SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-K
(Mark One)
[ X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 25, 1998
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-19681
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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
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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 11, 1998, 5,579,039 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 11, 1998) held by non-affiliates of the registrant was
$26,880,830 (5,376,166 shares at $5.00 per share).
Documents Incorporated by Reference:
- ------------------------------------
Portions of the Company's Annual Report to Stockholders for the
fiscal year ended June 25, 1998 are incorporated by reference into
Part II of this Report.
Portions of the Company's definitive proxy statement for its annual
meeting of stockholders to be held October 28, 1998 are
incorporated by reference into Part III of this Report.
PART I
- ------
Item 1 -- Description of Business
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a. General Development of Business
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(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 contained in the Company's 1998
Annual Report to Stockholders. On April 30, 1997 the Company's
Board of Directors voted to 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 Board of Directors believes
that the new fiscal year more closely matches the Company's
business cycle. References herein to fiscal 1998 are to the
fiscal year ended June 25, 1998. References herein to the
"Transition Period" are for the twenty-six weeks ended June 26,
1997. References herein to fiscal 1996 and fiscal 1995 are to the
fiscal years ended December 31, 1996 and 1995, respectively.
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, Texas Pride and Tom Scott 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
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(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,
sunflower seeds, corn snacks, sesame sticks and other sesame snack
products.
(ii) Principal Products
--------------------------
(A) Raw and Processed Nuts
------------------------------
The Company's principal products are raw and processed nuts.
These products accounted for approximately 85.9%, 85.6%, 83.8% and
84.9% of the Company's gross sales for fiscal 1998, the Transition
Period, fiscal 1996 and fiscal 1995, respectively. The nut
product line includes peanuts, almonds, Brazil nuts, pecans,
pistachios, filberts, cashews, English walnuts, black walnuts,
pine nuts 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 fiscal 1998, 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 4.3%, 4.9%, 5.3% and
5.0% of the Company's gross sales for fiscal 1998, the Transition
Period, fiscal 1996 and fiscal 1995, respectively. Approximately
2.3%, 4.9% and 16.5% of the Company's peanut butter products were
sold during fiscal 1998, fiscal 1996 and fiscal 1995,
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 3.8%, 4.4%, 4.6% and
4.4% of the Company's gross sales for fiscal 1998, the Transition
Period, fiscal 1996 and fiscal 1995, 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 6.0%,
5.1%, 6.3% and 5.7% of the Company's gross sales for fiscal 1998,
the Transition Period, fiscal 1996 and fiscal 1995, 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 approximately 9,800 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
approximately 3,600 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
fiscal 1996 and fiscal 1995, respectively. No single customer
accounted for more than 10% of the Company's gross sales for
fiscal 1998 or for the Transition Period. 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 fiscal 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 "Management's Discussion
and Analysis of Financial Condition and Results of Operations --
Fiscal 1996 Compared to Fiscal 1995", contained in the Company's
1998 Annual Report to Stockholders.
(iv) Sales, Marketing and Distribution
-----------------------------------------
The Company markets its products through its own sales
department and through a network of over 284 independent brokers
and various independent distributors and suppliers. The Company's
sales department of 46 employees includes 10 regional managers, 13
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. In addition to consumer
marketing, the Company has developed a number of cross promotions
with other consumer product companies, such as Mardi Gras napkins,
Kirin Beer and United Distillers & Vintners. These programs were
designed to bring new users and increased consumption in the snack
nut category. 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 approximately 3,600 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 54 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.), Ralcorp Holdings, 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. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations --
Factors That May Affect Future Results -- Competitive
Environment" contained in the Company's 1998 Annual Report to
Stockholders.
(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 fiscal 1998, less than
15.0% of the Company's nut purchases were from foreign sources.
