used
herein, unless the context otherwise indicates, the terms "Company" and
"JBSS" refer collectively to John B. Sanfilippo & Son, Inc. and, for all
periods commencing on or after May 28, 1992, its wholly owned subsidiaries,
including Sunshine Nut Co., Inc. ("Sunshine").
<TABLE>
Statement of Operations Data:
<CAPTION>
($ in thousands, except per share data)
(Unaudited)
Twenty-six Twenty-six Year Ended December 31,
Weeks Ended Weeks Ended ---------------------------------------------------
June 26, 1997 June 27, 1996 1996 1995 1994 1993 1992(1)(2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $133,064 $117,968 $294,404 $277,741 $208,970 $202,583 $191,373
Cost of sales 111,580 100,493 255,204 230,691 177,728 167,403 154,383
------- ------- ------- ------- ------- ------- -------
Gross profit 21,484 17,475 39,200 47,050 31,242 35,180 36,990
Selling and
administrative
expenses 16,762 16,050 35,410 30,338 25,857 21,762 22,249
------- ------- ------- ------- ------- ------- -------
Income from
operations 4,722 1,425 3,790 16,712 5,385 13,418 14,741
Interest expense 4,135 4,822 9,051 7,673 6,015 4,224 4,395
Other income 252 239 450 607 889 1,011 373
------- ------- ------- ------- ------- ------- -------
Income (loss)
before income
taxes 839 (3,158) (4,811) 9,646 259 10,205 10,719
Income tax
(expense)
benefit (388) 1,221 1,820 (3,858) (210) (4,082) (4,288)
------- ------- ------- ------- ------- ------- -------
Net income
(loss) $ 451 $ (1,947) $ (2,991) $ 5,788 $ 49 $ 6,123 $ 6,431
======= ======= ======= ======= ======= ====== ======
Net income
(loss) per
common share $ 0.05 $ (0.21) $ (0.33) $ 0.63 $ 0.00 $ 0.74 $ 0.95
======= ======= ======= ======= ======= ====== ======
Dividends
declared per
common share $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.05 $ 0.05
======= ======= ======= ======= ======= ====== ======
</TABLE>
<TABLE>
BALANCE SHEET DATA:
<CAPTION>
December 31,
(Unaudited) --------------------------------------------------
June 26, 1997 June 27, 1996 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital $ 49,866 $ 44,514 $ 40,956 $ 58,148 $ 36,418 $ 56,221 $ 27,500
Total assets 187,417 202,890 205,352 219,002 199,714 157,011 124,355
Long-term debt 68,862 65,603 63,319 74,681 52,804 46,409 34,442
Total debt 92,833 111,096 98,310 106,849 106,716 70,926 76,050
Stockholders' equity 73,071 73,664 72,620 75,611 68,092 69,247 32,417
</TABLE>
_____________________________
(1) The Company acquired Sunshine effective May 28, 1992, for $4,200. The
acquisition was accounted for as a purchase and, accordingly, the
results of operations for the year ended December 31, 1992 include the
results of operations of Sunshine from May 28, 1992.
(2) Certain amounts for the year ended December 31, 1992 have been
reclassified to conform to the Transition Period and the 1996, 1995,
1994 and 1993 presentations. This reclassification resulted in an
increase in cost of sales and a decrease in administrative expenses of
$1,465 from the amounts previously reported for the year ended
December 31, 1992. Such reclassification had no effect on net income or
retained earnings as previously reported.
Item 7 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations
- -----------------------------------------------------------
The statements contained in the following Management's Discussion
and Analysis of Financial Condition and Results of Operations which are not
historical are "forward looking statements". These forward looking statements,
which are generally followed (and therefore identified) by a cross reference to
"Factors That May Affect Future Results", represent the Company's present
expectations or beliefs concerning future events. The Company cautions that
such statements are qualified by important factors that could cause actual
results to differ materially from those in the forward looking statements,
including the factors described below under "Factors That May Affect Future
Results". Results actually achieved thus may differ materially from expected
results included in these statements.
General
The Company's business is seasonal. Demand for peanut and other nut
products is highest during the months of October, November and December.
Peanuts, pecans, walnuts, almonds and cashews, the Company's principal raw
materials, are purchased primarily during the period from August to February
and are processed throughout the year. As a result of this seasonality, the
Company's personnel and working capital requirements peak during the last four
months of the calendar year.
Also, due primarily to the seasonal nature of the Company's
business, the Company maintains significant inventories of peanuts, pecans,
walnuts, almonds and other nuts at certain times of the calendar year,
especially during the first and fourth quarters of each calendar year.
Fluctuations in the market prices of such nuts may affect the value of the
Company's inventory and thus the Company's profitability. During the
Transition Period, the Company has not been adversely affected by market
fluctuations. However, declines in the market prices for pecans and the
resulting reduction in the Company's selling price for pecans negatively
affected the Company's gross profit and gross profit margin generally for the
year ended December 31, 1996 and required the Company to record a $2.6 million
charge in the third quarter of 1996 to write down the carrying value of its
pecan inventory to the lower of cost or market value of such inventory as of
September 26, 1996. See "Results of Operations -- 1996 Compared to 1995 --
Gross Profit". The Company was also required to write down the value of its
peanut inventory during the third quarter of 1994 due to market conditions.
See "Results of Operations -- 1995 Compared to 1994 -- Gross Profit." There
can be no assurance that future write-downs of the Company's inventory may not
be required from time-to-time because of market price fluctuations, competitive
pricing pressures, the effects of various laws or regulations or other factors.
See " Factors That May Affect Future Results -- Availability of Raw Materials
and Market Price Fluctuations."
At June 26, 1997, the Company's inventories totalled approximately
$63.0 million compared to approximately $83.2 million at June 27, 1996, and
$77.1 million, $96.4 million and $89.0 million at December 31, 1996, 1995 and
1994, respectively. Inventory levels at June 26, 1997 were lower than
inventories at June 27, 1996 due primarily to reductions in the Company's total
pounds of inshell pecans on hand. The Company began operations at its new
pecan shelling facility in early 1996, and processing during the first quarter
of 1996 was affected by normal start-up inefficiencies. Consequently, the
level of inshell pecan inventories at both June 27, 1996 and December 31, 1995
were abnormally high. A $2.6 million inventory write-down was recorded in the
third quarter of 1996 to reflect significant declines in the market price for
pecans. See "Factors That May Affect Future Results -- Availability of Raw
Materials and Market Price Fluctuations."
In order to enhance consumer awareness of dietary issues
associated with the consumption of peanuts and other nut products, the Company
has taken steps to educate the consumer about the benefits of nut consumption.
The Company has no experience or data that indicates that the growth in the
number of health conscious consumers will cause a decline in nut consumption.
Also, recently there has been some publicity concerning allergic reactions to
peanuts and other nuts. However, the Company has no experience or data that
indicates the peanut and other nut related allergies have affected or will
affect the Company's business.
Results of Operations
The following table sets forth the percentage relationship of certain items
to net sales for the periods indicated and the percentage increase or
decrease of such items from June 26, 1997 to June 27, 1996, and from
December 31, 1996 to December 31, 1995 and from December 31, 1995 to
December 31, 1994:
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage of Net Sales Percentage Change
Twenty-six Weeks Ended Year Ended December 31, ------------------------------
--------------------------- ----------------------- Transition 1996 1995
(Unaudited) Period vs. vs. vs.
June 26, 1997 June 27,1996 1996 1995 1994 June 26, 1996 1995 1994
------------- ------------ ------ ------ ------ ------------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 12.8% 6.0% 32.9%
Gross profit 16.1 14.8 13.3 16.9 15.0 22.9 (16.7) 50.6
Selling expenses 8.9 8.8 8.1 7.3 8.2 13.3 18.2 18.1
Administrative expenses 3.7 4.8 3.9 3.6 4.2 (11.9) 13.8 15.9
Income from operations 3.5 1.2 1.3 6.0 2.6 231.4 (77.3) 210.3
</TABLE>
The Transition Period Compared to the Twenty-six Weeks Ended June 27, 1996
- --------------------------------------------------------------------------
Net Sales. Net sales increased from approximately $118.0 million for the
twenty-six weeks ended June 27, 1996 to approximately $133.1 million for the
Transition Period, an increase of approximately $15.1 million or 12.8%. The
increase in net sales was due primarily to increased unit volume sales to the
Company's retail and food service customers. The increase in net sales to food
service customers was due primarily to additional unit volume sales to airline
customers. Net sales to the Company's industrial customers declined slightly
in 1997 compared to 1996.
Gross Profit. Gross profit margin increased from 14.8% for the twenty-six
weeks ended June 27, 1996 to 16.1% for the Transition Period. This increase
was due primarily to (i) increases in net sales as a percentage of total sales
to retail customers, which generally carry higher margins than sales to the
Company's other customers, and (ii) declines in the market price for processed
pecan meats negatively affecting the 1996 gross profit margin.
Selling and Administrative Expenses. Selling and administrative
expenses as a percentage of net sales decreased from 13.6% for the twenty-six
weeks ended June 27, 1996 to 12.6% for the Transition Period. Selling expenses
as a percentage of net sales increased marginally from 8.8% for the twenty-six
weeks ended June 27, 1996 to 8.9% for the Transition Period. Administrative
expenses as a percentage of net sales decreased from 4.8% for the twenty-six
weeks ended June 27, 1996 to 3.7% for the Transition Period. This decrease was
due primarily to lower staffing costs due to the restructuring of certain
administrative functions after the first quarter of 1996.
Income from Operations. Due to the factors discussed above, income from
operations increased from approximately $1.4 million, or 1.2% of net sales, for
the twenty-six weeks ended June 27, 1996 to approximately $4.7 million, or 3.5%
of net sales, for the Transition Period.
Interest Expense. Interest expense decreased from approximately $4.8
million for the twenty-six weeks ended June 27, 1996 to approximately $4.1
million for the Transition Period. This decrease was due primarily to a lower
average level of borrowings during the Transition Period compared to 1996 due
to improved operating results, reduced working capital requirements and reduced
fixed asset expenditures.
Income Taxes. The Company recorded income tax expense of approximately
$0.4 million, or 46.2% of income before income taxes, for the Transition
Period.
1996 Compared to 1995
- ---------------------
Net Sales. Net sales increased from $277.7 million in 1995 to $294.4
million in 1996, an increase of $16.7 million, or 6.0%. The increase in net
sales was due primarily to increased unit volume sales to the Company's retail,
industrial and food service customers. The increase in net sales to retail
customers was due primarily to the additional unit volume sales generated by
the Company's Fisher Nut Division, which was acquired by the Company in the
fourth quarter of 1995. The increase in unit volume sales to retail customers
was partially offset by decreases in net sales to certain retail customers such
as Sam's Club. During the first quarter of 1996, the Company was outbid for
Sam's Club business, which accounted for approximately $23.4 million of the
Company's net sales in 1995. See "--Gross Profit" and "Factors That May Affect
Future Results - Competitive Environment". The increase in net sales to
industrial customers was due primarily to additional unit volume sales by
Sunshine. Net sales to food service customers increased due to higher sales
to airlines. In 1996, net sales to government customers declined, as the
Company chose to bid on fewer government contracts.
Gross Profit. Gross profit in 1996 decreased 16.7% to $39.2 million from
$47.1 million in 1995. Gross profit margin decreased from 16.9% in 1995 to
13.3% in 1996. This decrease was due primarily to (i) declines in the market
price for processed pecan meats throughout 1996 relative to the cost of the
Company's pecan inventory, (ii) a $2.6 million write-down of the Company's
pecan inventory as of the end of the third quarter of 1996 to reflect the lower
of cost or market value of such inventory, and (iii) increases in raw material
costs which the Company was unable to offset with increases in selling prices.
The Company's gross profit and gross profit margin were also adversely affected
by the Company's relocation of its pecan shelling operations from Des Plaines,
Illinois to the Company's new pecan shelling facility in Selma, Texas.
Although the relocation occurred during the fourth quarter of 1995, the new
facility was not fully operational until midway through the first quarter of
1996 and, consequently, the Company was not able to fully absorb the overhead
expenses of that facility during the first quarter of 1996.
Selling and Administrative Expenses. Selling and administrative expenses
as a percentage of net sales increased from 10.9% in 1995 to 12.0% in 1996.
Selling expenses as a percentage of net sales increased from 7.3% in 1995 to
8.1% in 1996. This increase was due primarily to increased promotional
expenses, staffing costs and commissions. Administrative expenses as a
percentage of net sales increased from 3.6% in 1995 to 3.9% in 1996. This
increase in administrative expenses as a percentage of net sales was due
primarily to (i) higher staffing costs, and (ii) amortization expense related
to acquisitions.
Income from Operations. Due to the factors discussed above, income from
operations decreased from $16.7 million in 1995 to $3.8 million in 1996, a
decrease of $12.9 million, or 77.3%. As a percentage of net sales, operating
income decreased from 6.0% in 1995 to 1.3% in 1996.
Interest Expense. Interest expense increased from $7.7 million in 1995
to $9.1 million in 1996, an increase of $1.4 million or 18.0%. This increase
was due primarily to a higher average level of borrowings due to working
capital requirements for the first three quarters of 1996, capital expenditures
and the impact of the net loss for 1996.
Income Taxes. The Company recorded an income tax benefit of
approximately $1.8 million, or 37.8% of the loss before income taxes. See Note
3 to the Consolidated Financial Statements.
1995 Compared to 1994
- ---------------------
Net Sales. Net sales increased from $209.0 million in 1994 to $277.7 million
in 1995, an increase of approximately $68.8 million, or 32.9%. The increase in
net sales was due primarily to increased unit volume sales to the Company's
retail, industrial, contract manufacturing and export customers. Generally
higher selling prices for certain of the Company's products during the first
two quarters of 1995 also contributed to the increase in net sales. The
increase in net sales to retail customers was due primarily to (i) sales of
approximately $29.3 million to Preferred Products, Inc. ("PPI", a wholly owned
subsidiary of Supervalu, Inc.), which were generated primarily under the
long-term supply contract entered into between the Company and PPI in the first
quarter of 1995, and (ii) an increase in net sales to Sam's Club from
approximately $11.7 million in 1994 to approximately $23.4 million in 1995. In
1995, net sales to government customers declined, as the Company chose to bid
on fewer government contracts, and net sales to food service customers remained
relatively unchanged compared to 1994.
Gross Profit. Gross profit in 1995 increased 50.6% to $47.1 million from $31.2
million in 1994. Gross profit margin increased from 15.0% in 1994 to 16.9% in
1995. Although these increases appear significant, the gross profit and gross
profit margin for 1994 were unusually low due primarily to the 1994 third
quarter write-down of the Company's peanut inventory by approximately $2.0
million, the underutilization of manufacturing capacity added through the
acquisition and renovation of facilities in 1994 and 1993, and approximately
$1.5 million in costs incurred by the Company to comply with new Federal
nutritional labeling requirements that became effective in 1994. The primary
factors contributing to the increase in gross profit and gross profit margin
were (i) the absence of any such write-down or new labeling requirements in
1995, (ii) the Company's ability to spread manufacturing costs over a larger
revenue base, and (iii) the effect of a change in the Company's customer mix,
as sales to retail customers (which are generally at higher margins) comprised
a higher percentage, and sales to industrial, food service and government
customers (which are generally at lower margins) comprised a lower percentage,
of the Company's total net sales for 1995 compared to 1994. Generally higher
selling prices for certain of the Company's products during the first two
quarters of 1995 also contributed to the increases in gross profit and gross
profit margin
Selling and Administrative Expenses. Selling and administrative expenses as a
percentage of net sales decreased from 12.4% in 1994 to 10.9% in 1995. Selling
expenses as a percentage of net sales decreased from 8.2% in 1994 to 7.3% in
1995. Administrative expenses as a percentage of net sales decreased from 4.2%
in 1994 to 3.6% in 1995. These decreases were due primarily to the higher
sales volume in 1995 compared to 1994.
Income from Operations. Due to the factors discussed above, income from
operations increased from $5.4 million in 1994 to $16.7 million in 1995, an
increase of $11.3 million, or 210.3%. As a percentage of net sales, operating
income increased from 2.6% in 1994 to 6.0% in 1995.
Interest Expense. Interest expense increased from $6.0 million in 1994 to $7.7
million in 1995, an increase of $1.7 million, or 27.6%. The increase in
interest expense for 1995 was due primarily to a higher average level of
borrowings during 1995 compared to 1994, as the Company financed certain
additional capital expenditures and its investment in inventory related to its
increased production capacity. Increases in the floating interest rate
applicable to borrowings under the working capital revolving loan component of
the Company's prior bank credit facility also contributed to
the increase in interest expense. The floating rate increased as a result of
increases generally in market rates of interest (such as LIBOR and the prime
rate) on which such interest rate is based, and an increase in the interest
rate applicable to the working capital revolving loan component of the
Company's prior bank credit facility resulting from certain amendments to the
Company's prior bank credit facility in September of 1994.
Income Taxes. Income tax expense in 1995 was $3.9 million, or 40.0% of income
before income taxes.
Liquidity and Capital Resources
- -------------------------------
General
During the Transition Period, the Company continued to finance its
activities through a bank credit facility (the "Bank Credit Facility"), $35.0
million borrowed under a long-term financing facility originally entered into
by the Company in 1992 (the "Long-Term Financing Facility") and $25.0 million
borrowed on September 12, 1995 under a long-term financing arrangement (the
"Additional Long-Term Financing"). On January 24, 1997, the Company granted
perfected security interests in, and liens on, substantially all of the
Company's assets to secure the Company's obligations under the Bank Credit
Facility, the Long-Term Financing Facility and the Additional Long-Term
Financing.
Net cash provided by operating activities was approximately $7.4
million for the Transition Period compared to approximately $2.0 million for
the twenty-six weeks ended June 27, 1996. The largest component of net cash
provided by operating activities during the Transition Period was a reduction
of approximately $14.1 million in inventories. The largest component of net
cash used in investing activities during the Transition Period was
approximately $1.9 million in capital expenditures. During the Transition
Period, the Company repaid approximately $2.4 million of long-term debt,
compared to approximately $1.6 million in the comparable period of 1996.
Financing Arrangements
The Bank Credit Facility is comprised of (i) a working capital
revolving loan which (as described below, depending on the time of year)
provides working capital financing of up to approximately $51.7 million, in
the aggregate, and matures on March 27, 1998, and (ii) an $8.3 million letter
of credit (the "IDB Letter of Credit") to secure the industrial development
bonds described below. Borrowings under the working capital revolving loan
accrue interest at a rate (the weighted average of which was 7.10% at June 26,
1997) determined pursuant to a formula based on the agent bank's quoted rate,
the Federal Funds Rate and the Eurodollar Interbank rate. The aggregate amount
outstanding under the Bank Credit Facility, as amended, is limited to specified
amounts which vary, because of the seasonal nature of the Company's business,
from $60.0 million during January through March, to $50.0 million during April
through May, to $40.0 million during June through September, and to $50.0
million during October through December.
Of the total $35.0 million of borrowings under the Long-Term
Financing Facility, $25.0 million matures on August 15, 2004, bears interest
rates ranging from 7.34% to 9.18% per annum payable quarterly, and requires
equal semi-annual principal installment payments based on a ten-year
amortization schedule. The remaining $10.0 million of this indebtedness
matures on May 15, 2006, bears interest at the rate of 9.16% per annum payable
quarterly, and requires equal semi-annual principal installment payments based
on a ten-year amortization schedule. As of June 26, 1997, there was
approximately $27.7 million outstanding under the Long-Term Financing Facility.
The Additional Long-Term Financing has a maturity date of
September 1, 2005 and (i) as to $10.0 million of the principal amount thereof,
bears interest at an annual rate of 8.3% payable semiannually and, beginning on
September 1, 1999, requires annual principal payments of approximately $1.4
million each through maturity, and (ii) as to the other $15.0 million of the
principal amount thereof, bears interest at an annual rate of 9.38% payable
semiannually and requires principal payments of $5.0 million each on September
1, 2003 and September 1, 2004, with a final payment of $5.0 million at maturity
on September 1, 2005.
On January 24, 1997, the Bank Credit Facility, the Long-Term
Financing Facility and the Additional Long-Term Financing were each required
to be amended in order to secure waivers from the Company's lenders of
violations by the Company of certain covenants under its financing
arrangements. The Bank Credit Facility was amended to, among other things: (i)
convert the fixed coverage ratio covenant from a most recent four quarter
calculation to an individual quarter calculation for each of the four quarters
in 1997; (ii) decrease the annual capital expenditure limitation to $7.2
million from $10.0 million in calendar year 1997; and (iii) increase the
aggregate amount outstanding limitation under the Bank Credit Facility's
covenant. The Long-Term Financing Facility was amended to, among other things,
modify existing financial covenants to conform to those contained in the Bank
Credit Facility, as amended. The Additional Long-Term Financing was amended,
to among other things: (i) replace the fixed charge coverage ratio covenant
for the fiscal quarters ending December 1996 through June 1997; and (ii)
reduce the required fixed charge ratio for the quarter ending
September 25, 1997.
The terms of the Company's financing facilities, as amended, include
certain restrictive covenants that, among other things; (i) require the Company
to maintain specified financial ratios; (ii) limit the amount of the Company's
capital expenditures in calendar 1997 to $7.2 million and $10.0 million
thereafter; and (iii) require that Jasper B. Sanfilippo (the Company's Chairman
of the Board and Chief Executive Officer) and Mathias A. Valentine (a director
and the Company's President) together with their respective immediate family
members and certain trusts created for the benefit of their respective sons and
daughters, continue to own shares representing the right to elect a majority of
the directors of the Company. In addition, (i) the Bank Credit Facility and
the Long-Term Financing Facility limit the Company's payment of dividends to a
cumulative amount not to exceed 25% of the Company's cumulative net income from
and after January 1, 1996, (ii) the Additional Long-Term Financing limits
cumulative dividends to the sum of (a) 50% of the Company's cumulative net
income (or minus 100% of the Company's cumulative net loss) from and after
January 1, 1995 to the date the dividend is declared, (b) the cumulative amount
of the net proceeds received by the Company during the same period from any
sale of its capital stock, and (c) $5.0 million, and (iii) the Bank Credit
Facility and the Long-Term Financing Facility prohibit the Company from
spending more than $1.0 million to redeem shares of capital stock. As of June
26, 1997, the Company was in compliance with all restrictive covenants, as
amended, under its financing facilities.
The Company has $8.0 million in aggregate principal amount of industrial
development bonds outstanding which was used to finance the acquisition,
construction and equipping of the Company's Bainbridge, Georgia facility (the
"IDB Financing"). The bonds bore interest payable semi-annually at 6% through
May 1997. On June 1, 1997, pursuant to the terms of the IDB Financing, the
Company replaced the existing letter of credit securing the IDB Financing with
the IDB Letter of Credit, reset the interest rate for the bonds at 5.375%,
redeemed substantially all of the bonds and then caused the underwriter of the
bonds to re-market all of the redeemed bonds on a "best efforts" basis. The
bonds now bear interest payable semi-annually at 5.375% through May 2002. On
June 1, 2002, and on each subsequent interest reset date for the bonds, the
Company is required to redeem the bonds at face value plus any accrued and
unpaid interest, unless a bondholder elects to retain his or her bonds. Any
bonds redeemed by the Company at the demand of a bondholder on the reset date
are required to be re-marketed by the underwriter of the bonds on a "best
efforts" basis. Funds for the redemption of bonds on the demand of any
bondholder are required to be obtained from the following sources in the
following order of priority: (i) funds supplied by the Company for redemption;
(ii) proceeds from the remarketing of the bonds; (iii) proceeds from a drawing
under the IDB Letter of Credit; or (iv) in the event funds from the foregoing
sources are insufficient, a mandatory payment by the Company. Drawings under
the IDB Letter of Credit to redeem bonds on the demand of any bondholder are
payable in full by the Company upon demand of the lenders under the Bank Credit
Facility. In addition, the Company is required to redeem the bonds in varying
annual installments, ranging from $170,000 to $780,000, beginning in 1998 and
continuing through 2017. The Company is also required to redeem the bonds in
certain other circumstances; for example, within 180 days after any
determination that interest on the bonds is taxable. The Company has the
option, subject to certain conditions, to redeem the bonds at face value plus
accrued interest, if any.
Significant Acquisitions and Capital Expenditures
The Company invested over $58 million in capital expenditures on major
expansion projects from 1993 through 1996. These programs are now
completed. For the twenty-six weeks ended June 26, 1997, capital
expenditures were $1.9 million. No significant capital expenditures are
anticipated in the near future.
Stock Repurchase
On February 25, 1994, the Company's Board of Directors authorized the
purchase from time to time of up to an aggregate of 500,000 shares of
Common Stock. Pursuant to such authorization, the Company repurchased
117,900 shares of Common Stock at an aggregate price of $1.2 million during
1994. Repurchased shares may be reissued to fulfill stock option exercises
under the Company's stock option plans or to finance future acquisitions.
The Company has not made any stock repurchases since 1994.
Capital Resources
As of June 26, 1997, the Company had approximately $13.8 million of available
credit under the Bank Credit Facility. The Company believes that cash flow
from operating activities and funds available under the Bank Credit Facility
will be sufficient to meet working capital requirements and anticipated capital
expenditures for the foreseeable future. See "Factors That May Affect Future
Results - Growth Initiatives".
Factors That May Affect Future Results
(a) Growth Initiatives
Over the past five years, the Company has substantially increased its shelling,
processing and manufacturing capacity through a combination of strategic
acquisitions and improvements and expansions of its facilities. The Company
increased its borrowings to finance these acquisitions, improvements and
expansions. The Company's growth initiatives also increased the cost of
operations and increased investments in inventory related to the resulting
increased production capacity. Underutilization of its increased production
capacity has had a negative impact on the Company's gross profit and gross
profit margin. Until such time as the Company is able to more fully utilize
its increased production capacity through further increases in its sales
volume, the Company's results of operations may continue to be adversely
affected. Furthermore, although the Company believes that cash flow from
operations and funds available under its credit facilities (assuming the
Company maintains compliance with its covenants under its financing
arrangements) will be sufficient to meet the Company's working capital
requirements and anticipated capital expenditures for fiscal 1998, there can
be no assurance that such cash flow and credit availability will be sufficient
to meet future capital requirements or that the Company will remain in
compliance with such covenants. See "Liquidity and Capital Resources". The
Company strives to update and improve its management information systems to
ensure their adequacy. Although the Company believes that its management
information systems currently provide the Company with the information
necessary to manage its business, there can be no assurance that the
Company's management information systems will meet the Company's future
requirements.
(b) Availability of Raw Materials and Market Price Fluctuations
The availability and cost of raw materials for the production of the Company's
products, including peanuts, pecans, other nuts, dried fruit and chocolate, are
subject to crop size and yield fluctuations caused by factors beyond the
Company's control, such as weather condition and plant diseases. Additionally,
the supply of edible nuts and other raw materials used in the Company's
products could be reduced upon a determination by the United States Department
of Agriculture or other government agency that certain pesticides, herbicides
or other chemicals used by growers have left harmful residues on portions of
the crop or that the crop has been contaminated by aflatoxin or other agents.
Shortages in the supply of and resulting increases in the prices of nuts and
other raw materials used by the Company in its products could have an adverse
impact on the Company's profitability. Furthermore, fluctuations in the market
prices of nuts, dried fruit or chocolate may affect the value of the Company's
inventory and the Company's profitability. For example, during the third
quarter of 1996 the Company was required to record a $2.6 million charge
against its earnings to reflect the impact of a lower cost or market adjustment
of its pecan inventory. The Company has a significant inventory of nuts,
dried fruit and chocolate that would be adversely affected by any decrease in
the market price of such raw materials. See "General".
(c) Competitive Environment
The Company operates in a highly competitive environment. The Company's
principal products compete against food and snack products manufactured and
sold by numerous regional and national companies, some of which are
substantially larger and have greater resources than JBSS, such as Planters
Livesavers Company (a subsidiary of RJR Nabisco, Inc.). JBSS also competes
with other shellers in the industrial market and with regional processors in
the retail and wholesale markets. In order to maintain or increase its market
share, the Company must continue to price its products competitively, which may
lower revenue per unit and cause declines in gross margin, if the Company is
unable to increase unit volumes as well as reduce its costs.
(d) Sales to Industrial Customers
The increase in the Company's processing and shelling capacity created by its
facility construction and expansion programs over the past four years and
increased sales by Sunshine may result in further increases in net sales to
industrial customers, both in amount and as a percentage of the Company's total
sales. Because sales to industrial customers are generally made at lower
margins than sales to other customers, increases in such sales may adversely
affect the Company's profit margins.
(e) Fixed Price Commitments
From time to time, the Company enters into fixed price commitments with its
customers. Such commitments typically represent 10% or less of the Company's
annual net sales and are normally entered into after the Company's cost to
acquire the nut products necessary to satisfy the fixed price commitment is
substantially fixed. The Company plans to continue entering into fixed price
commitments in respect to certain of its nut products prior to fixing its
acquisition cost when, in management's judgment, market or crop harvest
conditions so warrant. To the extent the Company does so, these fixed price
commitments may result in losses. Historically, however, such losses have
generally been offset by gains on other fixed price commitments. However,
there can be no assurance that losses from fixed price commitments may not have
a material adverse effect on the Company's results of operations.
(f) Federal Regulation of Peanut Prices, Quotas and Poundage Allotments
Peanuts are an important part of the Company's product line. The Company
processed approximately 40.4 million pounds of peanuts during the Transition
Period, which represents approximately 45% of the total pounds of products
processed by the Company for the period. The production and marketing of
peanuts are regulated by the USDA under the Agricultural Adjustment Act of 1938
(the "Agricultural Adjustment Act"). The Agricultural Adjustment Act, and
regulations promulgated thereunder, support the peanut crop by: (i) limiting
peanut imports, (ii) limiting the amount of peanuts that American farmers are
allowed to take to the domestic market each year, and (iii) setting a minimum
price that a sheller must pay for peanuts which may be sold for domestic
consumption. The amount of peanuts that American farmers can sell each year is
determined by the Secretary of Agriculture and is based upon the prior year's
peanut consumption in the United States. Only peanuts that qualify under the
quota may be sold for domestic food products and seed. The peanut quota for the
1997 calendar year is 1,236 million tons. Peanuts in excess of the quota are
called "additional peanuts" and generally may only be exported or used
domestically for crushing into oil or meal. Current regulations permit
additional peanuts to be domestically processed and exported as finished goods
to any foreign country. The quota support price for the 1997 calendar year is
$610 per ton.
The 1996 Farm Bill extended the federal support and subsidy program for
peanuts for seven years. However, there are no assurances that Congress
will not change or eliminate the program prior to its scheduled expiration.
Changes in the federal peanut program could significantly affect the
supply of, and price for, peanuts. While JBSS has successfully operated in
a market shaped by the federal peanut program for many years, JBSS believes
that it could adapt to a market without federal regulation if that were to
become necessary. However, JBSS has no experience in operating in such a
peanut market, and no assurances can be given that the elimination or
modification of the federal peanut program would not adversely affect
JBSS's business. Future changes in import quota limitations or the quota
support price for peanuts at a time when the Company is maintaining a
significant inventory of peanuts or has significant outstanding purchase
commitments could adversely affect the Company's business by lowering the
market value of the peanuts in its inventory or the peanuts which it is
committed to buy. While the Company believes that its ability to use its
raw peanut inventories in its own processing operations gives it greater
protection against these changes than is possessed by certain competitors
whose operations are limited to either shelling or processing, no
assurances can be given that future changes in, or the elimination of, the
federal peanut program or import quotas will not adversely affect the
Company's business.
The North American Free Trade Agreement ("NAFTA"), effective January 1,
1994, committed the United States, Mexico and Canada to the elimination of
quantitative restrictions and tariffs on the cross-border movement of
industrial and agricultural products. Under NAFTA, United States import
restrictions on Mexican shelled and inshell peanuts are replaced by a
tariff rate quota, initially set at 3,377 tons, which will increase by a 3%
compound rate each year until 2001. Shipments within the quota's
parameters enter the U.S. duty-free, while imports above-quota parameters
from Mexico face tariff rates equivalent to approximately 120% on shelled
and 185% on inshell peanuts. The tariffs will be phased-out gradually by
2001.
The Uruguay Round Agreement of the General Agreement on Trade and Tariffs
("GATT") took effect on July 1, 1995. Under GATT, the United States must
allow peanut imports to grow to 5% of domestic consumption by 2001. Import
quotas on peanuts have been replaced by high ad valorem tariffs, which must
be reduced by 15% annually for each of the next six years. Also under GATT,
the United States may limit imports of peanut butter, but must establish a
tariff rate quota for peanut butter imports based on 1993 import levels.
Peanut butter imports above the quota will be subject to an over-quota ad
valorem tariff, which also will be reduced by 15% annually for each of the
next six years.
Although NAFTA and GATT do not directly affect the federal peanut program,
the federal government may, in future legislative initiatives, reconsider
the federal peanut program in light of these agreements. The Company does
not believe that NAFTA and GATT have had a material impact on the Company's
business or will have a material impact on the Company's business in the
near term.
Item 8 -- Financial Statements and Supplementary Data
- -----------------------------------------------------
Report of Independent Accountants
Consolidated Balance Sheets at June 26, 1997, December 31, 1996 and
December 31, 1995
Consolidated Statements of Operations for the Twenty-Six Weeks Ended
June 26, 1997 and June 27, 1996, and for the Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the Twenty-Six
Weeks Ended June 26, 1997 and for the Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Twenty-Six Weeks
Ended June 26, 1997 and June 27, 1996, and for the Years Ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Quarterly Consolidated Financial Data
REPORT OF MANAGEMENT
The management of John B. Sanfilippo & Son, Inc. has prepared and is
responsible for the integrity of the information presented in this Form
10-K, including the Company's financial statements. These statements have
been prepared in conformity with generally accepted accounting principles
and include, where necessary, informed estimates and judgments by
management.
The Company maintains systems of accounting and internal controls designed
to provide assurance that assets are properly accounted for, as well as to
ensure that the financial records are reliable for preparing financial
statements. The systems are augmented by qualified personnel and are
reviewed on a periodic basis.
Our independent auditors, Price Waterhouse LLP, conduct annual audits of
our financial statements in accordance with generally accepted auditing
standards which include the review of internal controls for the purpose of
establishing audit scope, and issue an opinion on the fairness of such
financial statements.
The Company has an Audit Committee that meets periodically with management
and the independent auditors to review the manner in which they are
performing their responsibilities and to discuss auditing, internal
accounting controls, and financial reporting matters. The independent
auditors periodically meet alone with the Audit Committee and have free
access to the Audit Committee at any time.
/s/ Gary P. Jensen
- ------------------
Gary P. Jensen
Executive Vice President, Finance
& Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
John B. Sanfilippo & Son, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity and
of cash flows present fairly, in all material respects, the financial
position of John B. Sanfilippo & Son, Inc. and its subsidiaries at June 26,
1997 and December 31, 1996 and 1995, and the results of their
operations and their cash flows for the twenty-six week period ended June 26,
1997 and each of the three years in the period ended December 31, 1996,
in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Chicago, Illinois
August 29, 1997
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
June 26, 1997, December 31, 1996 and December 31, 1995
(dollars in thousands)
June 26, December 31,
1997 1996 1995
---------------------------------
ASSETS
CURRENT ASSETS:
Cash $ 631 $ 602 $ 408
Accounts receivable, including
affiliate receivables of $290,
$170 and $237, respectively,
less allowance for doubtful
accounts of $669, $676 and
$434, respectively 25,200 27,386 27,789
Inventories 62,988 77,105 96,360
Stockholder note receivable -- -- 354
Deferred income taxes 618 1,056 762
Income taxes receivable 2,830 2,209 --
Prepaid expenses and
other current assets 1,419 824 682
-------- -------- --------
TOTAL CURRENT ASSETS 93,686 109,182 126,355
-------- -------- --------
PROPERTIES :
Buildings 55,211 55,259 47,831
Machinery and equipment 66,019 64,353 52,825
Furniture and leasehold improvements 4,956 4,940 4,813
Vehicles 4,190 4,057 3,494
Construction in progress -- -- 8,977
-------- -------- --------
130,376 128,609 117,940
Less: Accumulated depreciation 53,749 50,000 42,854
-------- -------- --------
76,627 78,609 75,086
Land 1,892 1,945 1,945
-------- -------- --------
78,519 80,554 77,031
-------- -------- --------
OTHER ASSETS:
Goodwill and other intangibles 8,667 9,128 9,450
Miscellaneous 6,545 6,488 6,166
-------- -------- --------
15,212 15,616 15,616
-------- -------- --------
$187,417 $205,352 $219,002
======== ======== ========
The accompanying notes are an integral part of these financial statements.
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
June 26, 1997, December 31, 1996 and December 31, 1995
(dollars in thousands, except per share amounts)
June 26, December 31,
1997 1996 1995
---------------------------------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 19,034 $ 22,294 $ 28,582
Current maturities of long-term debt 4,937 12,697 3,586
Accounts payable, including affiliate
payables of $334, $538 and $1,071 11,193 23,843 26,727
Accrued expenses 8,656 9,392 8,668
Income taxes payable -- -- 644
------- ------- -------
TOTAL CURRENT LIABILITIES 43,820 68,226 68,207
------- ------- -------
LONG-TERM LIABILITIES
Long-term debt 68,862 63,319 74,681
Deferred income taxes 1,664 1,187 503
------- ------- -------
70,526 64,506 75,184
------- ------- -------
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value;
500,000 shares authorized,
none issued or outstanding -- -- --
Class A Common Stock, cumulative voting
rights of ten votes per share, $.01 par
value; 10,000,000 shares authorized,
3,687,426 shares issued and outstanding 37 37 37
Common Stock, noncumulative voting rights
of one vote per share, $.01 par value;
10,000,000 shares authorized, 5,578,140
shares issued and outstanding 56 56 56
Capital in excess of par value 57,191 57,191 57,191
Retained earnings 16,991 16,540 19,531
Treasury stock, at cost (1,204) (1,204) (1,204)
------- ------- -------
73,071 72,620 75,611
------- ------- -------
COMMITMENTS
$187,417 $205,352 $219,002
======= ======= =======
The accompanying notes are an integral part of these financial statements.