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", "Fiscal
1998 Compared to the Fifty-Two Weeks Ended June 26, 1997 -- Gross
Profit", "The Transition Period Compared to the Twenty-Six Weeks
Ended June 27, 1996 -- Gross Profit", and "Fiscal 1996 Compared
to Fiscal 1995 -- Gross Profit" under "Management's Discussion
and Analysis of Financial Condition and Results of Operations",
contained in the Company's 1998 Annual Report to Stockholders.
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 54% of the farmer stock peanuts purchased
by the Company in fiscal 1998 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 25, 1998 the Company had approximately 1,648 active
employees, including 222 corporate staff employees and 1,426
production and distribution employees. As a result of the
seasonal nature of the Company's business, the number of employees
peaked to approximately 1,781 in the last four months of calendar
1997 and dropped to an average of approximately 1,550 during the
remainder of fiscal 1998. Approximately 20 of the Company's
salespeople are covered by a collective bargaining agreement which
expires on June 30, 2001.
(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 "Management's Discussion
and Analysis of Financial Condition and Results of Operations --
General", contained in the Company's 1998 Annual Report to
Stockholders.
(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.
Approximately 50% of the total pounds of products processed
annually by the Company are peanuts, peanut butter and other
products containing peanuts. 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 (other than as described below pursuant to the North
American Free Trade Agreement and the Uruguay Round Agreement of
the General Agreement on Trade and Tariffs), (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 1998
calendar year is approximately 1.2 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 1998 calendar
year is approximately $615 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 the Company has successfully operated in a market
shaped by the federal peanut program for many years, the Company
believes that it could adapt to a market without federal
regulation if that were to become necessary. However, the Company
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 the
Company'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 were replaced by a tariff rate quota,
initially set at 3,377 tons and which increases 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 tariffs. The tariffs are being phased
out gradually and are scheduled to be eliminated 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, and import quotas on peanuts were replaced by
high ad valorem tariffs, which must be reduced annually pursuant
to the terms of GATT. Also under GATT, the United States may
continue to limit imports of peanut butter but is permitted to
establish a tariff rate quota for peanut butter imports based on
1993 import levels. Peanut butter imports above the quota are
subject to an over-quota ad valorem tariff which also must be
reduced annually pursuant to the terms of GATT.
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 $2.5 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 first Elk Grove Village facility, 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:
<TABLE>
<CAPTION>
Date
Company
Constructed, Approx.
Type Acquired or Utilization
Square of Description of First at June 25,
Location Footage Interest Principal Use Occupied 1998
- ------------------------------ ------- -------- ------------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Elk Grove Village, Illinois(1)
(Busse Road facility) 300,000 Leased/ Processing, 1981 61%
Owned packaging,
warehousing,
distribution, JBSS
corporate offices
and thrift store
Elk Grove Village, Illinois(2) 83,000 Owned Processing, 1989 42%
(Arthur Avenue facility) packaging,
warehousing and
distribution
Des Plaines, Illinois(3) 68,000 Leased Warehousing and 1974 N/A
thrift store
Bainbridge, Georgia(4) 230,000 Owned Peanut shelling, 1987 61%
purchasing,
processing,
packaging,
warehousing and
distribution
Garysburg, North Carolina 120,000 Owned Peanut shelling, 1994 66%
purchasing,
processing,
packaging,
warehousing and
distribution
Selma, Texas 200,000 Owned Pecan shelling, 1992 83%
processing,
packaging,
warehousing,
distribution and
Sunshine
corporate offices
Walnut, California(5) 50,000 Leased Processing, 1991 46%
packaging,
warehousing and
distribution
Gustine, California 75,000 Owned Walnut shelling, 1993 63%
processing,
packaging,
warehousing and
distribution
Arlington Heights, Illinois(6) 83,000 Owned Processing, 1994 72%
packaging,
warehousing and
distribution
</TABLE>
(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 the Section entitled "Compensation Committee
Interlocks and Insider Participation -- Lease Arrangements"
contained in the Company's Proxy Statement for the 1998 Annual
Meeting.