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the twenty-six weeks ended June 26, 1997 and June 27, 1996
and for the years ended December 31, 1996, 1995 and 1994
(dollars in thousands, except for earnings per share)
Twenty-six Weeks Ended Year Ended December 31,
----------------------- -----------------------------
(Unaudited)
June 26, June 27,
1997 1996 1996 1995 1994
-----------------------------------------------------------
Net sales $ 133,064 $ 117,968 $ 294,404 $ 277,741 $ 208,970
Cost of sales 111,580 100,493 255,204 230,691 177,728
-------- -------- -------- -------- --------
Gross profit 21,484 17,475 39,200 47,050 31,242
-------- -------- -------- -------- --------
Selling expenses 11,787 10,406 23,909 20,231 17,137
Administrative
expenses 4,975 5,644 11,501 10,107 8,720
-------- -------- -------- -------- --------
16,762 16,050 35,410 30,338 25,857
-------- -------- -------- -------- --------
Income from
operations 4,722 1,425 3,790 16,712 5,385
-------- -------- -------- -------- --------
Other income
(expense):
Interest expense
($440, $453,
$899, $936 and
$985 to affiliates) (4,135) (4,822) (9,051) (7,673) (6,015)
Interest income
($0, $7, $7,
$135 and $579
from affiliates) 16 17 27 188 673
Gain (loss) on
disposition of
properties 3 7 12 26 (40)
Rental income 233 215 411 393 256
-------- -------- -------- -------- --------
(3,883) (4,583) (8,601) (7,066) (5,126)
-------- -------- -------- -------- --------
Income (loss)
before income taxes 839 (3,158) (4,811) 9,646 259
Income tax (expense)
benefit (388) 1,211 1,820 (3,858) (210)
-------- -------- -------- -------- --------
Net income (loss) $ 451 $ (1,947) $ (2,991) $ 5,788 $ 49
======== ======== ======== ======== ========
Earnings (loss) per
common share $ 0.05 $ (0.21) $ (0.33) $ 0.63 $ 0.00
======== ======== ======== ======== ========
Weighted average
shares
outstanding 9,147,666 9,147,666 9,147,666 9,070,000 8,990,946
========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the twenty-six weeks ended June 26, 1997
and for the years ended December 31, 1996, 1995 and 1994
(dollars in thousands, except per share amounts)
Class A Capital in
Common Common Excess of Retained Treasury
Stock Stock Par Value Earnings Stock Total
----------------------------------------------------------
Balance, December
31, 1993 $ 37 $ 54 $55,462 $13,694 $ $69,247
Net income 49 49
Repurchase of 117,900
shares of Common Stock (1,204) (1,204)
----- ----- ------ ------ ------ ------
Balance, December
31, 1994 37 54 55,462 13,743 (1,204) 68,092
Net income 5,788 5,788
Issuance of 185,990
shares of Common Stock 2 1,729 1,731
----- ----- ------ ------ ------ ------
Balance, December
31, 1995 37 56 57,191 19,531 (1,204) 75,611
Net loss (2,991) (2,991)
----- ----- ------ ------ ------ ------
Balance, December
31, 1996 37 56 57,191 16,540 (1,204) 72,620
Net income 451 451
----- ----- ------ ------ ------ ------
Balance, June
26, 1997 $ 37 $ 56 $57,191 $16,991 $(1,204) $73,071
===== ===== ====== ====== ====== ======
The accompanying notes are an integral part of these financial statements.
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the twenty-six weeks ended June 26, 1997 and June 27, 1996
and for the years ended December 31, 1996, 1995 and 1994
(dollars in thousands)
<TABLE>
(Unaudited)
June 26, June 27, December 31, December 31, December 31,
1997 1996 1996 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 451 $ (1,947) $ (2,991) $ 5,788 $ 49
Adjustments:
Depreciation and amortization 4,322 4,139 8,629 7,551 6,006
(Gain) loss on disposition of
properties (4) (7) (8) (26) 40
Deferred income taxes 915 -- 390 621 (160)
Change in current assets and
current liabilities:
Accounts receivable, net 2,186 7,021 403 (5,165) (2,939)
Inventories 14,117 13,178 19,255 (7,345) (14,308)
Prepaid expenses and
other current assets (595) (329) (142) 1,455 (231)
Accounts payable (12,650) (17,039) (2,884) 7,124 7,509
Accrued expenses (736) (729) 724 3,365 2,231
Income taxes receivable/payable (621) (2,279) (2,853) 644 (1,218)
------ ------ ------ ------ ------
Net cash provided by (used in)
operating activities 7,385 2,008 20,523 14,012 (3,021)
------ ------ ------ ------ ------
Cash flows from investing activities:
Acquisition of properties (1,898) (5,246) (9,198) (13,517) (30,884)
Proceeds from disposition of
properties 7 10 13 50 31
Stockholder note receivable -- 354 354 200 200
Purchase of Fisher Nut business -- -- -- (5,779) -- --
Note receivable from affiliate,
net of repayments -- -- -- 5,790 146
Other 147 (61) (1,437) (3,268) (682)
------ ------ ------ ------ ------
Net cash used in investing activities ( 1,744) (4,943) (10,268) (16,524) (31,189)
------ ------ ------ ------ ------
Cash flows from financing activities:
Net borrowings (repayments)
on notes payable (3,259) 4,368 (6,289) (21,714) 27,101
Principal payments on long-term debt (2,353) (1,565) (3,772) (3,591) (1,321)
Proceeds from issuance of
long-term debt -- -- -- 27,500 10,010
Payments to acquire treasury stock -- -- -- -- (1,204)
Proceeds from issuance of Common Stock -- -- -- 210 --
Dividends paid -- -- -- -- (454)
------ ------ ------ ------ ------
Net cash (used in) provided
by financing activities ( 5,612) 2,803 (10,061) 2,405 34,132
------ ------ ------ ------ ------
Net increase (decrease) in cash 29 (132) 194 (107) (78)
Cash:
Beginning of year 602 408 408 515 593
------ ------ ------ ------ ------
End of year $ 631 $ 276 $ 602 $ 408 $ 515
====== ====== ====== ====== ======
Supplemental disclosures of
cash flow information:
Interest paid $ 4,127 $ 4,694 $ 8,785 $ 7,229 $ 5,747
Taxes paid 194 1,104 1,187 2,959 2,078
Supplemental schedule of noncash
investing and financing activities:
Note receivable issued on
sale of property -- -- -- -- 10
Capital lease obligation incurred 136 191 270 -- 8
Acquisition of Machine Design -- -- -- 1,520 --
Incorporated
Acquisition of Fisher Nut properties
payable pursuant to a promissory note -- 1,250 1,250 -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
John B. Sanfilippo & Son, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except share and per share data)
- -------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------
Basis of Consolidation
- ----------------------
The consolidated financial statements include the accounts of John B.
Sanfilippo & Son, Inc. and its wholly owned subsidiaries, including
Sunshine Nut Co., Inc. (collectively, "JBSS" or the "Company").
Intercompany balances and transactions have been eliminated.
Nature of business
- ------------------
The Company processes and sells shelled and inshell nuts and other
snack foods in both retail and wholesale markets. The Company has
plants located throughout the United States. Revenues are generated
from sales to a variety of customers, including several major retailers
and the U.S. government. Revenues are recognized as products are
shipped to customers. The related accounts receivable from sales are
unsecured.
Acquisitions
- ------------
On November 6, 1995, the Company completed the first step in its
acquisition of certain assets, and the assumption of certain
liabilities, of the Fisher Nut business from The Procter & Gamble
Company and its affiliates (the "Fisher Transaction"). The Fisher
Transaction was divided into several parts, with the Company acquiring:
(i) the Fisher trademarks, brand names, product formulas and other
intellectual and proprietary property for $5,000, paid on November 6,
1995; (ii) certain specified items of machinery and equipment for
$1,250, payable pursuant to a promissory note dated January 10, 1996
(secured by such machinery and equipment), bearing interest at an
annual rate of 8.5% and requiring eight equal quarterly installments of
principal (plus accrued interest) commencing in June 1996; (iii)
certain of the raw material and finished goods inventories of the
Fisher Nut business for $15,789, payable monthly, in cash, in amounts
based on the amounts of such inventories actually used by the Company
during each month with a final payment of the balance, if any, of the
purchase price on March 31, 1996; and (iv) substantially all of the
packaging materials of the Fisher Nut business for $1,128, payable
monthly, in cash, in amounts based on the amount of such materials
actually used by the Company during each month with a final payment of
the balance, if any, of the purchase price on November 6, 1996. The
acquisition was accounted for in accordance with the purchase method of
accounting with the purchase price being allocated to the specific
assets based upon their estimated fair value. The intangible assets
are being amortized on a straight-line basis over 15 years.
Amortization expense was $208 for the twenty-six weeks ended June 26,
1997 and was $409 and $64 for the years ended December 31, 1996 and
1995, respectively.
The following represents the unaudited pro forma results of operations
as if the Fisher Transaction had occurred at the beginning of the
periods presented and reflect estimated purchase accounting and other
adjustments related to the acquisition.
(Unaudited)
------------------------------
1995 1994
---------- ----------
Net sales $ 319,540 $ 263,818
Net (loss) $ (7,960) $ (12,495)
(Loss) per common share $ (0.88) $ (1.39)
The pro forma financial information is not necessarily indicative of
the results of operations that would have been obtained if the Fisher
Transaction had taken place at the beginning of the period presented or
of future results of operations.
On September 27, 1995, the Company purchased the Arlington Heights,
Illinois facility which it originally leased and renovated in
connection with its contract manufacturing arrangement with the Fisher
Nut Company. The purchase price for the Arlington Heights facility was
approximately $2,235 and was financed pursuant to a first mortgage loan
of $2,500. The remaining $265 was used to temporarily reduce the
amount outstanding under the Company's prior bank credit facility.
On June 2, 1995, the Company acquired, for $150, the Flavor Tree
trademark and substantially all of the assets relating to the products
manufactured and sold under that trademark (including certain
inventory) from the Dolefam Corporation. The acquisition was accounted
for in accordance with the purchase method of accounting.
On May 31, 1995, The Company acquired 100% of the issued and
outstanding stock of Machine Design Incorporated ("Machine Design")
from Machine Design's then existing stockholders (the "Sellers") for
shares of the Company's Common Stock, $.01 par value per share (the
"Common Stock"), valued at approximately $1,520. The acquisition of
Machine Design, which owns several patents pertaining to nut cracking
equipment, but is otherwise not engaged in any active business, was
structured as a merger of a newly formed, wholly owned subsidiary of
the Company into Machine Design, with Machine Design continuing after
the merger as the surviving corporation. The Company issued, on May
31, 1995, 164,342 shares of Common Stock, valued for purposes of the
acquisition at $9.25 per share, in payment of the $1,520 purchase price
for Machine Design. Pursuant to the Merger Agreement for the
acquisition, the Company also issued an additional 21,648 shares of
Common Stock to the Sellers on June 13, 1995, valued for purposes of
the acquisition at $9.70 per share, for $210 in cash that was included
in the assets of Machine Design as of the closing date of the
acquisition. The acquisition was accounted for in accordance with the
purchase method of accounting with the purchase price being allocated
to the specific assets based upon their estimated fair value. The
acquisition consisted of patents only, which are being amortized on a
straight-line basis over six years. Amortization expense was $131 for
the twenty-six weeks ended June 26, 1997 and was $261 and $152 for the
years ended December 31, 1996 and 1995, respectively.
Inventories
- -----------
Inventories are stated at the lower of cost (first-in, first-out) or
market. The value of inventory may be impacted by market price
fluctuations.
Properties
- ----------
Properties are stated at cost. Cost, less the estimated salvage value,
is depreciated using the straight-line method over the following
estimated useful lives: buildings -- 30 to 40 years, machinery and
equipment -- 5 to 10 years, furniture and leasehold improvements -- 5
to 10 years and vehicles -- 3 to 5 years.
The cost and accumulated depreciation of assets sold or retired are
removed from the respective accounts, and any gain or loss is
recognized currently. Maintenance and repairs are charged to
operations as incurred.
Certain lease transactions relating to the financing of buildings are
accounted for as capital leases, whereby the present value of future
rental payments, discounted at the interest rate implicit in the lease,
is recorded as a liability. A corresponding amount is capitalized as
the cost of the assets and amortized on a straight-line basis over the
estimated lives of the assets or over the lease terms which range from
20 to 30 years, whichever is lower. See also Note 8.
Earnings per common share
- -------------------------
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. Common stock equivalents (stock options) had an
immaterial effect on Transition Period, 1995 and 1994 earnings per share
and, accordingly, have not been included in the weighted average shares
outstanding. Fully diluted earnings per common share, which include
the effect of conversion of common stock equivalents and a convertible
debenture, for Transition Period, 1995 and 1994 are not materially different
from the earnings per share presented. Common stock equivalents were not
used in the 1996 earnings per share calculation as they were anti-
dilutive.
Income taxes
- ------------
The Company accounts for income taxes using an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that
have been reported in the Company's financial statements or tax
returns. In estimating future tax consequences, the Company considers
all expected future events other than changes in tax law or rates.
Fair value of financial instruments
- -----------------------------------
Based on borrowing rates presently available to the Company under
similar borrowing arrangements, the Company believes the recorded
amount of its long-term debt obligations approximates fair market
value. The carrying amount of the Company's other financial
instruments approximates their estimated fair value based on market
prices for the same or similar type of financial instruments.
Company customers
- -----------------
The highly competitive nature of the Company's business provides an
environment for the loss of customers and the opportunity for new
customers.
Gross sales to one customer were $34,770 and $29,297, or 11.7% and
10.4%, of total gross sales for the years ended December 31, 1996 and
1995, respectively.
Management estimates
- --------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Goodwill and other long-lived assets
- ------------------------------------
During 1996, the Company adopted Statement of Financial Accounting
Standards No. 121. Under FAS 121, the Company reviews the carrying
value of goodwill and other long-lived assets for impairment when
events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. This review is performed by
comparing estimated undiscounted future cash flows from use of the
asset to the recorded value of the asset.
Current accounting pronouncements
- ---------------------------------
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share
("FAS 128). FAS 128 establishes standards for computing and presenting
earnings per share. The Company is required to adopt FAS 128 for the
quarter ending December 25, 1997. The Company does not believe that
FAS 128 will have a material effect on its results of operations.
Interim financial data
- ----------------------
The interim financial data for the twenty-six weeks ended June 27, 1996
is unaudited; however, in the opinion of the Company, the interim data
includes all adjustments consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the
interim periods.
NOTE 2 - COMMON STOCK
- ---------------------
Capital stock transactions
- --------------------------
The Company's Class A Common Stock, $.01 par value (the "Class A
Stock"), has cumulative voting rights with respect to the election of
those directors which the holders of Class A Stock are entitled to
elect, and 10 votes per share on all other matters on which holders of
the Company's Class A Stock and Common Stock are entitled to vote. In
addition, each share of Class A Stock is convertible at the option of
the holder at any time into one share of common stock and automatically
converted into one share of common stock upon any sale or transfer
other than related individuals. Each share of the Company's Common
Stock, $.01 par value (the "Common Stock") has noncumulative voting
rights of one vote per share. The Class A Stock and the Common Stock
are entitled to share equally, on a share-for-share basis, in any cash
dividends declared by the Board of Directors and the holders of the
Common Stock are entitled to elect 25% of the members comprising the
Board of Directors.
On February 25, 1994, the Company's Board of Directors authorized the
purchase from time to time of up to an aggregate of 500,000 shares of
Common Stock. Pursuant to such authorization, the Company repurchased
117,900 shares of Common Stock at an aggregate price of $1,204 during
1994. The Company intends to reissue repurchased shares to fulfill
stock option exercises under its stock option plans or to finance
future acquisitions.
On May 31, 1995, the Company issued 164,342 shares of Common Stock in
payment of the purchase price for Machine Design of $1,520. For
purposes of the acquisition the Common Stock was valued at $9.25 per
share. On June 13, 1995, the Company issued an additional 21,648 shares
of Common Stock valued at $9.70 per share, in exchange for $210 in cash
that was included in the assets of Machine Design as of the closing.
NOTE 3 - INCOME TAXES
- ---------------------
The provision (benefit) for income taxes for the twenty-six weeks ended
June 26, 1997 and for the years ended December 31, 1996, 1995 and 1994
are as follows:
December 31,
June 26, ----------------------
1997 1996 1995 1994
--------- ------ ----- -----
Current:
Federal $ (431) $(1,870) $2,496 $ 309
State (96) (340) 741 61
Deferred 915 390 621 (160)
------- ------ ----- -----
$ 388 $(1,820) $3,858 $ 210
======= ====== ===== =====
The differences between income taxes at the statutory federal income
tax rate of 34% and income taxes reported in the statements of
operations for the twenty-six weeks ended June 26, 1997 and for the
years ended December 31, 1996, 1995 and 1994 are as follows:
December 31,
June 26, ----------------------
1997 1996 1995 1994
--------- ----- ----- -----
Federal statutory
income tax rate 34.0% 34.0% 34.0% 34.0%
State income and
replacement taxes,
net of federal benefit 5.6 4.7 5.1 8.5
Adjustments to prior
year liability -- -- -- 13.5
Nondeductible items,
principally goodwill 4.7 (2.0) 0.8 24.7
Other 1.9 1.1 0.1 0.4
------ ------ ------ ------
46.2% 37.8% 40.0% 81.1%
====== ====== ====== ======
The deferred tax assets and liabilities are comprised of the following:
December 31,
June 26, ----------------------------------
1997 1996 1995
Asset Liability Asset Liability Asset Liability
----- --------- ----- --------- ----- ---------
Current:
Provision for
doubtful accounts $ 268 $ -- $ 270 $ -- $ 174 $ --
Employee
compensation 388 -- 363 -- 331 --
Inventory 75 -- 75 -- 20 --
Accounts receivable -- (405) -- -- -- --
Other 292 -- 348 -- 237 --
----- ----- ----- ----- ----- -----
1,023 (405) 1,056 -- 762 --
----- ----- ----- ----- ----- -----
Long-Term:
Depreciation -- 3,373 -- 3,051 -- 2,028
Capitalized leases 1,342 -- 1,312 -- 1,133 --
Other 367 -- 552 -- 392 --
----- ----- ----- ----- ----- -----
1,709 3,373 1,864 3,051 1,525 2,028
----- ----- ----- ----- ----- -----
Total $2,732 $2,968 $2,920 $3,051 $2,287 $2,028
===== ===== ===== ===== ===== =====
NOTE 4 - INVENTORIES
- --------------------
Inventories consist of the following:
December 31,
June 26, ----------------
1997 1996 1995
---------- ----- -----
Raw material and supplies $29,713 $48,213 $70,465
Work-in-process and
finished goods 33,275 28,892 25,895
------ ------ ------
$62,988 $77,105 $96,360
====== ====== ======
NOTE 5 - NOTE RECEIVABLE FROM AFFILIATE
- ---------------------------------------
On September 29, 1992, the Company loaned $6,223 to a partnership,
certain partners of which are also directors, officers and/or
stockholders of the Company, which owns a building under capital lease
with the Company. The loan was secured by a first mortgage on the
building and by a secured promissory note which accrued interest at the
rate of 8.72% per annum and was payable in equal monthly installments
of principal and interest of $55 each over a period of 20 years. The
Company recognized $96 and $524 of interest income in 1995 and 1994,
respectively, relating to the note receivable. On March 7, 1995, the
partnership repaid the secured promissory note in full and the Company
released its mortgage on the building.
NOTE 6 - INVESTMENT IN NAVARRO PECAN COMPANY, INC.
- --------------------------------------------------
Effective August 31, 1991, the Company assigned all of its rights in
advances to Navarro Pecan Company, Inc. ("Navarro") to a director,
officer and stockholder of the Company for a purchase price of $1,154,
which represented the aggregate amount of principal and interest
outstanding under the advances. The purchase price for the Navarro
advances was payable pursuant to a promissory note which bore interest
at 8% per year and required quarterly principal installments of $50,
plus interest through March 1996. During 1996, 1995 and 1994, the
Company recognized $7, $39 and $55, respectively, of interest income
relating to this note receivable. This promissory note was fully paid
in 1996 under the terms and conditions set forth upon its origination.
The Company purchased inventory from Navarro during the years ended
December 31, 1996, 1995 and 1994 aggregating $532, $1,205 and $148,
respectively. Accounts payable to Navarro aggregated $793 at
December 31, 1995. The Company sold inventory to Navarro aggregating
$379 during the twenty-six weeks ended June 26, 1997 and for the years
ended December 31, 1996, 1995 and 1994 aggregating $1,233, $1,209 and
$806, respectively. Accounts receivable from Navarro aggregated $197
at June 26, 1997 and $143 and $229 for the years ended December 31,
1996 and 1995, respectively.
NOTE 7 - NOTES PAYABLE
- ----------------------
Notes payable consist of the following:
December 31,
June 26, --------------------
1997 1996 1995
--------- ----- -----
Revolving bank loan $19,034 $22,294 $28,582
====== ====== ======
On March 27, 1996, the Company entered into a new unsecured credit
facility, with certain banks, totaling $60,000 (the "Bank Credit
Facility"). The Bank Credit Facility is comprised of (i) a working
capital revolving loan which (as described below, depending on the time
of year) provides for working capital financing of up to approximately
$51,740, in the aggregate, and matures on March 27, 1998, and (ii) an
$8,260 standby letter of credit which matures on June 1, 2002.
Borrowings under the working capital revolving loan accrue interest at
a rate (the weighted average of which was 6.85% at June 26, 1997)
determined pursuant to a formula based on the agent bank's quoted rate,
the Federal Funds Rate and the Eurodollar Interbank Rate. The standby
letter of credit replaced a prior letter of credit securing certain
industrial development bonds which financed the original acquisition,
construction, and equipping of the Company's Bainbridge, Georgia
facility. The aggregate amount outstanding under the Bank Credit
Facility, as amended, is limited to specified amounts which vary,
because of the seasonal nature of the Company's business, from $60,000
during January through March, to $50,000 during April through May, to
$40,000 during June through September, to $50,000 during October
through December.
On January 24, 1997, the Company granted a first priority perfected
security interest in, and liens on, substantially all of the Company's
assets to secure the Company's obligations under the Bank Credit
Facility.
The Bank Credit Facility, as amended, includes certain restrictive
covenants that, among other things: (i) require the Company to maintain
a minimum tangible net worth; (ii) comply with specified ratios; (iii)
limit calendar 1997 capital expenditures to $7,200; (iv) restrict
dividends to 25% of the Company's cumulative net income from January 1,
1996; and (v) require that certain officers and stockholders of the
Company, together with their respective family members and certain
trusts created for the benefits of their respective children, continue
to own shares representing the right to elect a majority of the
directors of the Company.
NOTE 8 - LONG-TERM DEBT
- -----------------------
Long-term debt consists of the following:
December 31,
June 26, ---------------------
1997 1996 1995
--------- ----- -----
Industrial development bonds, secured by
building, machinery and equipment with
a cost aggregating $8,000 $ 8,000 $ 8,000 $ 8,000
Bank loan, secured by land and building
with a cost of $2,050 guaranteed by
certain stockholders of JBSS, principal
and interest at 11.25%, payable in monthly
installments of $18 through May 1999 1,620 1,636 1,666
Capitalized lease obligations 7,899 8,032 8,277
Series A note payable, interest payable
quarterly at 8.72%, principal payable
in semi-annual installments of $200
beginning February 1995 3,000 3,200 3,600
Series B note payable, interest payable
quarterly at 9.07%, principal payable
in semi-annual installments of $300
beginning February 1995 4,500 4,800 5,400
Series C note payable, interest payable
quarterly at 9.07%, principal payable
in semi-annual installments of $200
beginning February 1995 3,000 3,200 3,600
Series D note payable, interest payable
quarterly at 9.18%, principal payable
in semi-annual installments of $150
beginning May 1995 2,250 2,400 2,700
Series E note payable, interest payable
quarterly at 7.34%, principal payable
in semi-annual installments of $400
beginning May 1995 6,000 6,400 7,200
Series F notes payable, interest payable
quarterly at 9.16%, principal payable
in semi-annual installments ranging
from $550 to $475 beginning November 1996 8,925 9,450 10,000
Note payable, interest payable
semi-annually at 8.3%, principal payable
in annual installments of approximately
$1,429 beginning September 1, 1999 10,000 10,000 10,000
Note payable, Subordinated interest payable
semi-annually at 9.38%, principal payable
in three annual installments of $5,000
beginning on September 1, 2003 15,000 15,000 15,000
Arlington Heights facility, first mortgage,
principal and interest payable at 8.875%,
in monthly installments of $22 beginning
November 1, 1995 through October 1, 2015 2,414 2,440 2,489
Note payable, secured by machinery and
equipment with a cost aggregating $1,250,
principal and interest at 8.50%, payable
in quarterly installments of $194
beginning June 1996 736 1,082 --
Other 455 376 335
------ ------ ------
73,799 76,016 78,267
Less: Current maturities 4,937 12,697 3,586
------ ------ ------
$68,862 $63,319 $74,681
====== ====== ======
JBSS financed the construction of a peanut shelling plant with
industrial development bonds in 1987. Through May 31, 1992, the
bonds bore interest payable semi-annually at 7%. On June 1,
1992, the Company remarketed the bonds, resetting the interest
rate at 6% through May 1997. On June 1, 1997, the Company
remarketed the bonds, resetting the interest rate at 5.375% through
May 2002, and at a market rate to be determined thereafter. On
June 1, 2002, and on each subsequent interest reset date for the
bonds, the Company is required to redeem the bonds at face value
plus any accrued and unpaid interest, unless a bond holder elects
to retain his or her bonds. Any bonds redeemed by the Company at
the demand of a bondholder on the reset date are required to be
remarketed by the underwriter of the bonds on a "best efforts"
basis. The agreement requires the Company to redeem the bonds in
varying annual installments, ranging from $170 to $780, beginning
in 1998 and running through 2017. The Company is also required
to redeem the bonds in certain other circumstances; for example,
within 180 days after any determination that interest on the
bonds is taxable. The Company has the option at any time,
however, subject to certain conditions, to redeem the bonds at
face value plus accrued interest, if any.
On September 29, 1992, the Company entered into a long-term
financing facility with a major insurance company (the "Long-Term
Financing Facility") which provided financing to the Company
evidenced by promissory notes in the aggregate principal amount
of $14,000 (the "Initial Financing"). The Initial Financing was
comprised of (i) a $4,000 7.87% Senior Secured Term Note due 2004
(the "Series A Note"), (ii) a $6,000 8.22% Senior Secured Term
Note due 2004 (the "Series B Note"), and (iii) a $4,000 8.22%
Senior Secured Term Note due 2004 (the "Series C Note"). In
addition, the Long-Term Financing Facility included a shelf
facility providing for the issuance by the Company of additional
promissory notes with an aggregate original principal amount of
up to $11,000 (the "Shelf Facility"). On January 15, 1993, the
Company borrowed $3,000 under the Shelf Facility evidenced by an
8.33% Senior Secured Term Note due 2004 (the "Series D Note").
On September 15, 1993, the Company borrowed the remaining $8,000
available under the Shelf Facility evidenced by a 6.49% Senior
Secured Term Note due 2004 (the "Series E Note").
On October 19, 1993, the Long-Term Financing Facility was amended
to provide for an additional shelf facility providing for the
issuance by the Company of additional promissory notes with an
aggregate original principal amount of $10,000 and to terminate
and release all liens and security interests in Company
properties. On June 23, 1994, the Company borrowed $10,000 under
the additional shelf facility evidenced by an $8,000 8.31% Series
F Senior Note due May 15, 2006 (the "Series F-1 Note") and a
$2,000 8.31% Series F Senior Note due May 15, 2006 (the "Series
F-2 Note").
Effective January 1, 1997, the interest rates on each promissory
note comprising the Long-Term Financing Facility were increased
by 0.85%, due to the Company not meeting the required ratio of
(a) net income plus interest expense to (b) senior funded debt
for the year ending December 31, 1996.
On January 24, 1997, the Company granted (a) a first priority
perfected security interest in, and liens on, substantially all
of the Company's assets to secure the Company's obligations under
the Bank Credit Facility, the Long-Term Financing Facility and
the senior portion of the Additional Long-Term Financing (as
defined below), and (b) a junior security interest in the
Company's assets to secure the obligations under the subordinated
portion of the Additional Long-Term Financing. Also, on January
24, 1997 the Company entered into the Second Amended and Restated
Note Agreement under the Long-Term Financing Facility. The Long-
Term Financing Facility was amended to contain the same
restrictive covenants as contained in the Bank Credit Facility,
as discussed in Note 7.
On September 12, 1995, the Company borrowed an additional $25,000
under an unsecured long-term financing arrangement (the
"Additional Long-Term Financing"). The Additional Long-Term
Financing has a maturity date of September 1, 2005 and (i) as to
$10,000 of the principal amount thereof, bears interest at an
annual rate of 8.3% and, beginning on September 1, 1999, requires
annual principal payments of approximately $1,429 each through
maturity, and (ii) as to the other $15,000 of the principal
amount thereof (which is subordinated to the Company's other debt
facilities), bears interest at an annual rate of 9.38% and
requires annual principal payments of $5,000 beginning on
September 1, 2003 through maturity.
The Additional Long-Term Financing includes certain restrictive
covenants that, among other things: (i) require the Company to
maintain specified financial ratios; (ii) require the Company to
maintain a minimum tangible net worth; and (iii) limit cumulative
dividends to the sum of (a) 50% of the Company's cumulative net
income (or minus 100% of a cumulative net loss) from and after
January 1, 1995 to the date the dividend is declared, (b) the
cumulative amount of the net proceeds received by the Company
during the same period from any sale of its capital stock, and
(c) $5,000.
As described above, on January 24, 1997, the Company granted
security interests in, and liens on, substantially all of the
Company's assets to secure the Company's obligations under its
financing arrangements. On January 24, 1997, the Company entered
into Amendment No. 2 to Note Purchase Agreement under the
Additional Long-Term Financing. This amendment, among other
things, required the Company to achieve specified levels of
consolidated operating income and to not exceed specified levels
of interest expense for those fiscal quarters ending December
1996 through June 1997. This amendment also requires a reduced
minimum fixed charge coverage ratio for the quarter ending in
September 1997, after which time the terms of the original
Additional Long-Term Financing again become effective.
On September 27, 1995, the Company purchased the Arlington
Heights, Illinois facility which it previously leased. The
purchase was financed pursuant to a $2,500 first mortgage loan on
the facility.
As part of the Fisher Transaction, the Company acquired specified
items of machinery and equipment for $1,250, payable pursuant to
a promissory note dated January 10, 1996 (secured by such
machinery and equipment), bearing interest at an annual rate of
8.5% and requiring eight equal quarterly installments of
principal and interest beginning in June, 1996.
Aggregate maturities of long-term debt, excluding capitalized
lease obligations, are as follows for the years ending:
June 25, 1998 $ 4,937
June 24, 1999 5,795
June 29, 2000 5,676
June 28, 2001 5,762
June 27, 2002 12,709
Subsequent years 38,920
------
$73,799
======
The accompanying financial statements include the following
amounts related to assets under capital leases:
December 31,
June 26, -----------------
1997 1996 1995
-------- ----- -----
Buildings $ 9,520 $ 9,520 $ 9,520
Less: Accumulated amortization 4,974 4,768 4,357
------ ------ ------
$ 4,546 $ 4,752 $ 5,163
====== ====== ======
Amortization expense aggregated $206 for the twenty-six weeks
ended June 26, 1997, $411, $412 and $455 for the years ended
December 31, 1996, 1995 and 1994.
Buildings under capital leases are rented from entities that are
owned by certain directors, officers, and stockholders of JBSS.
Future minimum payments under the leases, together with the
related present value, are summarized as follows for the years
ending:
June 25, 1998 $ 1,144
June 24, 1999 1,144
June 29, 2000 1,144
June 28, 2001 1,144
June 27, 2002 1,144
Subsequent years 9,121
------
Total minimum lease payments 14,841
Less: Amount representing interest 6,942
------
Present value of minimum lease payments,
including amounts due to affiliates of $7,899 $ 7,899
======
JBSS also leases buildings and certain equipment pursuant to
agreements accounted for as operating leases. Rent expense under
these operating leases aggregated $387 the twenty-six weeks ended
June 26, 1997 and aggregated $777, $805 and $684 for the years
ended December 31, 1996, 1995 and 1994, respectively. Aggregate
noncancelable lease commitments under these operating leases are
as follows for the years ending:
June 25, 1998 $ 827
June 24, 1999 344
June 29, 2000 124
June 28, 2001 71
June 27, 2002 3
-----
$1,369
=====
NOTE 9 - EMPLOYEE BENEFIT PLANS
- -------------------------------
JBSS maintains a contributory profit sharing plan established
pursuant to the provisions of section 401(k) of the Internal
Revenue Code. The plan provides retirement benefits for all
nonunion employees meeting minimum age and service requirements.
Through June 26, 1997, the Company contributed 50% of the
amount contributed by each employee up to certain maximums
specified in the plan. Additional contributions are determined
at discretion of the Board of Directors. No additional
contributions were made for the twenty-six weeks ended June 26,
1997 or for the years ended December 31, 1996 and 1994. For
1995, the additional contribution was $383, which was paid in
1996.
JBSS contributed approximately $53 during the twenty-six weeks
ended June 26, 1997 and contributed $86, $73 and $79 during the
years ended December 31, 1996, 1995 and 1994, respectively, to
multi-employer union-sponsored pension plans. JBSS is presently
unable to determine its respective share of either accumulated
plan benefits or net assets available for benefits under the
union plans.
NOTE 10 - TRANSACTIONS WITH AFFILIATES
- --------------------------------------
In addition to the related party transactions described in Notes
5, 6 and 8, JBSS also entered into transactions with the
following affiliates:
Equipment purchases
- -------------------
During the twenty-six weeks ended June 26, 1997, JBSS purchased
$76 and during the years ended December 31, 1996, 1995 and 1994
JBSS purchased $442, $681 and $1,209, respectively, of customized
manufacturing equipment and engineering services from an entity
owned by stockholders, both of whom are related to the Company's
Chairman of the Board and Chief Executive Officer and one of whom
is an executive officer of the Company. In addition to the
foregoing, JBSS leased office and warehouse space to the entity.
Rent collected from the entity aggregated $49 for the twenty-six
weeks ended June 26, 1997 and aggregated $62, $12 and $12 for the
years ended December 31, 1996, 1995 and 1994, respectively.
Accounts receivable aggregated $16 at June 26, 1997, $9 at
December 31, 1996 and $6 at December 31, 1995. Accounts payable
aggregated $13 at December 31, 1996.
Material purchases
- ------------------
JBSS purchases materials from a company which is owned 50% by the
Company's Chairman of the Board and Chief Executive Officer.
Material purchases aggregated $2,261 for the twenty-six weeks
ended June 26, 1997, and aggregated $5,049, $3,255 and $2,221
during the years ended December 31, 1996, 1995 and 1994,
respectively. Accounts payable included amounts due to the
related entity for materials of $334 at June 26, 1997, $525 at
December 31, 1996 and $278 at December 31, 1995.
Brokerage commissions
- ---------------------
During the twenty-six weeks ended June 26, 1997, JBSS paid
brokerage commissions of $16 and during the years ended December
31, 1996, 1995 and 1994 paid commissions of $90, $43 and $52,
respectively, to a food brokerage company. In addition, JBSS
paid brokerage commissions to a trading company of $89 and $166
during the years ended December 31, 1995 and 1994. The President
of the food brokerage company and the trading company is related
to the Company's President.
Product purchases and sales
- ---------------------------
JBSS also purchased products aggregating $137, $458 and $902
during the years ended December 31, 1996, 1995 and 1994,
respectively, from the trading company referred to in the
preceding paragraph. JBSS sold products to the same company
aggregating $6, $12 and $28 during the years ended December 31,
1996, 1995 and 1994, respectively.
Additionally, during the twenty-six weeks ended June 26, 1997,
JBSS made sales aggregating $423, and aggregated $1,014, $276
and $154 during the years ended December 31, 1996, 1995 and 1994,
respectively, to a company which is indirectly owned, in part, by
a member of the JBSS Board of Directors who is not an employee of
the Company. Accounts receivable aggregated $77 at June 26,
1997.
JBSS purchased services from a company in which the owner is an
employee of the Company. Purchases were $38 during the twenty-
six weeks ended June 26, 1997, and $105, $74 and $68 during the
years ended December 31, 1996, 1995 and 1994, respectively.
Building Space Rental
- ---------------------
During the twenty-six weeks ended June 26, 1997, and the years
ended December 31, 1996 and 1995, the Company rented office and
warehouse space to a company whose president is related to the
Company's Chairman of the Board and Chief Executive Officer.
Rental income for the twenty-six weeks ended June 26, 1997
aggregated $32, and for the years ended December 31, 1996 and
1995 were $66 and $10, respectively.
NOTE 11 - STOCK OPTION PLANS
- ----------------------------
As permitted, the Company applies Accounting Principles Board
Opinion No. 25 and related Interpretations in accounting for its
stock-based compensation plans. Had compensation cost for the
Company's stock-based compensation plans been determined based on
the fair value at the grant dates for awards under the plans with
the alternative method of Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation, the
effect on the Company's net income (loss) for the twenty-six weeks ended
June 26, 1997 and for the years ended December 31, 1996 and December 31,
1995 would not have been significant.
In October 1991, JBSS adopted a stock option plan (the "1991
Stock Option Plan") which became effective on December 10, 1991
and was terminated early by the Board of Directors on February
28, 1995. Pursuant to the terms of the 1991 Stock Option Plan,
up to 350,000 shares of Common Stock can be awarded to certain
executives and key employees of JBSS and its subsidiaries. The
exercise price of the options will be determined as set forth in
the 1991 Stock Option Plan by the Board of Directors. The
exercise price for the stock options will be at least fair market
value with the exception of nonqualified stock options which will
have an exercise price equal to at least 33% of the fair market
value of the Common Stock on the date of grant. Except as set
forth in the 1991 Stock Option Plan, options expire upon
termination of employment. All of the options granted were
intended to qualify as incentive stock options within the meaning
of Section 422 of the Internal Revenue Code (the "Code").
Although the majority of the options granted have an exercise
price equal to the market price on the date of grant, in 1995,
3,650 options, were granted to individuals who own directly (or
by attribution under Section 424(d) of the Code) shares
possessing more than 10% of the total combined voting power of
all classes of JBSS and thus, in order to qualify as incentive
stock options, have an exercise price equal to 110% of the market
price on the date of grant .
Effective February 28, 1995, the Board terminated early the 1991
Stock Option Plan. The termination of the 1991 Stock Option Plan
did not, however, affect options granted under the 1991 Stock
Option Plan which remained outstanding as of the effective date
of such termination. Accordingly, the unexercised options
outstanding under the 1991 Stock Option Plan at December 31, 1995
will continue to be governed by the terms of the 1991 Stock
Option Plan.
The following is a summary of activity under the 1991 Stock
Option Plan:
Number of Weighted-Average
shares Exercise Price
--------- ------------------
Outstanding at December 31, 1994 309,450 $13.10
Granted 38,800 $ 6.06
Canceled (4,100) $ 9.78
-------
Outstanding at December 31, 1995 344,150 $12.35
Canceled (77,450) $12.04
-------
Outstanding at December 31, 1996 266,700 $12.43
Canceled (40,100) $13.31
-------
Outstanding at June 26, 1997 226,600 $12.30
=======
Options exercisable at
June 26, 1997 197,825 $12.67
=======
Exercise prices for options outstanding as of June 26, 1997
ranged from $6.00 to $16.50. The weighted-average remaining
contractual life of those options is 5.2 years. The options
outstanding at June 26, 1997 may be segregated into two ranges,
as is shown in the following:
Option Price Per Option Price Per
Share Range Share Range
$6.00-$6.60 $12.00-$16.50
---------------- ----------------
Number of options 30,250 196,350
Weighted-average exercise
price $6.07 $13.26
Weighted-average remaining
life (years) 6.9 4.9
Number of options exercisable 15,125 182,700
Weighted average exercise
price for exercisable options $6.07 $13.19
At the Company's annual meeting of stockholders on May 2, 1995,
the Company's stockholders approved, and the Company adopted,
effective as of March 1, 1995, a new stock option plan (the "1995
Equity Incentive Plan") to replace the 1991 Stock Option Plan.