(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 the
Section entitled "Compensation Committee Interlocks and Insider
Participation -- Lease Arrangements" contained in the Company's
Proxy Statement for the 1998 Annual Meeting.
(4) The Bainbridge facility is subject to a mortgage and deed of
trust securing approximately $7.8 million (excluding accrued and
unpaid interest) in industrial development bonds. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources",
contained in the Company's 1998 Annual Report to Stockholders.
(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 that 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 fiscal
1998, the Company processed approximately 37 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 fiscal 1998, the Selma facility processed approximately 10
million pounds of almonds.
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 fiscal 1998, the Bainbridge facility shelled
approximately 63 million inshell pounds of peanuts.
The Garysburg facility has the capacity to process approximately
40 million inshell pounds of farmer stock peanuts annually. For
fiscal 1998, the Garysburg facility processed approximately 28
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 fiscal 1998, the Gustine facility shelled
approximately 28 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
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
No matter was submitted during the fourth quarter of fiscal 1998
to a vote of security holders, through solicitation of proxies or
otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
Pursuant to General Instruction G(3) of Form 10-K and Instruction
3 to Item 401(b) of Regulation S-K, the following information is
included as an unnumbered item in Part I of this Report in lieu of
being included in the Proxy Statement for the Company's annual
meeting of stockholders to be held on October 28, 1998:
JASPER B. SANFILIPPO, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER, age 67 -- 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 and was a
member of the Stock Option Committee until February 27, 1997 (when
that Committee was disbanded). 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 65 -- 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
and was a member of the Stock Option Committee until February 27,
1997 (when that Committee was disbanded). 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 52 -- 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 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 53 -- 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 Armour 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 44 -- 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 39 -- 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 30 -- 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 36 -- Mr.
Sanfilippo has been employed by the Company since 1985 and has
served as Product Manager and General Manager of the Busse Road
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 48 -- 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 "Executive
Compensation - Employment Contract", contained in the Company's
Proxy Statement for the 1998 Annual Meeting.
CERTAIN RELATIONSHIPS AMONG DIRECTORS AND EXECUTIVE OFFICERS
- ------------------------------------------------------------
Jasper B. Sanfilippo, Chairman of the Board and Chief Executive
Officer and a director of the Company, is (i) the father of Jasper
B. Sanfilippo, Jr. and James J. Sanfilippo, each of whom is an
executive officer of the Company, as indicated above, (ii) the
brother-in-law of Mathias A. Valentine, President and a director
of the Company, and (iii) the uncle of Michael J. Valentine who is
an executive officer and a director of the Company, as indicated
above. Mathias A. Valentine, President and a director of the
Company, is (i) the brother-in-law of Jasper B. Sanfilippo, (ii)
the uncle of Jasper B. Sanfilippo, Jr. and James J. Sanfilippo,
and (iii) the father of Michael J. Valentine. Michael J.
Valentine, Vice President and Secretary and a director of the
Company is (i) the son of Mathias A. Valentine, (ii) the nephew of
Jasper B. Sanfilippo, and (iii) the cousin of Jasper B.
Sanfilippo, Jr. and James J. Sanfilippo. John C. Taylor,
Executive Group Vice President and a director of the Company, is
the brother of Steven G. Taylor, Vice President of the Company
PART II
-------
Item 5 -- Market for Registrant's Common Equity and Related
- -----------------------------------------------------------
Stockholder Matters
- -------------------
The section entitled "Markets for the Company's Securities and
Related Matters" on page 32 of the Company's 1998 Annual Report
to Stockholders is incorporated herein by reference.
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 executive
officers of the Company), as an affiliate of the Company. See the
Sections entitled "Compensation Committee Interlocks and Insider
Participation", "Security Ownership of Certain Beneficial Owners
and Management" and "Certain Relationships and Related
Transactions" contained in the Company's Proxy Statement for the
1998 Annual Meeting, and "Executive Officers of the Registrant --
Certain Relationships Among Directors and Executive Officers"
appearing immediately after Part I of this Report.