Pursuant to the terms of the 1995 Equity Incentive Plan, up to
200,000 shares of Common Stock can be awarded to certain key
employees and "outside directors" (i.e. directors who are not
employees of the Company or any of its subsidiaries). The
exercise price of the options is determined as set forth in the
1995 Equity Incentive Plan by the Board of Directors. The
exercise price for the stock options must be at least the fair
market value of the Common Stock on the date of grant, with the
exception of nonqualified stock options which will have an
exercise price equal to at least 50% of the fair market value of
the Common Stock on the date of grant. Except as set forth in
the 1995 Equity Incentive Plan options expire upon termination of
employment of directorship. The options granted under the 1995
Equity Incentive Plan, are exercisable 25% annually commencing on
the first anniversary date of grant and become fully exercisable
on the fourth anniversary date of grant. All of the options
granted were intended to qualify as incentive stock options
within the meaning of Section 422 of the Code. Although the
majority of the options granted have an exercise price equal to
the fair market value of the Common Stock on the date of grant,
9,600 options were granted in 1997 and 7,100 options were granted
in 1995 to individuals who own directly (or by attribution under
Section 424(d) of the Code) shares possessing more than 10% of
the total combined voting power of all classes of stock of JBSS,
and thus, in order to qualify as incentive stock options, have an
exercise price equal to 110% of the fair market value on the date
of grant. The options granted under the 1995 Equity Incentive
Plan are exercisable 25% annually commencing on the first
anniversary date of grant and become fully exercisable on the
fourth anniversary of the date of grant.
The following is a summary of activity under the 1995 Equity
Incentive Plan:
Weighted-Average
Number of Shares Exercise Price
---------------- ----------------
Outstanding at December 31, 1994 -- --
Granted 92,300 $9.47
-------
Outstanding at December 31, 1995 92,300 $9.47
Granted 7,000 $7.02
Canceled (10,800) $9.38
-------
Outstanding at December 31, 1996 88,500 $9.28
Granted 102,100 $6.30
Canceled ( 4,900) $8.24
-------
Outstanding at June 26, 1997 185,700 $7.67
=======
Options exercisable at
June 26, 1997 22,225 $9.38
=======
Exercise prices for options outstanding as of June 26, 1997
ranged from $5.25 to $10.50. The weighted-average remaining
contractual life of those options is 8.7 years. The options
outstanding at June 26, 1997 may be segregated into two ranges,
as is shown in the following:
Option Price Per Option Price Per
Share Range Share Range
$5.25-$6.88 $8.25-$10.50
---------------- -----------------
Number of options 105,800 79,900
Weighted-average exercise price $6.30 $9.48
Weighted-average remaining life (years) 9.4 8.3
Number of options exercisable 1,000 21,225
Weighted average exercise price
for exercisable options $6.66 $9.51
NOTE 12 - LEGAL MATTERS
- -----------------------
The Company is party to various lawsuits, proceedings and other
matters arising out of the conduct of its business. It is
management's opinion that the ultimate resolution of these
matters will not have a material adverse effect upon the
business, financial condition or results of operations of the
Company.
QUARTERLY CONSOLIDATED FINANCIAL DATA
The following table presents unaudited quarterly consolidated
financial data for the Company for the twenty-six weeks ended
June 26, 1997 and for the years ended December 31, 1996 and 1995.
Such data are unaudited, but in the opinion of the Company
reflect all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the information
for the periods presented. The consolidated financial data
should be read in conjunction with the Consolidated Financial
Statements and Notes thereto contained elsewhere herein. Such
quarterly consolidated data are not necessarily indicative of
future results of operations.
<TABLE>
Quarter Ended
------------------------------------------------------------------------------------------------------
Mar.27, June 26, Mar.28, June 27, Sept.26, Dec.31, Mar.30, June 29, Sept.28, Dec.31,
1997 1997 1996 1996 1996 1996 1995 1995 1995 1995
------- -------- ------- -------- -------- ------- ------- -------- -------- -------
(dollars in thousands, except per share data)
Statement of Income Data:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 58,525 $ 74,539 $ 53,059 $ 64,909 $ 70,373 $106,063 $ 47,089 $ 58,818 $ 67,048 $ 104,786
Gross profit 9,563 11,921 8,176 9,299 6,175 15,550 8,089 11,848 12,089 15,024
Income (loss)
from operations 1,622 3,100 534 887 (2,298) 4,667 2,149 3,457 4,635 6,471
Net (loss) income (192) 643 (1,184) (763) (2,590) 1,546 191 1,062 1,784 2,751
(Loss) earnings per
common share(1) (0.02) 0.07 (0.13) ( 0.08) (0.28) 0.17 0.02 0.12 0.20 0.29
Balance Sheet Data
(at end of period):
Working capital $ 40,396 $ 49,866 $ 54,467 $ 44,514 $ 40,965 $ 40,956 $ 35,764 $ 35,489 $ 63,120 $ 58,148
Long-term debt 62,041 68,862 74,213 65,603 64,202 63,319 49,782 49,255 75,485 74,681
Total debt 110,991 92,833 123,083 111,096 101,286 98,310 105,712 96,623 95,649 106,849
</TABLE>
_________________________
(1) Earnings (loss) per common share calculations for each of
the quarters is based on the weighted average number of
shares of Common Stock and Class A Stock outstanding for
each period.
Item 9 -- Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
- -----------------------------------------------------------
There were no disagreements on any matters of accounting
principles or financial statement disclosure with the Company's
independent accountants during the twenty-six weeks ended June
26, 1997 and the years ended December 31, 1996 and 1995.
PART III
Item 10 -- Directors and Executive Officers of the Registrant
- -------------------------------------------------------------
DIRECTORS OF THE REGISTRANT
The following are the directors of the Registrant:
WILLIAM D. FISCHER, Director, age 68 -- Mr. Fischer served as the
President and Chief Operating Officer of Dean Foods Company, a
publicly traded dairy and specialty food products company based
in Franklin Park, Illinois from 1989 through December 1993. He
also served as that company's Vice President, Finance from 1971
to 1989, Secretary from 1973 to 1988, Treasurer from 1973 to 1984
and as a director from 1979 to March 1996. Mr. Fischer has also
served as a director and a member of the compensation committee
of Allied Products Corporation, a manufacturer of industrial and
agricultural machinery, since 1993. Mr. Fischer has been a
member of the Company's Board of Directors since December 1991
and is a member of the Company's Audit and Compensation
Committees.
JOHN W. A. BUYERS, Director, age 69 -- Mr. Buyers is currently
employed by C. Brewer and Company, Limited ("C. Brewer"), based
in Honolulu, Hawaii, where he has served as Chief Executive
Officer since 1975 and as Chairman of the Board since 1982.
Mr. Buyers is also currently the Chairman of the Board, President
and Chief Executive Officer of Buyco, Inc., the privately-held
parent company of C. Brewer, and has served in those capacities
since 1986. C. Brewer is a diversified agribusiness, specialty
foods company and developer of commercial and agricultural real
estate. It is the world's leading producer of macadamia nuts
(Mauna Loar) and guava (KAIr and Mauna La'ir). In addition, C.
Brewer specializes in the roasting, processing, marketing and
distribution of Kona Coffee (Royal Konar and Mauna Kear) as well
as the processing, marketing and distribution of Hawaiian fruit
jams, jellies and syrups (Kukuir). C. Brewer also distributes
products and services for the agricultural, environmental and
construction industries. See "Item 13 -- Certain Relationships and Related
Transactions." In addition, Mr. Buyers currently serves on the
board of directors of First Hawaiian Bank, First Hawaiian, Inc.,
Mauna Loa Macadamia Partners, L.P., and C. Brewer Homes, Inc.
Mr. Buyers has been a member of the Company's Board of Directors
since January 1992 and is a member of the Company's Audit and
Compensation Committees.
JASPER B. SANFILIPPO, Chairman of the Board and Chief Executive
Officer and Director, age 66 -- Mr. Sanfilippo has been employed
by the Company since 1953. Mr. Sanfilippo served as the
Company's President from 1982 to December 1995 and was the
Company's Treasurer from 1959 to October 1991. He became the
Company's Chairman of the Board and Chief Executive Officer in
October 1991 and has been a member of the Company's Board of
Directors since 1959. Mr. Sanfilippo is also a member of the
Company's Compensation Committee. Since June 1992,
Mr. Sanfilippo has been a member of the Board of Directors and a
Vice President of Sunshine Nut Co., Inc. ("Sunshine"), a wholly-
owned subsidiary acquired by the Company in 1992. Mr. Sanfilippo
is the father of Jasper B. Sanfilippo, Jr. and James J.
Sanfilippo, each of whom is an executive officer of the Company,
the brother-in-law of Mathias A. Valentine, the President and a
director of the Company, and the uncle of Michael J. Valentine, a
director and an executive officer of the Company.
MATHIAS A. VALENTINE, President and Director, age 64 --
Mr. Valentine has been employed by the Company since 1960 and was
named its President in December 1995. He served as the Company's
Secretary from 1969 to December 1995, as its Executive Vice
President from 1987 to October 1991, and as its Senior Executive
Vice President and Treasurer from October 1991 to December 1995.
He has been a member of the Company's Board of Directors since
1969. Mr. Valentine is also a member of the Company's
Compensation Committee. Mr. Valentine has been a member of the
Board of Directors and a Vice President of Sunshine since June
1992. Mr. Valentine is the brother-in-law of Jasper B.
Sanfilippo, Chairman of the Board and Chief Executive Officer and
a director of the Company, the father of Michael J. Valentine,
director and an executive officer of the Company, and the uncle
of Jasper B. Sanfilippo, Jr. and James J. Sanfilippo, each of
whom is an executive officer of the Company.
JOHN C. TAYLOR, Executive Group Vice President and Director, age
51 -- Mr. Taylor has been the President and a director of
Sunshine, which the Company acquired in May 1992, since 1976. In
August 1995, Mr. Taylor was named a director of the Company and
in December 1995 was appointed the Executive Group Vice President
of the Company (responsible for coordinating certain joint
activities of the Company and Sunshine). As President of
Sunshine, Mr. Taylor is responsible for overseeing that company's
processing, packaging, marketing and distribution of shelled
nuts. Mr. Taylor is the brother of Steven G. Taylor, an
executive officer of the Company.
WILLIAM PETTY, Director, age 65 -- Mr. Petty served as the
President and Chief Executive Officer of Curtice Burns Foods,
Inc. ("Curtice Burns") from March 1993 until his retirement in
November 1994 and as a director of Curtice Burns from 1990 until
November 1994. Curtice Burns is a manufacturer and marketer of a
diversified line of food products, including canned and frozen
vegetables and fruits, condiments, snack foods and canned
entrees. From 1990 to March 1993, Mr. Petty was the Executive
Vice President of Curtice Burns. In January 1996, Mr. Petty
became the President, Chief Executive Officer and a director of
Orval Kent Food Company, Incorporated, a Chicago, Illinois
manufacturer and marketer of refrigerated salads, side dishes and
entrees. Mr. Petty has been a director of the Company since
August 1995 and is a member of the Company's Audit Committee. He
is a former member of the board of directors of the Grocery
Manufacturers of America and the National Food Processors
Association.
MICHAEL J. VALENTINE, Vice President and Secretary, age 38 -- Mr.
Valentine has been employed by the Company since 1987 and was
named its Vice President and Secretary in December 1995. He
served as an Assistant Secretary and the General Manager of
External Operations for the Company from June 1987 and 1990,
respectively to December 1995. Mr. Valentine is the son of
Mathias A. Valentine, the President and a Director of the
Company, the nephew of Jasper B. Sanfilippo, Chairman of the
Board and Chief Executive Officer of the Company, and cousin of
Jasper B. Sanfilippo, Jr. and James J. Sanfilippo, each of whom
is an executive officer of the Company. Mr. Valentine has been a
member of the board of directors since April 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the Executive Officers of the Registrant:
JASPER B. SANFILIPPO, Chairman of the Board and Chief Executive
Officer, age 66 -- Mr. Sanfilippo has been employed by the
Company since 1953. Mr. Sanfilippo served as the Company's
President from 1982 to December 1995 and was the Company's
Treasurer from 1959 to October 1991. He became the Company's
Chairman of the Board and Chief Executive Officer in October 1991
and has been a member of the Company's Board of Directors since
1959. Mr. Sanfilippo is also a member of the Company's
Compensation Committee. Since June 1992, Mr. Sanfilippo has been
a member of the Board of Directors and a Vice President of
Sunshine.
MATHIAS A. VALENTINE, President, age 64 -- Mr. Valentine has been
employed by the Company since 1960 and was named its President in
December 1995. He served as the Company's Secretary from 1969 to
December 1995, as its Executive Vice President from 1987 to
October 1991 and as its Senior Executive Vice President and
Treasurer from October 1991 to December 1995. He has been a
member of the Company's Board of Directors since 1969. Mr.
Valentine is also a member of the Company's Compensation
Committee. Mr. Valentine has been a member of the Board of
Directors and a Vice President of Sunshine since June 1992.
JOHN C. TAYLOR, Executive Group Vice President, age 51 -- Mr.
Taylor has been the President and a director of Sunshine, which
the Company acquired in June 1992, since 1976. In August 1995,
Mr. Taylor was named a director of the Company and in December
1995 was appointed an Executive Group Vice President of the
Company (responsible for coordinating certain joint activities of
the Company and Sunshine). As President of Sunshine, Mr. Taylor
is responsible for overseeing that company's processing,
packaging, marketing, and distribution of shelled nuts.
GARY P. JENSEN, Executive Vice President, Finance and Chief
Financial Officer, age 52 -- Mr. Jensen became the Company's
Executive Vice President, Finance and Chief Financial Officer in
December 1995, having previously served as the Company's Vice
President, Finance and Chief Financial Officer from February
1995. Prior to joining the Company, he served from August 1992
to October 1994 as Vice President Finance of Amour Swift-Eckrich,
a meat processing and packaging company. In addition, Mr. Jensen
was employed by Vlasic Foods, Inc., a condiments processing
company, from 1975 to August 1992 and served as its Vice
President Finance and Chief Financial Officer from 1988 to August
1992.
WILLIAM R. POKRAJAC, Controller, age 43 -- Mr. Pokrajac has been
with the Company since 1985 and has served as the Company's
Controller since 1987. Mr. Pokrajac is responsible for the
Company's accounting, financial reporting and inventory control
functions.
MICHAEL J. VALENTINE, Vice President and Secretary, age 38 -- Mr.
Valentine has been employed by the Company since 1987 and in
December 1995 was named the Company's Vice President and
Secretary. Mr. Valentine was elected as a director of the
Company in April 1997. He served as an Assistant Secretary and
the General Manager of External Operations for the Company from
June 1987 and 1990, respectively, to December 1995. Mr.
Valentine is responsible for the Company's peanut operations,
including sales and procurement.
JASPER B. SANFILIPPO, Jr., Vice President and Assistant
Secretary, age 29 -- Mr. Sanfilippo has been employed by the
Company since 1991 and served as General Manager of the Walnut
Processing Division from 1993 to December 1995. He has served as
an Assistant Secretary of the Company since 1993 and was named a
Vice President in December 1995. Mr. Sanfilippo is responsible
for the Company's walnut operations, including plant operations
and procurement.
JAMES J. SANFILIPPO, Vice President and Treasurer, age 35 -- Mr.
Sanfilippo has been employed by the Company since 1985 and has
served as Product Manager and General Manager of the Busse
Operations since June 1985 and December 1995 respectively. In
December 1995, he was also named a Vice President and the
Treasurer of the Company. Mr. Sanfilippo is responsible for
operations at the Company's Busse Road facility and Arlington
Heights facility, including plant operations and contract
manufacturing.
STEVEN G. TAYLOR, Executive Vice President, age 47 -- Mr. Taylor
has been the Vice President of Sunshine since 1982. In December
1995, Mr. Taylor became a Vice President of the Company and was
named an Executive Vice President of the Company in October 1996.
Mr. Taylor and Sunshine are parties to an Employment Agreement
pursuant to which Mr. Taylor is to be employed by Sunshine as
Sunshine's Vice President until June 2000. See item 11 -
"Executive Compensation - Employment Contract."
Item 11 -- Executive Compensation
The following table sets forth a summary of compensation for
services in all capacities to the Company during the Transition
Period and for the fiscal years ended December 31, 1996, 1995 and
1994 paid to or accrued for (i) the Company's Chief Executive
Officer, and (ii) each of the four additional most highly
compensated executive officers of the Company (together with the
Chief Executive Officer, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation(1) Awards
---------------------- ------------
Securities
Name and Underlying All Other
Principal Position Year Salary Bonus Options(#) Compensation
- ------------------ ---- ------ ----- ---------- -------------
Jasper B. Sanfilippo(2)1997(+) $184,615 --(12) -- $ 63,972(3)(4)
Chairman of the 1996 395,877 0 -- 129,960
Board and Chief 1995 372,444 53,502 -- 130,200
Executive Officer 1994 356,815 0 -- 133,701
Mathias A. Valentine(5)1997(+) $110,769 --(12) -- $ 27,904(4)(6)
President 1996 236,539 0 -- 64,678
1995 217,720 $31,276 -- 68,428
1994 208,235 0 -- 68,558
John C. Taylor(7) 1997(+) $ 87,500 --(12) 2,800 $ 4,116(8)
Executive Group 1996 172,424 0 -- 6,486
Vice President 1995 164,649 $20,651 4,800 10,635
1994 161,330 0 -- 7,407
Steven G. Taylor(7) 1997(+) $ 87,500 --(12) 2,800 $ 1,214(9)
Executive Vice 1996 172,424 0 -- 1,065
President 1995 164,649 $20,651 4,800 4,614
1994 161,330 0 -- 649
Gary P. Jensen(10) 1997(+) $ 64,615 --(12) 2,800 $ 300(11)
Executive Vice 1996 138,408 0 -- 300
President,Finance and 1995 115,204 $14,067 5,600 --
Chief Financial 1994 -- 0 -- --
Officer
___________________________
+ Compensation for the Transition Period which includes the 26 weeks
ended June 26, 1997
(1) None of the Named Executive Officers received
perquisites in excess of the lesser of $50,000 or 10% of
the aggregate of such officer's salary and bonus.
(2) Mr. Sanfilippo also served as the Company's President
during 1994 and the majority of 1995.
(3) Includes $55,282 of premiums paid by the Company under
a split-dollar agreement with Mr. Sanfilippo covering
certain joint and survivor life insurance policies issued
on the joint lives of Jasper B. Sanfilippo and his spouse.
Also includes $8,690 of life insurance premiums.
(4) The split-dollar agreements require that the Company
be reimbursed for all premiums paid upon either the
surrender of the policies or the death of both insureds.
The reimbursement obligation is secured by a collateral
assignment to the Company of certain rights in the
policies. The Company is required to pay the monthly
premiums; provided, however, each of Messrs. Sanfilippo
and Valentine may elect in any year to pay that portion of
the monthly premiums which would otherwise be treated as
taxable compensation to him under the Internal Revenue
Code of 1986, as amended (the "Code"). The Company
reflects the total amount of premiums it pays under the
split-dollar agreements as an asset on its financial
statements.
(5) During 1994 and the majority of 1995, Mr. Valentine
served as the Company's Senior Executive Vice President,
Secretary and Treasurer. He was named President of the
Company in December 1995.
(6) Includes $20,004 of premiums paid by the Company under
a split-dollar agreement with Mr. Valentine covering
certain joint and survivor life insurance policies issued
on the joint lives of Mathias A. Valentine and his spouse.