Item 6 -- Selected Financial Data
- ---------------------------------
The Selected Historical Consolidated Financial Data for
the year ended June 25, 1998, the twenty-six weeks ended June 25,
1997, and the years ended December 31, 1996, 1995, 1994 and 1993
contained on page 8 of the Company's 1998 Annual Report to
Stockholders is incorporated herein by reference.
Item 7 -- Management's Discussion and Analysis of Financial
- -----------------------------------------------------------
Condition and Results of Operation
- ----------------------------------
Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in pages 9 through
16, inclusive, of the Company's 1998 Annual Report to
Stockholders is incorporated herein by reference.
Item 8 -- Financial Statements and Supplementary Data
- -----------------------------------------------------
a. QUARTERLY CONSOLIDATED FINANCIAL DATA
----------------------------------------
The following table presents unaudited quarterly consolidated
financial data for the Company for fiscal 1998, the Transition
Period and fiscal 1996. 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 in the 1998
Annual Report to Stockholders. Such quarterly consolidated data
are not necessarily indicative of future results of operations.
<TABLE>
<CAPTION>
June 25, Mar. 26, Dec. 25, Sep. 25, June 26, Mar. 27, Dec. 31, Sep. 26, June 27, Mar. 28,
1998 1998 1997 1997 1997 1997 1996 1996 1996 1996
------- ------- -------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Net sales $69,306 $58,145 $112,683 $77,256 $74,539 $58,525 $106,063 $70,373 $64,909 $53,059
Gross profit 12,731 10,866 20,503 12,804 11,921 9,563 15,550 6,175 9,299 8,176
Income (loss) from
operations 3,279 2,153 8,110 3,420 3,100 1,622 4,667 (2,298) 887 534
Net income (loss) 500 (106) 3,713 1,015 643 (192) 1,546 (2,590) (763) (1,184)
Basic earnings (loss)
per common share(1) 0.05 (0.01) 0.41 0.11 0.07 (0.02) 0.17 (0.28) (0.08) (0.13)
Diluted earnings (loss)
per common share (1) 0.05 (0.01) 0.40 0.11 0.07 (0.02) 0.17 (0.28) (0.08) (0.13)
Balance Sheet Data
(at end of period):
Working capital $52,850 $53,147 $ 53,483 $49,161 $49,866 $40,396 $40,956 $40,965 $44,514 $54,467
Long-term debt 63,182 65,450 66,735 67,719 68,862 62,041 63,319 64,202 65,603 74,213
Total debt 117,930 122,057 105,105 93,793 92,833 110,991 98,310 101,286 111,096 123,083
</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.
b. Consolidated Financial Statements and Supplementary Data
- -----------------------------------------------------------
The following information contained on the respective pages indicated
below in the Company's 1998 Annual Report to Stockholders is
incorporated herein by reference:
Report of Independent Accountants -- Page 17
Consolidated Balance Sheets at June 25, 1998 and June 26, 1997 --
Pages 18 and 19
Consolidated Statements of Operations for the Year Ended June 25,
1998, the Twenty-six Weeks Ended June 26, 1997 and June 27,
1996, and the Years Ended December 31, 1996 and 1995 -- Page 20
Consolidated Statements of Stockholders' Equity for the Year Ended
June 25, 1998, the Twenty-six Weeks Ended June 26, 1997 and the
Years Ended December 31, 1996 and 1995 -- Page 20
Consolidated Statements of Cash Flows for the Year Ended June 25,
1998, the Twenty-six Weeks Ended June 26, 1997 and June 27,
1996 and the Years Ended December 31, 1996 and 1995 -- Page 21
Notes to Consolidated Financial Statements - Pages 22 through 31
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 year ended June 25, 1998, 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
- -------------------------------------------------------------
The Sections entitled "Nominees for Election by The Holders of
Common Stock", "Nominees for Election by The Holders of Class A
Stock" and "Other Matters" of the Company's Proxy Statement for
the 1998 Annual Meeting and filed pursuant to Regulation 14A are
incorporated herein by reference. Information relating to the
executive officers of the Company is included immediately after
Part I of this Report.
Item 11 -- Executive Compensation
- ---------------------------------
The Sections entitled "Executive Compensation", "Committees and
Meetings of the Board of Directors" and "Compensation Committee
Interlocks and Insider Participation" of the Company's Proxy
Statement for the 1998 Annual Meeting are incorporated herein by
reference.
Item 12 -- Security Ownership of Certain Beneficial Owners and
- --------------------------------------------------------------
Management
- ---------
The Section entitled "Security Ownership of Certain Beneficial
Owners and Management" of the Company's Proxy Statement for the
1998 Annual Meeting is incorporated herein by reference.
Item 13 -- Certain Relationships and Related Transactions
- ---------------------------------------------------------
The Sections entitled "Executive Compensation", "Compensation
Committee Interlocks and Insider Participation" and "Certain
Relationships and Related Transactions" of the Company's Proxy
Statement for the 1998 Annual Meeting are incorporated herein by
reference.
PART IV
- --------
Item 14 -- Exhibits, Financial Statement Schedules and Reports on
- -----------------------------------------------------------------
Form 8-K
- --------
(a)(1) Financial Statements
------------------------------
The following information contained on the respective pages
indicated below in the Company's 1998 Annual Report to
Stockholders is incorporated herein by reference and is filed as
Exhibit 13 to this Report:
Report of Independent Accountants -- Page 17
Consolidated Balance Sheets as of June 25, 1998 and June 26,
1997 -- Pages 18 and 19
Consolidated Statements of Operations for the Year Ended June
25, 1998, the Twenty-six Weeks Ended June 26, 1997 and
June 27, 1996 and the Years Ended December 31, 1996 and
1995 -- Page 20
Consolidated Statements of Stockholders' Equity for the Year
Ended June 25, 1998, the Twenty-six Weeks Ended June 26, 1997
and the Years Ended December 31, 1996 and 1995 -- Page 20
Consolidated Statements of Cash Flows for the Year Ended June
25, 1998, the Twenty-six Weeks Ended June 26, 1997 and June 27,
1996, and the Years Ended December 31, 1996 and 1995 -- Page 21
Notes to Consolidated Financial Statements -- Pages 22 through 31
(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
------------------------
The Company did not file any Current Reports on Form 8-K for the
quarter ended June 25, 1998.
(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 22, 1998 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.
Name Title Date
- ------------------------ ----------------------------- ------------------
/s/ Jasper B. Sanfilippo Chairman of the Board and September 22, 1998
- ------------------------ Chief Executive Officer and
Jasper B. Sanfilippo Director (Principal Executive
Officer)
/s/ GARY P. JENSEN Executive Vice President, September 22, 1998
- ------------------ Finance and Chief Financial
Gary P. Jensen Officer(Principal Financial
Officer)
/s/ WILLIAM R. POKRAJAC Controller (Principal September 22, 1998
- ----------------------- Accounting Officer)
William R. Pokrajac
/s/ MATHIAS A. VALENTINE Director September 22, 1998
- ------------------------
Mathias A. Valentine
/s/ WILLIAM D. FISCHER Director September 22, 1998
- ----------------------
William D. Fischer
/s/ JOHN W.A. BUYERS Director September 22, 1998
- --------------------
John W.A. Buyers
/s/ JOHN C. TAYLOR Director September 22, 1998
- ------------------
John C. Taylor
/s/ MICHAEL J. VALENTINE Director September 22, 1998
- ------------------------
Michael J. Valentine
/s/ J. WILLIAM PETTY Director September 22, 1998
J. William Petty
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 18, 1998 appearing on page 17
of the 1998 Annual Report to Stockholders of John B.