Also includes $7,600 of life insurance premiums, $300 of
matching contributions to the 401(k) Plan described below.
(7) The salary and bonus amounts set forth for Messrs.
John C. Taylor and Steven G. Taylor, executive officers of
JBSS and employees of Sunshine, were paid to them by
Sunshine.
(8) Includes $2,520 of premiums paid by the Company under
a split-dollar agreement with Mr. Taylor covering his
life. Also includes $1,296 of disability insurance
premiums and $300 of matching contributions to the 401(k)
Plan described below. The split-dollar agreement requires
that the Company be reimbursed for all premiums paid upon
either the surrender of the policy or the death of the
insured. Sunshine reflects the total amount of premiums
it pays under the split-dollar agreement as an asset on
its financial statements.
(9) Includes $300 of matching contributions to the 401(k)
Plan described below, $914 of disability insurance
premiums paid by the Company for 1996.
(10) During 1995, Mr. Jensen was hired as Vice President and
Chief Financial Officer of the Company. Mr. Jensen was
named the Company's Executive Vice President, Finance and
Chief Financial Officer in December 1995.
(11) Includes $300 of matching contributions to the 401(k) Plan
described below.
(12) Under the Company's Incentive Bonus Program, bonuses earned
for the period January 1, 1997 through June 26, 1997 are
based on earnings for calendar 1997.
Incentive Bonus Program
- -----------------------
During the Transition Period, the Compensation Committee
established an Incentive Bonus Program (the "Incentive Bonus
Program") to provide qualifying employees, including
executive officers, with cash bonuses. Under the Incentive
Bonus Program, cash bonuses are awarded based upon the
Company's earnings per share and vary according to each
qualifying employee's job category. This program replaces
the Company's previous Incentive Compensation Program (the
"Incentive Compensation Program").
401(k) Plan
- -----------
The Company maintains a plan (the "401(k) Plan") which is
intended to qualify under sections 401(a) and 401(k) of the
Code. The 401(k) Plan was adopted in January 1986 and
amended in August 1992, January 1993, January 1994 and
January 1996. All non-union employees of the Company who
have attained age 21 and completed at least one year of
service with the Company are eligible to participate in the
401(k) Plan. The 401(k) Plan permits each participant to
make contributions on a pretax basis subject to limitations
established by the trustees who administer the 401(k) Plan.
The amount of participant contributions to the 401(k) Plan
may also be limited by Code requirements. Effective January
1, 1994, the Company contributes 50% of the amount each
employee contributes to the 401(k) Plan up to a maximum
matching contribution of $300 per employee. The Company may
also make discretionary contributions to the 401(k) Plan
which are allocated among participants pro rata based on
compensation. The pretax contributions made by participants
and the matching contributions made by the Company, and
earnings thereon, are at all times fully vested. A
participant's interest in discretionary contributions made by
the Company and earnings thereon vest over a six year period
and becomes fully vested upon the earliest to occur of such
participant's attainment of age 65, death, disability or
completion of six years of service. Benefits under the
401(k) Plan may be distributed to participants upon their
termination of employment. In addition, the 401(k) Plan
permits employees who have attained age 59 1/2 years and who
have completed 10 years of service to withdraw all or a
portion of their 401(k) Plan account balances under certain
circumstances. During the Transition Period, the Company
made matching contributions to the 401(k) Plan of $300 on
behalf of each of Messrs. Valentine, Jensen, Steven G. Taylor
and John C. Taylor, and $2,100 for all executive officers as
a group. Mr. Sanfilippo did not make any elective
contributions to the 401(k) Plan during the Transition Period
and, consequently, did not receive any matching
contributions. The Company did not make any discretionary
contributions to the 401(k) Plan for 1994 or 1996. The
Company will consider discretionary contributions for 1997 at
the end of the current calendar year. The Company made a
discretionary contribution for 1995 to the 401(k) Plan of
$383,460.
1991 Stock Option Plan
- ----------------------
The Company's 1991 Stock Option Plan (the "Prior Plan") was
adopted in 1991 and terminated by the Board of Directors as
of February 28, 1995. The termination of the Prior Plan does
not, however, affect options granted under the Prior Plan
which remain outstanding. The Prior Plan was administered by
the Stock Option Committee, which was comprised of Jasper B.
Sanfilippo and Mathias A. Valentine. Messrs. Sanfilippo and
Valentine were not eligible to participate in the Prior Plan.
Effective February 27, 1997, the Stock Option Committee was
eliminated and administration of the Prior Plan was assumed
by the Board of Directors. An aggregate of 350,000 shares of
Common Stock were available for awards under the Prior Plan,
subject to adjustments reflecting changes in the Company's
capitalization. Options granted under the Prior Plan were
either incentive stock options or such other forms of
nonqualified stock options as the Stock Option Committee
determined. Incentive stock options granted under the Prior
Plan were intended to qualify as "incentive stock options"
within the meaning of Section 422 of the Code. The exercise
price of such options was determined by the Stock Option
Committee except that the exercise price of (a) an incentive
stock option granted to an individual who owned (directly or
by attribution under Section 424(d) of the Code) shares
possessing more than 10% of the total combined voting power
of all classes of stock of the Company (a "10% Owner") is at
least 110% of the fair market value (as defined in the Prior
Plan) of a share of Common Stock on the date the incentive
stock option was granted; (b) an incentive stock option
granted to an individual other than a 10% Owner is at least
100% of the fair market value of a share of Common Stock on
the date the incentive stock option was granted; and (c) a
nonqualified stock option is at least 33% of the fair market
value of a share of Common Stock on the date the nonqualified
stock option was granted. Subject to certain exceptions, an
individual's options expire if the individual's employment
with or service as a director of the Company, as the case may
be, terminates. As of February 28, 1995, the date the Prior
Plan was terminated, the Company had granted options to
purchase a total of 373,000 shares of Common Stock pursuant
to the Prior Plan (although no more than 350,000 shares of
Common Stock were, at any given time, subject to options
granted under the Prior Plan). Of these options, 144,650 had
been canceled and 1,750 had been exercised as of September
15, 1997 and 210,225 were exercisable on or within 60 days of
September 15, 1997 (the balance of such options becoming
exercisable in various increments over the next two years).
1995 Equity Incentive Plan
- --------------------------
The Company's 1995 Equity Incentive Plan (the "1995 Plan")
was adopted in 1995 to encourage and facilitate the
acquisition of Common Stock by those key employees and
Outside Directors upon whose judgment and interest the
growth, development and financial success of the Company is
dependent. Subject to antidilution and similar provisions,
an aggregate of 200,000 shares of Common Stock may be issued
upon the exercise of stock options granted under the 1995
Plan. As of September 15, 1997, the Company had granted
options to purchase a total of 201,400 shares of Common Stock
under the 1995 Plan. Of these options, 16,200 had been
canceled as of September 15, 1997, and 40,950 were
exercisable on or within 60 days of September 15, 1997 (the
balance of such options becoming exercisable in various
increments over the next four years).
Pursuant to the 1995 Plan, the Company's Board of Directors
may select key employees of the Company to receive awards of
stock options, which may be either nonqualified stock options
or "incentive stock options" within the meaning of Section
422 of the Code, in consideration for their services. In
addition, under the 1995 Plan each Outside Director is
granted a nonqualified option to purchase up to 1,000 shares
of Common Stock (i) on the date of his or her initial
election to the Board of Directors, and (ii) on the date of
each subsequent re-election to the Board.
Generally, stock options granted under the 1995 Plan become
exercisable in equal installments of 25% of the shares
covered by the option on the first four anniversaries of the
date of grant subject to, in the case of an employee,
continued employment with the Company or its subsidiaries, or
in the case of an outside director, continued service as a
director, on such date. However, all options granted under
the 1995 Plan become fully vested and exercisable on the
first date on which no shares of Class A Stock are
outstanding. The exercise price of options granted to
employees under the 1995 Plan is determined by the Stock
Option Committee; provided, however, that (i) the exercise
price for nonqualified stock options granted to employees may
not be less than 50% of the fair market value of a share of
Common Stock on the date of grant, and (ii) the exercise
price for incentive stock options may not be less than 100%
of the fair market value of a share of Common Stock on the
date of the grant (110% in the case of incentive stock
options granted to a 10% Owner). The exercise price for each
option granted to an Outside Director under the 1995 Plan
must equal 100% of the fair market value for a share of
Common Stock on the date such option is granted. The Stock
Option Committee may provide that if a grantee delivers
shares of Common Stock in full or partial payment of the
exercise price, the grantee will be granted a "reload stock
option" to purchase the number of shares of Common Stock so
delivered by the grantee. Options granted under the 1995
Plan may not be assigned or transferred other than by will or
the laws of descent and distribution and may be exercised
during the grantee's lifetime only by the grantee. No option
granted under the 1995 Plan may be exercised after the
expiration of ten years after the date of the grant (five
years in the case of incentive stock options granted to a 10%
Owner). Unexercised options terminate upon or within one year
of an employee's termination of employment with the Company.
Options Grant Table
- -------------------
The following table sets forth certain information concerning
the grant of stock options made to each of the Named
Executive Officers during the Transition Period:
<TABLE>
OPTION GRANTS DURING THE TRANSITION PERIOD
Individual Grants
Potential
% of Total Realizable Value
Options at Assumed Annual
Options Granted to Exercise Rates of Stock
Granted(1) Employees in Price Expiration Price Appreciation
Name (#) Fiscal Year(2) ($/Share) Date Option Term(3)
- ----------------------- ---------- -------------- --------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
5%($) 10%($)
----- ------
Jasper B. Sanfilippo -- -- -- -- -- --
Mathias A. Valentine -- -- -- -- -- --
John C. Taylor 2,800(4) 2.8% 6.25 5/21/2007 11,006 27,890
Steven G. Taylor 2,800(4) 2.8% 6.25 5/21/2007 11,006 27,890
Gary P. Jensen 2,800(4) 2.8% 6.25 5/21/2007 11,006 27,890
</TABLE>
(1) The stock options reflected above expire if the
individual's employment with the Company terminates. The
stock options set forth above are exercisable with respect
to the Common Stock underlying such options 25% annually
commencing on the first anniversary of the date of the
grant and become fully exercisable on the fourth
anniversary of the date of the grant.
(2) Includes employees of the Company's wholly-owned subsidiary
Sunshine.
(3) Amounts represent hypothetical gains or "option spreads"
that could be achieved for the respective options based on
assumed annual compound stock appreciation rates of 5% and
10% over the original full ten-year term of these options.
The 5% and 10% rates of stock appreciation are mandated by
rules of the Securities and Exchange Commission and do not
represent the Company's estimate of the future market price
of the Common Stock.
(4) Options granted under the 1995 Plan.
Option Exercises and Holdings
- -----------------------------
The following table sets forth the certain information
regarding option exercises during the Transition Period by
each of the Named Executive Officers and the number and value
of securities underlying options held by each of the Named
Executive Officers at June 26, 1997.
AGGREGATED OPTION EXERCISES DURING THE TRANSITION PERIOD
AND TRANSITION PERIOD END OPTION VALUES
<TABLE>
Number of
Shares Unexercised Options at Value of Unexercised In the Money
Acquired on Value Fiscal-Year End(#) Options at Fiscal-Year End($)
Name Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ---- ------------ ----------- ------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Jasper B.
Sanfilippo -- -- --
Mathias A.
Valentine -- -- --
John C.
Taylor -- -- 14,125 / 6,875 $ 375 / 1,075
Steven G.
Taylor -- -- 14,125 / 6,875 375 / 1,075
Gary P.
Jensen -- -- 2,750 / 6,250 0 / 700
</TABLE>
Compensation of Directors
- -------------------------
Directors of the Company who are not employees of the Company are
paid $16,000 per year plus $1,000 for each Board meeting
attended, $350 for each telephonic meeting of the Board in which
they participate. Directors who serve on committees of the board
receive $500 for each committee meeting attended and $350 for
each telephonic committee meeting in which they participate.
Directors are also reimbursed for their expenses incurred in
attending such meetings. Directors who are employees of the
Company receive no compensation for their services as directors.
Under the 1995 Plan, a director who is not an employee of the
Company, its subsidiaries, or any of their affiliates (an
"Outside Director") is automatically granted an option to
purchase 1,000 shares of Common Stock on the date of his or her
election to the Company's Board, and on each date of his or her
re-election to the Board. Options granted to Outside Directors
under the 1995 Plan are granted at an exercise price equal to the
fair market value (as defined in the 1995 Plan) of a share of
Common Stock on the date of grant. Pursuant to the 1997 Plan, on
April 30, 1996, Messrs. Buyers, Fischer and Petty each were
granted an option to purchase up to 1,000 shares of Common Stock
at an exercise price of $6.00 per share
Employment Contract
- -------------------
Sunshine is a party to an Employment Agreement with Steven G.
Taylor (the "Employment Agreement"), dated June 17, 1992,
pursuant to which Steven G. Taylor is to be employed as and
serve as a Vice President of Sunshine until June 17, 2000.
Mr. Taylor's annual base compensation under his Employment
Agreement is $150,000, subject to increase from time to time
in the sole discretion of the board of directors of Sunshine
but generally in accordance with Sunshine's customary
practices for increases in base salaries. Under his
Employment Agreement, Steven G. Taylor is entitled to
participate in employment plans and benefits provided by
Sunshine to executive officers of Sunshine and is also
entitled to receive pay increases, bonuses and stock options
comparable to those available annually to upper level
management employees of the Company. In accordance with the
terms of the Employment Agreements, the board of directors of
Sunshine has fixed the current annual 1997 salary for Steven
G. Taylor at $175,000. The Company has guaranteed the
performance of Sunshine under the Employment Agreements.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
The Compensation Committee, which reviews and makes
recommendations to the Board with respect to salaries, bonuses
and other compensation of officers and other executives, was
comprised of Jasper B. Sanfilippo, Mathias A. Valentine,
William D. Fischer and John W. A. Buyers. Mr. Sanfilippo is
the Company's Chairman of the Board and Chief Executive
Officer and is a director and Vice President of Sunshine
during the Transition Period. Mr. Valentine is the Company's
President and a director and Vice President of Sunshine.
Details of related transactions are included in Item 13 of
this report.
Report of the Compensation Committee
- ------------------------------------
Overview of Executive Compensation Program
- ------------------------------------------
The Company's total compensation program for its executive
officers consists of both cash and, except with respect to the
Chief Executive Officer and the President, equity based
compensation. Each executive officer's annual compensation
consists of a base salary, eligibility for matching and
discretionary contributions to the 401(k) Plan and eligibility
for an annual bonus under the Incentive Bonus Program. In
addition, the Company provides life (including split-dollar
life insurance) and disability insurance for certain executive
officers. The Compensation Committee determines the level of
base salary for key executive officers, including the Chief
Executive Officer, and a base salary range for other executive
officers. The Compensation Committee generally determines
such salary or salary range based on a number of factors and
criteria, including the salaries paid by the Company to its
executive officers during the immediately preceding year, the
rate of inflation, the Company's performance during the
immediately preceding fiscal year, the performance of the
executive officer during the immediately preceding fiscal
year, and the salaries paid to the executive officers of
certain other companies engaged in the food or agricultural
commodity business that have annual sales of less than $1.0
billion (the "Compensation Comparison Group"). The weight and
importance given each year to the foregoing factors, the
individual components of each factor and the decision whether
to consider additional factors, lies within the subjective
discretion of the Compensation Committee. Because the
compensation levels of the Company's executive officers are
significantly below compensation levels that would be affected
by the limitations on the deduction of executive salaries
imposed by Section 162(m) of the Code ("Section 162(m)"), the
Compensation Committee has not formulated a policy with
respect to Section 162(m). The 1995 Plan provides for certain
limits, consistent with Code Section 162 and the regulations
promulgated thereunder, on the maximum number of shares of
Common Stock subject to options that may be granted to any
grantee in any one calendar year.
1997 Executive Compensation
- ---------------------------
The Compensation Committee has based 1997 calendar year
salaries (and as a consequence, salaries during the Transition
Period) and salary ranges of the Company's executive officers,
including the Chief Executive Officer, on the salaries paid to
such executive officers in 1996. For 1997, such base salaries
and salary ranges were generally increased by a percentage
slightly greater than the percentage change in the Consumer
Price Index in 1996. The Compensation Committee determined,
in general, not to increase additionally such salaries and
salary ranges, including the salary of the Chief Executive
Officer, due to performance. The Company's return on equity,
growth in net sales, and actual versus anticipated results of
operations for 1996 did not meet the expectations of
management. The Compensation Committee evaluated the
foregoing performance criteria subjectively without giving
specific weight to any particular criteria and in conjunction
with a subjective evaluation of the Company's overall
financial performance in 1996. The Compensation Committee did
not use the salaries of executive officers of the Compensation
Comparison Group to establish base salaries and salary ranges
for the Company's executive officers, including the Chief
Executive Officer, for calendar year 1997 (and as a
consequence, salaries during the Transition Period), but did
compare its determination of such salaries and salary ranges
against the base salaries reported for executive officers of
the Compensation Comparison Group as an independent measure of
reasonableness. The calendar year 1997 base salaries for the
Company's executive officers set by the Compensation Committee
were, in general, at the low to medium ranges when compared to
the base salaries of the Compensation Comparison Group's
executives. However, the Compensation Committee does not
currently have an established policy with regard to the
salaries and salary ranges of the Company's executive
officers, including the salary of the Chief Executive Officer,
relative to the salaries paid to the Compensation Comparison
Group executive officers.
The Compensation Committee also awards annual bonuses to
participants in the Incentive Bonus Program, including the
executive officers of the Company.
The Company provides long-term incentives to its executive
officers through its stock option plans. Through the award of
stock option grants, the objective of aligning executive
officers' long-range interests with those of the stockholders
are met by providing the executive officers with the
opportunity to build a meaningful stake in the Company. The
Stock Option Committee reviewed and approved the participation
of employees of the Company and its subsidiaries under the
Prior Plan (which was terminated in February 1995) and the
1995 Plan through February 27, 1997, at which time the
Committee was eliminated and its duties and responsibilities
under both plans were assumed by the full Board.
Executive officers are eligible to participate in the
Company's 401(k) Plan, including Company matching and
discretionary contributions to the 401(k) Plan. The Company
will consider discretionary contributions for 1997 at the end
of the current calendar year. The Company made no
discretionary contributions to the 401(k) Plan for 1997;
however, the Executive Officers as a whole had $2,100
contributed as matching funds under the 401(k) Plan. The
Company provides certain executive officers with life and
disability insurance. The Company also maintains split-dollar
life insurance policies on the joint lives of Jasper B.
Sanfilippo and his spouse and Mathias A. Valentine and his
spouse and on the life of John C. Taylor. See "Executive
Compensation - Summary Compensation Table."
The Compensation Committee and the Board of Directors believe
that their respective grants of compensation awards will
produce significant long-term compensation for periods when
the Company's performance objectives are met.
1997 Chief Executive Officer Compensation
- -----------------------------------------
The Compensation Committee increased the Chief Executive
Officer's current annual base salary to $400,000, which was a
6.3 percent increase over his previous base salary which was
slightly greater than the rate of inflation. The Compensation
Committee based this increase in the Chief Executive Officer's
base salary on the factors and criteria discussed above with
regard to the establishment of 1997 base salaries and salary
ranges for the Company's executive officers. The Chief
Executive Officer's 1997 base salary was at the medium range
of the base salaries of chief executive officers of the
companies in the Compensation Comparison Group. William D.
Fischer and John W. A. Buyers, as the only disinterested
directors on the Compensation Committee during 1997, were
assisted in establishing the increase in the Chief Executive
Officer's base salary for fiscal 1997 by their broad knowledge
of executive pay practices in the food industry and the
importance to the Company of the services provided by the
Chief Executive Officer. The Chief Executive Officer did not
participate in the Prior Plan and does not participate in the
1995 Plan. In 1997, the Company also provided the Chief
Executive Officer with life insurance and split-dollar life
insurance as discussed above.