Sanfilippo & Son, Inc. (which report and consolidated
financial statements are incorporated by reference in this
Annual Report on Form 10-K) also included an audit of the
Financial Statement Schedule listed in Item 14(a)(2) 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/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
August 18, 1998
JOHN B. SANFILIPPO & SON, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the year ended June 25, 1998, the twenty-six weeks
ended June 26, 1997 and the years ended December 31, 1996
and 1995
(Dollars in thousands)
Balance at Balance at
Description Beginning Additions Deductions End of Period
- ------------------------------- ---------- --------- ---------- -------------
June 25, 1998
- -------------
Allowance for doubtful accounts $ 669 $ 338 $ (161) $ 846
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
Number Description
- ------- ------------------------------------------------------------------
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 Second Amended and Restated Note Agreement by and
between the Registrant and The Prudential Insurance Company
of America ("Prudential") dated January 24, 1997 (the
"Long-Term Financing Facility")(19)
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(10)
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(10)
4.11 Amended and Restated Guaranty Agreement dated as of
October 19, 1993 by Sunshine in favor of Prudential(8)
4.12 Amendment to the Second Amended and Restated Note
Agreement dated May 21, 1997 by and among Prudential,
Sunshine and the Registrant(20)
4.13 Amendment to the Second Amended and Restated Note
Agreement dated March 31, 1998 by and among Prudential, the
Registrant, Sunshine, and Quantz Acquisition Co., Inc.
("Quantz") (21)
4.14 Guaranty Agreement dated as of March 31, 1998 by JBS
International, Inc. ("JBSI") in favor of Prudential(21)
4.15 $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(12)
4.16 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)
4.17 Note Purchase Agreement dated as of August 30, 1995
between the Registrant and Teachers Insurance and Annuity
Association of America ("Teachers")(15)
4.18 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(15)
4.19 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(15)
4.20 Guaranty Agreement dated as of August 30, 1995 by
Sunshine in favor of Teachers (Senior Notes)(15)
4.21 Guaranty Agreement dated as of August 30, 1995 by
Sunshine in favor of Teachers (Senior Subordinated Notes)(15)
4.22 Amendment, Consent and Waiver, dated as of March 27,
1996, by and among Teachers, Sunshine and the Registrant(17)
4.23 Amendment No. 2 to Note Purchase Agreement dated as of
January 24, 1997 by and among Teachers, Sunshine and the
Registrant(19)
4.24 Amendment to Note Purchase Agreement dated May 19,
1997 by and among Teachers, Sunshine and the Registrant(20)
4.25 Amendment No. 3 to Note Purchase Agreement dated as of
March 31, 1998 by and among Teachers, Sunshine, Quantz and
the Registrant(21)
4.26 Guaranty Agreement dated as of March 31, 1998 by JBSI
in favor of Teachers (Senior Notes)(21)
4.27 Guaranty Agreement dated as of March 31, 1998 by JBSI
in favor of Teachers (Senior Subordinated Notes)(21)
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(14)
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(11)
10.4 First Amendment to the Touhy Avenue Lease dated June
1, 1987(11)
10.5 Second Amendment to the Touhy Avenue Lease dated
December 14, 1990(11)
10.6 Third Amendment to the Touhy Avenue Lease dated
September 1, 1991(16)
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(17)
10.9 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)
10.10 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)
10.11 First Amendment to Industrial Building 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)
10.12 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(12)
10.13 Third Amendment to Industrial Building Lease dated
August 15, 1998, 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
10.14 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(12)
10.15 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(12)
10.16 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)
10.17 Tax Indemnification Agreement between Registrant and
certain Stockholders of Registrant prior to its initial
public offering(2)
*10.18 Indemnification Agreement between Registrant and
certain Stockholders of Registrant prior to its initial
public offering(2)
*10.19 The Registrant's 1991 Stock Option Plan(1)
*10.20 First Amendment to the Registrant's 1991 Stock
Option Plan(4)
*10.21 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)
*10.22 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)
*10.23 Certain documents relating to Reverse Split-Dollar
Insurance Agreement between Sunshine and John Charles
Taylor dated November 24, 1987(12)
10.24 Outsource Agreement between the Registrant and
Preferred Products, Inc. dated January 19, 1995
[CONFIDENTIAL TREATMENT REQUESTED](12)
10.25 Letter Agreement between the Registrant and Preferred
Products, Inc., dated February 24, 1995, amending the
Outsource Agreement dated January 19, 1994 [CONFIDENTIAL
TREATMENT REQUESTED](12)
*10.26 The Registrant's 1995 Equity Incentive Plan(13)
10.27 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")(16)
10.28 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(16)
10.29 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(16)
10.30 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(16)
10.31 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(17)
10.32 Reimbursement Agreement between the Registrant and
BAI, dated as of March 27, 1996(17)
10.33 Guaranty Agreement dated as March 27, 1996 by
Sunshine in favor of BAI as agent on behalf of NCB, NTC and
BAI(17)
10.34 Amendment No. 1 and Waiver to Credit Agreement dated
as of August 1, 1996 by and among the Registrant, BAI, NCB
and NTC(18)
10.35 Amendment No. 2 and Waiver to Credit Agreement dated
as of October 30, 1996 by and among the Registrant, BAI,
NCB and NTC(18)
10.36 Amendment No. 3 to Credit Agreement dated as of
January 24, 1997 by and among the Registrant, BAI, NCB, and
NTC(19)
10.37 Amendment No. 5 to Credit Agreement dated as of June
2, 1997 by and among the Registrant, BAI, NCB, and NTC(20)
10.38 Amendment No. 7 to Credit Agreement dated as of March
27, 1998 by and among the Registrant, BAI, NCB, and NTC(21)
*10.39 Employment Agreement by and between Sunshine and
Steven G. Taylor dated June 17, 1992(19)
10.40 Credit Agreement dated as of March 31, 1998 among the
Registrant, Sunshine, Quantz, JBSI, U.S. Bancorp Ag Credit,
Inc. ("USB") as Agent, Keybank National Association
("KNA"), and LNB(21)
10.41 Revolving Credit Note in the principal amount of
$35.0 million executed by the Registrant, Sunshine, Quantz
and JBSI in favor of USB, dated as of March 31, 1998(21)
10.42 Revolving Credit Note in the principal amount of
$15.0 million executed by the Registrant, Sunshine, Quantz
and JBSI in favor of KNA, dated as of March 31, 1998(21)
10.43 Revolving Credit Note in the principal amount of
$20.0 million executed by the Registrant, Sunshine, Quantz
and JBSI in favor of LSB, dated as of March 31, 1998(21)
11-12 None
13 1998 Annual Report to Stockholders
14-20 None
21 Subsidiaries of the Registrant
22 None
23 Consent of PricewaterhouseCoopers LLP
24-26 None
27 Financial Data Schedule
28-99 None
(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
Current Report and Form 8-K dated June 23, 1994
(Commission File No. 0-19681).
(11) 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).
(12) 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).
(13) 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).
(14) 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).
(15) Incorporated by reference to the Registrant's
Current Report on Form 8-K dated September 12, 1995
(Commission File No. 0-19681).
(16) 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).
(17) 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).
(18) Incorporated by reference to the Registrant's
Current Report on Form 8-K dated January 24,
1997 (Commission file No. 0-19681).
(19) Incorporated by reference to the Registrant's Annual
Report Form 10-K for the fiscal year ended
December 31, 1996 (Commission file No. 0-19681).
(20) Incorporated by reference to the Registrant's
Current Report on Form 8-K dated May 21, 1997 (Commission
file No. 0-19681).