Compensation Committee
----------------------
Jasper B. Sanfilippo
Mathias A. Valentine
William D. Fischer
John W. A. Buyers
Performance Graph
The following Performance Graph compares the Company's cumulative
total stockholder return on its Common Stock for the period June
1992 to June 1997, with the cumulative total return of the
Standard & Poor's 500 stock index and a peer group of companies
selected by the Company (the "Peer Group") for purposes of the
comparison and described more fully below. Dividend reinvestment
has been assumed and, with respect to companies in the Peer
Group, the returns of each such company have been weighted to
reflect relative stock market capitalization.
The following table represents a comparison of the total return
between John B. Sanfilippo $ Son, Inc., the S&P 500 and the Peer Group
Index.
Jun-92 Jun-93 Jun-94 Jun-95 Jun-96 Jun-97
------ ------ ------ ------ ------ ------
John B. Sanfilippo
& Son, Inc. 100.00 100.30 67.37 70.45 42.10 47.25
S&P 500 100.00 113.57 115.20 145.14 182.78 246.08
Peer Group Index(2) 100.00 128.12 113.16 125.77 137.39 163.62
(1) Assumes $100 invested in June 1992 in the Company's Common
Stock, S&P 500 Index and Peer Group.
(2) The Peer Group selected by the Company is comprised of the
following companies: Chock Full O'Nuts Corp., J&J Snack Foods
Corp., Universal Foods Corp. and Tootsie Roll Industries, Inc.
("Tootsie Roll"). The Peer Group was selected by the
Company in good faith based upon similarities in the nature
of the business of the companies, total revenues, seasonality of
business of the companies and market capitalization.
The Peer Group selected by the Company for its 1993 Proxy
Statement included Jimbo's Jumbos Inc. ("Jimbo's") but did not
include Tootsie Roll. The Company is no longer able to include Jimbo's
in its Peer Group because Jimbo's was acquired by the JJJ Acquisition
Corporation in July 1993 and is no longer publicly traded. The
cumulative total return for the Peer Group in the Performance Graph
above has been recalculated to exclude Jimbo's and to include
Tootsie Roll for the period from June 1992 to June 1997.
Item 12 -- Security Ownership of Certain Beneficial Owners and Management
- -------------------------------------------------------------------------
The following table sets forth information as of August 1, 1997
with respect to the beneficial ownership of Common Stock and
Class A Stock by (a) the persons known by the Company to be the
beneficial owners of more than 5% of the outstanding shares of
Common Stock or Class A Stock, (b) each director of the Company,
(c) each of the executive officers named in the Summary
Compensation Table below, and (d) all directors and executive
officers of the Company as a group. The information set forth in
the table as to directors and executive officers is based upon
information furnished to the Company by them in connection with
the preparation of this Form 10-K. Except where otherwise
indicated, the mailing address of each of the stockholders named
in the table is: c/o John B. Sanfilippo & Son, Inc., 2299 Busse
Road, Elk Grove Village, Illinois 60007.
<TABLE>
No. of % of No. of % of % of Outstanding
Shares Outstanding Shares of Outstanding Votes on Matters
of Common Shares of Class A Shares of Class Other than Election
Name Stock(1) Common Stock Stock(1)(2) A Stock of Directors
- ---- ---------- ------------ ----------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
Jasper B. Sanfilippo(3)+- 31,000 1.0% 1,523,776 41.3% 36.1%
Mathias A. Valentine(4)+- None -- 637,515 17.3 15.1
Marian Sanfilippo(5) 8,152 * 914,720 24.8 21.6
Michael J. Valentine(6)+- 13,327 * 611,415 16.6 14.5
Gary P. Jensen(7)- 7,150 * None -- *
John C. Taylor(8)+- 15,165 * None -- *
Steven G. Taylor(9)- 14,975 * None -- *
William D. Fischer(10)+ 16,000 * None -- *
J. William Petty(11)+ 1,750 * None -- *
John W. A. Buyers(12)+ 5,300 * None -- *
Swiss Bank Corporation(13) 748,200 13.7 None -- 1.8
All directors and executive
officers as a group (12
persons, all of whom are
stockholders)(3)(4)(6)(7)
(8)(9)(10)(11)(12)(14) 135,548 2.3 2,772,706 75.2 65.7
</TABLE>
- -----------------------------
+ Denotes Director.
- Denotes Named Executive Officer.
* Less than one percent.
(1) Except as otherwise indicated below, beneficial ownership
means the sole power to vote and dispose of shares. In
calculating each holder's percentage ownership and
beneficial ownership in the table above, shares of Common
Stock which may be acquired by the holder through the
exercise of stock options exercisable on or within 60 days
of August 1, 1997 are included.
(2) Each share of Class A Stock is convertible at the option of
the holder thereof at any time and from time to time into
one share of Common Stock. In addition, the Restated
Certificate provides that Class A Stock may be transferred
only to (a) Jasper B. Sanfilippo or Mathias A. Valentine,
(b) a spouse or lineal descendant of Mr. Sanfilippo or
Mr. Valentine, (c) trusts for the benefit of any of the
foregoing individuals, (d) entities controlled by any of the
foregoing individuals, (e) the Company, or (f) any bank or
other financial institution as a bona fide pledge of shares
of Class A Stock by the owner thereof as collateral security
for indebtedness due to the pledgee (collectively, the
"Permitted Transferees"), and that upon any transfer of
Class A Stock to someone other than a Permitted Transferee
each share transferred will automatically be converted into
one share of Common Stock.
(3) Includes 163,045 shares of Class A Stock held by Jasper B.
Sanfilippo as trustee of certain trusts, the beneficiaries of which are
the children of Jasper and Marian Sanfilippo (two of whom - Jasper B.
Sanfilippo, Jr. and James J. Sanfilippo are executive
officers of the Company). Excludes shares held or voted by
Jasper B. Sanfilippo's wife, Marian Sanfilippo, of which Mr.
Sanfilippo disclaims beneficial ownership. Marian
Sanfilippo's mailing address is 2299 Busse Road, Elk Grove
Village, Illinois 6007.
(4) Excludes 24 shares of Common Stock held by Mathias A.
Valentine's wife, Mary Valentine, of which Mr. Valentine
disclaims beneficial ownership.
(5) Includes 890,220 shares of Class A Stock held by Marian Sanfilippo
as trustee of certain trusts, the beneficiaries of which are the children
of Jasper and Marian Sanfilippo (two of whom - Jasper B.
Sanfilippo, Jr. and James J. Sanfilippo are executive
officers of the Company). Excludes shares held or voted by
Marian Sanfilippo's husband, Jasper B. Sanfilippo, of which
Mrs. Sanfilippo disclaims beneficial ownership.
(6) Includes (a) options to purchase 1,400 shares of Common
Stock, 375 shares of Common Stock and 400 shares of Common
Stock at $15.125, $6.60 and $10.3125, respectively, per
share which are exercisable by Michael J. Valentine on or
within 60 days of August 1, 1997, (b) 611,415 shares of
Class A Stock held as trustee of certain trusts
(collectively, the "Valentine Trusts"), the beneficiaries of
which are the children of Mathias and Mary Valentine,
including Michael J. Valentine an executive officer of the
Company and nominee for election as a Class A Director, and
(c) 3,000 shares of Common Stock owned by a general
partnership, the general partners of which are the Valentine
Trusts.
(7) Includes options to purchase 1,500 shares of Common Stock
and 650 shares of Common Stock at $9.625 and $9.375,
respectively, per share, which are exercisable by Gary P.
Jensen on or within 60 days of August 1, 1997.
(8) Includes options to purchase 10,000 shares of Common Stock,
3,400 shares of Common Stock, 750 shares of Common Stock and
825 shares of Common Stock at $15.00, $13.75, $6.00 and
$9.375, respectively, per share which are exercisable by
John C. Taylor on or within 60 days of August 1, 1997.
(9) Includes options to purchase 10,000 shares of Common Stock,
3,400 shares of Common Stock, 750 shares of Common Stock and
825 shares of Common Stock at $15.00, $13.75, $6.00 and
$9.375, respectively, per share which are exercisable by
Steven G. Taylor on or within 60 days of August 1, 1997.
(10) Includes options to purchase 4,000 shares of Common Stock,
500 shares of Common Stock, 250 shares of Common Stock and
250 shares of Common Stock at $12.25, $10.50, $6.00 and
$6.625, respectively, per share which are exercisable by
William D. Fischer on or within 60 days of August 1, 1997.
Mr. Fischer's mailing address is 680 North Lake Shore Drive,
Chicago, Illinois 60611.
(11) Includes options to purchase 500 shares of Common Stock and
250 shares of Common Stock at $8.25 and $6.625,
respectively, per share which are exercisable by J. William
Petty on or within 60 days of August 1, 1997. Mr. Petty's
mailing address is 425 Ahwahnee Road, Lake Forest, Illinois
60045.
(12) Includes options to purchase 4,000 shares of Common Stock,
500 shares of Common Stock, 250 shares of Common Stock and
250 shares of Common Stock at $12.25, $10.50, $6.00 and
$6.625, respectively, per share which are exercisable by
John W. A. Buyers on or within 60 days of August 1, 1997.
Mr. Buyers' mailing address is 827 Fort Street, Honolulu,
Hawaii 96813.
(13) The information set forth in the table above and in this
footnote is based solely on a Schedule 13G dated
February 12, 1997 filed jointly by Brinson Holdings, Inc.
("BHI"), Brinson Partners, Inc. ("BPI"), Brinson Trust
Company ("BTC"), SBC Holding (USA), Inc. ("SBCUSA") and
Swiss Bank Corporation ("SBC") with the Securities and
Exchange Commission. BTC, which is a wholly-owned
subsidiary of BPI, owns 218,526 shares of Common Stock.
BPI, which is a wholly-owned subsidiary of BHI, owns 529,674
shares of Common Stock (not including the shares held by
BTC). BHI is a wholly-owned subsidiary of SBCUSA, which is
a wholly-owned subsidiary of SBC. The principal business
office of BPI, BTC and BHI is located at 209 South LaSalle
Street, Chicago, IL 60604. The principal business office of
SBCUSA is located at 222 Broadway, New York, NY 10038. The
principal business office of SBC is located at Aeschenplatz
6 CH-4002, Basel, Switzerland.
(14) Includes options to purchase a total of 56,150 shares of
Common Stock (including the options referred to in footnotes
6, 7, 8, 9, 10, 11 and 12 above) at prices ranging from
$6.00 to $15.125 per share which are exercisable by certain
of the directors and executive officers on or within 60 days
of August 1, 1997.
Item 13 -- Certain Relationships and Related Transactions
- ---------------------------------------------------------
Lease Arrangements
- ------------------
The Company leases a warehousing and retail facility in Des
Plaines, Illinois (the "Des Plaines Facility") and its
production and office facilities at 2299 Busse Road, Elk Grove
Village, Illinois (the "Busse Road Facility") from land trusts
in which the direct and indirect beneficiaries are Jasper B.
Sanfilippo (a stockholder, director and executive officer of
the Company), Mathias A. Valentine (a stockholder, director
and executive officer of the Company), their respective
spouses, Anne Karacic and Rose Laketa (sisters of Mr.
Sanfilippo) and Rosalie Sanfilippo (Mr. Sanfilippo's mother).
The lease for the Des Plaines Facility expires on October 31,
2010 and provides for monthly rent of $21,250, subject to
periodic increases based on increases in the Consumer Price
Index (the "CPI") on each of June 1, 2003 and June 1, 2005.
The lease for the Busse Road Facility expires on May 31, 2015
and provides for monthly rent of $74,084, subject to CPI
increases on each of June 1, 2002, June 1, 2007 and June 1,
2012. The monthly rent increase effective June 1, 1997 is
currently under review. The leases for the Des Plaines
Facility and the Busse Road Facility also require the Company
to pay the real estate taxes on, and to maintain and insure,
the Des Plaines Facility and the Busse Road Facility. During
1997, the aggregate amount of real estate taxes on and
insurance premiums paid by the Company under both leases was
approximately $148.
The Company has constructed an addition to the Busse Road
Facility (the "Addition") which is situated on property owned
by the land trust that owns the Busse Road Facility (the
"Busse Land Trust") and on property owned by the Company.
Accordingly, (i) the Company and the Busse Land Trust entered
into a ground lease with a term beginning January 1, 1995
pursuant to which the Company leases from the Busse Land Trust
the land on which a portion of the Addition is situated and
all related improvements thereon (the "Busse Addition
Property"), and (ii) the Company, the Busse Land Trust and the
sole beneficiary of the Busse Land Trust entered into a party
wall agreement effective as of January 1, 1995, which sets
forth the respective rights and obligations of the Company and
the Busse Land Trust with respect to the common wall which
separates the existing Busse Road Facility and the Addition.
The ground lease has a term which expires on May 31, 2015 (the
same date on which the Company's lease for the Busse Road
Facility expires) and requires the Company to pay the Busse
Land Trust annual rent of $6,425, subject to CPI increases on
each of June 1, 2000, June 1, 2005 and June 1, 2010. The
Company has an option to extend the term of the ground lease
for one five-year term, an option to purchase the Busse
Addition Property at its then appraised fair market value at
any time during the term of the ground lease, and a right of
first refusal with respect to the Busse Addition Property.
The ground lease also requires the Company to pay the real
estate taxes on, and to insure, the Busse Addition Property.
The party wall agreement grants the Company the right to use
and the obligation to participate pro rata with the Busse
Partnership (defined below) in the maintenance of the common
wall shared by the Addition and Busse Road Facility.
The sole beneficiary of the Busse Land Trust is the
Arthur/Busse Limited Partnership (the "Busse Partnership").
The general partner of the Busse Partnership is Arthur/Busse
Properties, Inc. The shareholders of Arthur/Busse Properties,
Inc. and the limited partners of the Busse Partnership are
Jasper B. Sanfilippo, Marian Sanfilippo (Mr. Sanfilippo's
wife), Mathias A. Valentine, Mary Valentine (Mr. Valentine's
wife), Anne Karacic and Rose Laketa (sisters of
Mr. Sanfilippo), and Rosalie Sanfilippo (Mr. Sanfilippo's
mother).
Supplier, Vendor, Broker and Other Arrangements
- -----------------------------------------------
During the Transition Period, the Company sold $378,822 of
products and services to Navarro Pecan Company, Inc.
("Navarro"). The Company anticipates that it will continue to
make such purchases from and sales to Navarro in 1998 and
thereafter. Jasper B. Sanfilippo, a stockholder, director and
executive officer of the Company, also serves as a director
and officer of Navarro. In addition, Mr. Sanfilippo owns 33-
1/3% of the outstanding common stock of Navarro. The
remaining two-thirds of the outstanding common stock of
Navarro is owned by unaffiliated parties.
During the Transition Period, the Company purchased
approximately $2.26 million of raw materials from an entity in
respect of which Mr. Sanfilippo serves as a director and owns
50% of the outstanding common stock.
During the Transition Period, the Company purchased $75,607 of
manufacturing equipment (such as canning and packaging
machinery) and engineering services from JesCorp, Inc.
("JesCorp"). The Company anticipates that it will continue to
make such purchases of products and services from JesCorp in
1998 and thereafter. James J. Sanfilippo and John Sanfilippo
are the stockholders, directors and officers of JesCorp and
are employees (James Sanfilippo is an executive officer) and
stockholders of the Company and sons of Jasper B. Sanfilippo,
a stockholder, director and executive officer of the Company.
Marian Sanfilippo, Jasper B. Sanfilippo's wife and a
beneficial owner of more than 5% of the Company's outstanding
Class A Stock, is also a director of JesCorp. Through
February 1997, JesCorp subleased from the Company
approximately 10,981 square feet of space at the Company's
facilities and paid rent for this space at the rate of $5,138
per month. In February 1997, JesCorp subleased additional
space which brought the total space subleased to JesCorp to
approximately 17,481 square feet. JesCorp is paying $8,198
of rent per month under the new arrangement. This amount is
equal to the amount paid by the Company in respect for such
space. JesCorp's lease will expire December 31, 2000.
Gibson Specialty Corporation ("Gibson") subleases
approximately 11,605 square feet of space from the Company.
Gibson's rent is equal to the amount paid by the Company in
respect for such space. Gibson is owned 60% by Jerome Evon,
the son-in-law of Jasper B. Sanfilippo. The remaining 40%
of Gibson is owned by unaffiliated parties. Gibson's lease
will expire December 31, 2000.
During the Transition Period, the Company sold approximately
$423,465 of products and services to Mauna Loa Macadamia Nut
Corporation ("Mauna Loa"). Mauna Loa is a wholly-owned
subsidiary of C. Brewer and Company, Limited ("C. Brewer") and
C. Brewer, in turn, is a wholly-owned subsidiary of Buyco,
Inc. ("Buyco"). John W. A. Buyers, a stockholder and director
of the Company, is a stockholder, director and executive
officer of Buyco, an executive officer and director of C.
Brewer and a director of Mauna Loa. All such transactions
have been and will continue to be on terms which the Company
believes to be at least as favorable to the Company as could
be obtained from unaffiliated parties.
PART IV
Item 14 -- Exhibits, Financial Statement Schedules and Reports on Form 8-K
- --------------------------------------------------------------------------
(a)(1) Financial Statements
The following financial statements of John B. Sanfilippo & Son,
Inc. are included in Part II, Item 8 of this Report:
Report of Independent Accountants
Consolidated Balance Sheets at June 26, 1997, December 31, 1996
and December 31, 1995
Consolidated Statements of Operations for the Twenty-Six Weeks
Ended June 26, 1997 and June 27, 1996, and for the Years
Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the Twenty-
Six Weeks Ended June 26, 1997 and for the Years Ended December
31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Twenty-Six Weeks
Ended June 26, 1997 and June 27, 1996, and for the Years Ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Quarterly Consolidated Financial Data
(2) Financial Statement Schedules
The following information included in this Report is filed as a
part hereof:
Report of Independent Accountants on Financial Statement
Schedule
Schedule II -- Valuation and Qualifying Accounts and Reserves
All other schedules are omitted because they are not applicable
or the required information is shown in the Consolidated
Financial Statements or Notes thereto.
(3) Exhibits
The exhibits required by Item 601 of Regulation S-K and filed
herewith are listed in the Exhibit Index which follows the
signature page and immediately precedes the exhibits filed.
(b) Reports on Form 8-K
On June 4, 1997, the Company filed a Current Report on Form 8-
K, dated May 21, 1997. The Current Report dated May 21, 1997,
reported pursuant to Item 8 thereof that the Company was changing
its fiscal year end from December 31 to the last Thursday of June
of each year, beginning June 26, 1997.
(c) Exhibits
See Item 14(a)(3) above.
(d) Financial Statement Schedules
See Item 14(a)(2) above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: September 23, 1997 JOHN B. SANFILIPPO & SON, INC.
By: /s/ Jasper B. Sanfilippo
----------------------------
Jasper B. Sanfilippo
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following
persons on behalf of the Registrant in the capacities and on
the dates indicated.
<TABLE>
Name Title Date
- ---- ----- ----
<S> <C> <C>
/s/ Jasper B. Sanfilippo Chairman of the Board and Chief Executive September 23, 1997
- ------------------------ Officer and Director (Principal
Jasper B. Sanfilippo Executive Officer)
/s/ Gary P. Jensen Executive Vice President, Finance and Chief September 23, 1997
- ------------------ Financial Officer (Principal Financial
Gary P. Jensen Officer)
/s/ William R. Pokrajac Controller (Principal Accounting Officer) September 23, 1997
- -----------------------
William R. Pokrajac
/s/ Mathias A. Valentine Director September 23, 1997
- ------------------------
Mathias A. Valentine
/s/ William D. Fischer Director September 23, 1997
- ----------------------
William D. Fischer
/s/ John W.A. Buyers Director September 23, 1997
- --------------------
John W.A. Buyers
/s/ John C. Taylor Director September 23, 1997
- ------------------
John C. Taylor
/s/ Michael J. Valentine Director September 23, 1997
- ------------------------
Michael J. Valentine
/s/ J. William Petty
- --------------------
J. William Petty Director September 23, 1997
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of John B. Sanfilippo & Son, Inc.
Our audits of the consolidated financial statements
referred to in our report dated August 29, 1997 appearing on
page 21 of this Form 10-K also included an audit of the
Financial Statement Schedule listed in Item 14(a) of this
Form 10-K. In our opinion, the Financial Statement
Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with
the related consolidated financial statements.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Chicago
August 29, 1997
JOHN B. SANFILIPPO & SON, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the twenty-six weeks ended June 26, 1997 and for the
years ended December 31, 1996 and 1995
(Dollars in thousands)
Balance at Balance at
Description Beginning Additions Deductions End of Period
- ----------- ---------- --------- ---------- -------------
TWENTY-SIX WEEKS ENDED
JUNE 26, 1997
Allowance for doubtful
accounts $ 676 $ 27 $ (34) $ 669
DECEMBER 31,1996
Allowance for doubtful
accounts $ 434 $ 443 $(201) $ 676
DECEMBER 31,1995
Allowance for doubtful
accounts $ 407 $ 195 $(168) $ 434
JOHN B. SANFILIPPO & SON, INC.
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
Exhibit Total
Number Description Pages
- ------- ----------- -----
1 None
2 None
3.1 Restated Certificate of Incorporation of Registrant(2)
3.2 Certificate of Correction to Restated Certificate(2)
3.3 Bylaws of Registrant(1)
4.1 Specimen Common Stock Certificate(3)
4.2 Specimen Class A Common Stock Certificate(3)
4.3 Amended and Restated Note Purchase and Private Shelf
Agreement by and between the Registrant and The Prudential
Insurance Company of America ("Prudential") dated as of October
19, 1993 (the "Long-Term Financing Facility)(8)
4.4 7.87% Series A Senior Note dated September 29, 1992 in the
original principal amount of $4.0 million due August 15, 2004
executed by the Registrant in favor of Prudential(5)
4.5 8.22% Series B Senior Note dated September 29, 1992 in the
original principal amount of $6.0 million due August 15, 2004
executed by the Registrant in favor of Prudential(5)
4.6 8.22% Series C Senior Note dated September 29, 1992 in the
original principal amount of $4.0 million due August 15, 2004
executed by the Registrant in favor of Prudential(5)
4.7 8.33% Series D Senior Note dated January 15, 1993 in the
original principal amount of $3.0 million due August 15, 2004
executed by the Registrant in favor of Prudential(6)
4.8 6.49% Series E Senior Note dated September 15, 1993 in the
original principal amount of $8.0 million due August 15, 2004
executed by the Registrant in favor of Prudential(9)
4.9 8.31% Series F Senior Note dated June 23, 1994 in the
original principal amount of $8.0 million due May 15, 2006
executed by the Registrant in favor of Prudential(11)
4.10 8.31% Series F Senior Note dated June 23, 1994 in the
original principal amount of $2.0 million due May 15, 2006
executed by the Registrant in favor of Prudential(11)
4.11 Amended and Restated Guaranty Agreement dated as of
October 19, 1993 by Sunshine in favor of Prudential(8)
4.12 First Amendment to the Long-Term Financing Facility dated
as of August 31, 1994 by and between Prudential, Sunshine Nut Co.,
Inc. ("Sunshine") and the Registrant(12)
4.13 Second Amendment to the Long-Term Financing Facility dated
as of September 12, 1995 by and among Prudential, Sunshine and the
Registrant(17)
4.14 Third Amendment to the Long-Term Financing Facility dated
as of February 20, 1996 by and between Prudential, Sunshine and
the Registrant (20)
4.15 Second Amendment and Restated Note Agreement dated January
24, 1997 to the Long Term Financing Facility by and among
Prudential, Sunshine, and the Registrant (22)
4.16 Amendment to the Second Amended and Restated Note
Agreement dated May 21, 1997 by and among Prudential, Sunshine and
the Registrant (23)
4.17 $1.8 million Promissory Note dated March 31, 1989
evidencing a loan by Cohen Financial Corporation to LaSalle
National Bank ("LNB"), as Trustee under Trust Agreement dated
March 17, 1989 and known as Trust No. 114243(14)
4.18 Modification Agreement dated as of September 29, 1992 by
and among LaSalle National Trust, N.A. ("LaSalle Trust"), a
national banking association, not personally but as Successor
Trustee to LNB under Trust Agreement dated March 17, 1989 known as
Trust Number 114243; the Registrant; Jasper B. Sanfilippo and
Mathias A. Valentine; and Mutual Trust Life Insurance Company(5)
4.19 Note Purchase Agreement dated as of August 30, 1995
between the Registrant and Teachers Insurance and Annuity
Association of America ("Teachers")(17)
4.20 8.30% Senior Note due 2005 in the original principal
amount of $10.0 million, dated September 12, 1995 and executed by
the Registrant in favor of Teachers(17)
4.21 9.38% Senior Subordinated Note due 2005 in the original
principal amount of $15.0 million, dated September 12, 1995 and
executed by the Registrant in favor of Teachers(17)
4.22 Guaranty Agreement dated as of August 30, 1995 by Sunshine
in favor of Teachers (Senior Notes)(17)
4.23 Guaranty Agreement dated as of August 30, 1995 by Sunshine
in favor of Teachers (Senior Subordinated Notes)(17)
4.24 Amendment, Consent and Waiver, dated as of March 27,
1996, by and among Teachers, Sunshine and the Registrant(20)
4.25 Amendment No. 2 to Note Purchase Agreement dated as of
January 24, 1997 by and among Teachers, Sunshine and the
Registrant(22)
4.26 Amendment to Note Purchase Agreement dated May 19, 1997 by
and among Teachers, Sunshine and the Registrant(23)
5-9 None
10.1 Certain documents relating to $8.0 million Decatur County-
Bainbridge Industrial Development Authority Industrial Development
Revenue Bonds (John B. Sanfilippo & Son, Inc. Project) Series 1987
dated as of June 1, 1987(1)
10.2 Industrial Building Lease dated as of October 1, 1991
between JesCorp, Inc. and LNB, as Trustee under Trust Agreement
dated March 17, 1989 and known as Trust No. 114243(16)
10.3 Industrial Building Lease (the "Touhy Avenue Lease") dated
November 1, 1985 between Registrant and LNB, as Trustee under
Trust Agreement dated September 20, 1966 and known as Trust No.
34837(13)
10.4 First Amendment to the Touhy Avenue Lease dated June 1,
1987(13)
10.5 Second Amendment to the Touhy Avenue Lease dated December
14, 1990(13)
10.6 Third Amendment to the Touhy Avenue Lease dated September
1, 1991(18)
10.7 Industrial Real Estate Lease (the "Lemon Avenue Lease")
dated May 7, 1991 between Registrant, Majestic Realty Co. and
Patrician Associates, Inc(1)
10.8 First Amendment to the Lemon Avenue Lease dated January
10, 1996(20)
10.9 $4.0 million Promissory Note dated October 5, 1988
evidencing a loan to Registrant by Jasper B. Sanfilippo(1)
10.10 Form of Receivable Assignment Agreement between Registrant
and Jasper B. Sanfilippo and form of $1,153,801.36 Promissory Note
executed by Jasper B. Sanfilippo in connection therewith(14)
10.11 Mortgage, Assignment of Rents and Security Agreement made
on September 29, 1992 by LaSalle Trust, not personally but as
Successor Trustee under Trust Agreement dated February 7, 1979
known as Trust Number 100628 in favor of the Registrant relating
to the properties commonly known as 2299 Busse Road and 1717
Arthur Avenue, Elk Grove Village, Illinois(5)
10.12 Industrial Building Lease dated June 1, 1985 between
Registrant and LNB, as Trustee under Trust Agreement dated
February 7, 1979 and known as Trust No. 100628(1)
10.13 First Amendment to Industrial Lease dated September 29,
1992 by and between the Registrant and LaSalle Trust, not
personally but as Successor Trustee under Trust Agreement dated
February 7, 1979 and known as Trust Number 100628(5)
10.14 Second Amendment to Industrial Building Lease dated March
3, 1995, by and between the Registrant and LaSalle Trust, not
personally but as Successor Trustee under Trust Agreement dated
February 7, 1979 and known as Trust Number 100628(14)
10.15 Ground Lease dated January 1, 1995, between the Registrant
and LaSalle Trust, not personally but as Successor Trustee under
Trust Agreement dated February 7, 1979 and known as Trust Number
100628(14)
10.16 Party Wall Agreement, dated March 3, 1995, between the
Registrant, LaSalle Trust, not personally but as Successor Trustee
under Trust Agreement dated February 7, 1979 and known as Trust
Number 100628 and the Arthur/Busse Limited Partnership(14)
10.17 Secured Promissory Note in the amount of $6,223,321.81
dated September 29, 1992 executed by Arthur/Busse Limited
Partnership in favor of the Registrant(5)
10.18 Tax Indemnification Agreement between Registrant and
certain Stockholders of Registrant prior to its initial public
offering(2)
*10.19 Indemnification Agreement between Registrant and certain
Stockholders of Registrant prior to its initial public offering(2)
*10.20 The Registrant's 1991 Stock Option Plan(1)
*10.21 First Amendment to the Registrant's 1991 Stock Option
Plan(4)
*10.22 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, and Collateral Assignment from John E. Sanfilippo as
trustee of the Jasper and Marian Sanfilippo Irrevocable Trust,
dated September 23, 1990, as assignor, to Registrant, as
assignee(7)
*10.23 John B. Sanfilippo & Son, Inc. Split-Dollar Insurance
Agreement Number Two among Michael J. Valentine, as trustee of the
Valentine Life Insurance Trust, dated May 15, 1991, Mathias
Valentine, Mary Valentine and Registrant, and Collateral
Assignment from Michael J. Valentine, as trustee of the Valentine
Life Insurance Trust, dated May 15, 1991, as assignor, and
Registrant, as assignee(7)
10.24 License to Use Trade Name, Trademarks and Service Marks,
dated April 15, 1993 by and among Bert S. Crane, Nancy M. Crane,
Bert A. Crane, Mary Crane Couchman, Karen N. Crane, Crane Walnut
Orchards Processing Division, Amsterdam Land and Cattle Company,
Inc. and the Registrant(10)
10.25 Credit Agreement among the Registrant, American National
Bank and Trust Company of Chicago ("ANB") as agent, LNB, National
City Bank ("NCB") and ANB, dated as of October 19, 1993(8)
10.26 Guaranty Agreement dated as of October 19, 1993 by
Sunshine in favor of ANB, as agent on behalf of LNB, NCB and ANB(8)
10.27 Amendment to Amended and Restated Reimbursement Agreement
dated as of October 19, 1993 by and among the Registrant, LNB and
ANB(8)
10.28 Amendment No. 1 to Bank Credit Facility entered into as of
August 31, 1994 by and among the Registrant, ANB, LNB and NCB(12)
10.29 Amendment No. 2 to Bank Credit Facility entered into as of
September 1, 1994 by and among the Registrant, ANB, LNB and NCB(12)
10.30 Amendment No. 3 to Bank Credit Facility dated as of
September 13, 1995 by and among the Registrant, ANB, LNB and
NCB.(17)
10.31 Memorandum of Agreement dated February 24, 1994, between
the Registrant and The Fisher Nut Company ("Fisher")(13)
10.32 Asset Purchase and Sales Agreement, dated as of October
10, 1995, by and among The Procter & Gamble Company, ("P&G"). The
Procter & Gamble Distribution Company ("P&GDC"), Fisher and the
Registrant(19)
10.33 Inventory Purchase Agreement, dated as of October 10,
1995, by and among P&G, P&GDC, Fisher and the Registrant(19)
10.34 Equipment Purchase Agreement, dated as of October 10,
1995, by and among Fisher and the Registrant(19)
10.35 Lease Agreement, dated as of December 10, 1993, by and
between LaSalle Trust and the Registrant for the premises at 3001
Malmo Drive, Arlington Heights, Illinois(16)
*10.36 Certain documents relating to Reverse Split-Dollar
Insurance Agreement between Sunshine and John Charles Taylor dated
November 24, 1987(14)
10.37 Outsource Agreement between the Registrant and Preferred
Products, Inc. dated January 19, 1995 [CONFIDENTIAL TREATMENT
REQUESTED](14)
10.38 Letter Agreement between the Registrant and Preferred
Products, Inc., dated February 24, 1995, amending the Outsource
Agreement dated January 19, 1994 [CONFIDENTIAL TREATMENT
REQUESTED](14)
*10.39 The Registrant's 1995 Equity Incentive Plan(15)
10.40 Merger Agreement dated May 31, 1995, among the Registrant,
Quantz Acquisition Co., Inc. James B. Quantz, the National Bank of
South Carolina, as Trustee of the James Bland Quantz Irrevocable
Trust dated May 6, 1980, and Machine Design Incorporated
[CONFIDENTIAL TREATMENT REQUESTED](16)
10.41 Promissory Note (the "ILIC Promissory Note") in the
original principal amount of $2.5 million, dated September 27,
1995 and executed by the Registrant in favor of Indianapolis Life
Insurance Company ("ILIC")(18)
10.42 First Mortgage and Security Agreement (the "ILIC"
Mortgage") by and between the Registrant, as mortgagor, and ILIC,
as mortgagee, dated September 27, 1995, and securing the ILIC
Promissory Note and relating to the property commonly known as
3001 Malmo Drive, Arlington Heights, Illinois (18)
10.43 Assignment of Rents, Leases, Income and Profits dated
September 27, 1995, executed by the Registrant in favor of ILIC
and relating to the ILIC Promissory Note, the ILIC Mortgage and
the Arlington Heights facility(18)
10.44 Environmental Risk Agreement dated September 27, 1995,
executed by the Registrant in favor of ILIC and relating to the
ILIC Promissory Note, the ILIC Mortgage and the Arlington Heights
facility(18)
10.45 Credit Agreement among the Registrant, Bank of America
Illinois ("BAI") as agent, NCB, The Northern Trust Company ("NTC")
and BAI, dated as of March 27, 1996(20)
10.46 Reimbursement Agreement between the Registrant and BAI,
dated as of March 27, 1996(20)
10.47 Guaranty Agreement dated as March 27, 1996 by Sunshine in
favor of BAI as agent on behalf of NCB, NTC and BAI(20)
10.48 Amendment No. 1 and Waiver to Credit Agreement dated as of
August 1, 1996 by and among the Registrant, BAI, NCB and NTC(21)
10.49 Amendment No. 2 and Waiver to Credit Agreement dated as of
October 30, 1996 by and among the Registrant, BAI, NCB and NTC(21)
10.50 Amendment No. 3 to Credit Agreement dated as of January
24, 1997 by and among the Registrant, BAI, NCB, and NTC(22)
10.51 Amendment No. 5 to Credit Agreement dated June 2, 1997 by
and among the Registrant, BAI, NCB and NTC(23)
*10.52 Employment Agreement by and between Sunshine and John C.
Taylor dated June 17, 1992
*10.53 Employment Agreement by and between Sunshine and Steven G.
Taylor dated June 17, 1992
11-20 None
21 Subsidiaries of the Registrant 1
22 None
23 Consent of Price Waterhouse LLP 1
24-26 None
27 Financial Data Schedule
28-98 None
99.1 Recast 1991 Statements of Operations and Balance Sheets(3)
(1) Incorporated by reference to the Registrant's
Registration Statement on Form S-1, Registration No. 33-
43353, as filed with the Commission on October 15, 1991
(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 second quarter ended June
25, 1992 (Commission File No. 0-19681).
(5) Incorporated by reference to the Registrant's Current
Report on Form 8-K dated September 29, 1992 (Commission
File No. 0-19681).
(6) Incorporated by reference to the Registrant's Current
Report on Form 8-K dated January 15, 1993 (Commission
File No. 0-19681).
(7) Incorporated by reference to the Registrant's
Registration Statement on Form S-1, Registration No. 33-
59366, as filed with the Commission on March 11, 1993
(Commission File No. 0-19681).
(8) Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the third quarter ended
September 30, 1993 (Commission File No. 0-19681).
(9) Incorporated by reference to the Registrant's Current
Report on Form 8-K dated September 15, 1993 (Commission
file No. 0-19681).
(10) Incorporated by reference to the Registrant's
Amendment No. 1 to Registration Statement on Form S-1,
Registration No. 33-59366, as filed with the commission
on April 19, 1993 (Commission File No. 0-19681).
(11) Incorporated by reference to the Registrant's
Current Report and Form 8-K dated June 23, 1994
(Commission File No. 0-19681).
(12) Incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q for the third quarter
ended September 29, 1994 (Commission File No. 0-19681).
(13) Incorporated by reference to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (Commission File No. 0-19681).
(14) Incorporated by reference to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (Commission File No. 0-19681).
(15) Incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q for the first quarter
ended March 30, 1995 (Commission File No. 0-19681).
(16) Incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q for the second quarter
ended June 29, 1995 (Commission File No. 0-19681).
(17) Incorporated by reference to the Registrant's
Current Report on Form 8-K dated September 12, 1995
(Commission File No. 0-19681).
(18) Incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q for the third quarter
ended September 28, 1995 (Commission file No. 0-19681).
(19) Incorporated by reference to the Registrant's
Current Report on Form 8-K dated November 6, 1995
(Commission file No. 0-19681).
(20) Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1995 (Commission file No. 0-19681).
(21) Incorporated by reference to the Registrant's Current
Report on Form 8-K dated January 24, 1997 (Commission file No. 0-19681).
(22) Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996
(Commission file No. O-19681)
(23) Incorporated by reference to the Registrant's Current
Report on Form 8-K dated May 21, 1997 (Commission file No. O-19681)
* Indicates a management contract or compensatory plan or
arrangement required to be filed as an exhibit to this
form pursuant to Item 14(c).
John B. Sanfilippo & Son, Inc. will furnish any of the
above exhibits to its stockholders upon written request
addressed to the Secretary at the address given on the
cover page of this Form 10-K. The charge for furnishing
copies of the exhibits is $.25 per page, plus postage.
</TABLE>
LIST OF SUBSIDIARIES OF JOHN B. SANFILIPPO & SON, INC.
- ------------------------------------------------------
REGISTRANT'S
RELATIONSHIP OWNERSHIP
ENTITY TO REGISTRANT BUSINESS PERCENTAGE
- ------ ------------- -------- ------------
Sunshine Nut Co., Inc, Subsidiary Processor, 100%
a Texas corporation packager,
marketer and
distributor of
shelled nuts
JBS International, Inc., Subsidiary Export sales 100%
a Barbados corporation of the
Registrant's
products
Quantz Acquisition Co., Inc., Subsidiary Holder of 100%
a Delaware corporation various
patents
CONSENT OF INDEPENDENT ACCOUNTANTS
- ----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-56896) of John B. Sanfilippo & Son, Inc. of
our report dated August 29, 1997 appearing on page 21 of this Form 10-K.
We also consent to the incorporation by reference of our report
on the Financial Statement Schedule, which appears on page 62 of this
Form 10-K.
/s/ Price Waterhouse LLP
- ------------------------
Chicago, Illinois
September 23, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the John B.
Sanfilippo & Son, Inc. Consolidated Statement of Operations for the twenty-six
weeks ended June 26, 1997 and Consolidated Balance Sheet as of June 26, 1997 and
is qualified in its entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
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