(21) Incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q for the third quarter ended
March 26, 1998 (Commission file No. 0-19681).
* 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-Q. The charge for furnishing copies of the
exhibits is $.25 per page, plus postage.
THIRD AMENDMENT TO INDUSTRIAL BUILDING LEASE DATED JUNE 1,
- ----------------------------------------------------------
1985, ("Lease"), AS PREVIOUSLY AMENDED, BETWEEN LaSALLE
- ----------------------------------------------------------
NATIONAL TRUST, N.A., NOT PERSONALLY BUT AS SUCCESSOR
- ----------------------------------------------------------
TRUSTEE TO LaSALLE NATIONAL BANK, NOT PERSONALLY BUT AS
- ----------------------------------------------------------
TRUSTEE UNDER TRUST AGREEMENT DATED FEBRUARY 7, 1979 KNOWN
- ----------------------------------------------------------
AS TRUST NO. 100628 ("Lessor") and JOHN B. SANFILIPPO &
- ----------------------------------------------------------
SON, INC., a DELAWARE CORPORATION ("Lessee").
- ----------------------------------------------------------
WHEREAS, the Lease has been previously amended pursuant
to the terms of the First Amendment dated September 29,
1992, and the Second Amendment dated March 3, 1995 (the
"Prior Amendments"); and
WHEREAS, under the terms of the Lease and the Prior
Amendments, the rent was to be increased by the percentage
increase in the Consumer Price Index - U.S. City average -
All Urban Consumers' ("Index") between the base year of
June, 1985, and June, 1997, June, 2002, June, 2007, and June
2012; and
WHEREAS, the parties hereto believe that it is in their
best interest to amend the Lease to provide that the June,
1997 increase in rent will be effective January 1, 1998 and
the increase will be limited to 14%.
NOW THEREFORE, in consideration of the mutual promises
and agreements set forth herein, and other valuable
consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties herto agree as follows:
1. In Section 1.2 of the Lease, the June, 1997
comparison date for rent increases shall be removed, and the
following sentence shall be added:
"Notwithstanding the foregoing, effective January 1,
1998, the rent shall be increased to
$84,500.00 per month."
2. In all other respects, the Lease and the Prior
Amendments shall remain unaltered.
Dated: August 15, 1998
LESSEE: LESSOR: LaSalle National Bank,
John B. Sanfilippo & Son, Inc. Successor Trustee To:
LaSalle National Trust, N.A.,
not personally but as successor
Trustee under Trust Agreement dated
February 7, 1979, and known as Trust
No. 100628
By:/s/ MATHIAS A. VALENTINE By: /s/ ROSEMARY COLLINS
------------------------ --------------------
President Assistant Vice President
ATTEST: ATTEST:
/s/ MICHAEL J. VALENTINE /s/ DEBORAH BERG
- ------------------------ -----------------
Secretary Assistant Secretary
Consented to by Northern Life Insurance Company
By: /s/ JACK SAN FELIPPO
---------------------
ATTEST:
/s/ JACQUELINE PARENTEER
- ------------------------
RIDER ATTACHED TO AND MADE A PART OF
------------------------------------
THIRD AMENDMENT TO LEASE DATED AUGUST 15, 1998
----------------------------------------------
This Third amendment to Lease is executed by LaSalle
National Bank, not personally but as Trustee as aforesaid,
in the exercise and power and authority conferred upon and
vested in it as such Trustee, and under the express
direction of the beneficiaries of a certain Trust Agreement
dated February 7, 1979 and known as Trust No. 100628 at
LaSalle National Bank, to all provisions of which Trust
Agreement this Lease is expressly made subject. It is
expressly understood and agreed that nothing herein or in
said Lease contained shall be construed as creating any
liability whatsoever against said Trustee personally, and in
particular without limiting the generality of the foregoing,
there shall be no personal liability to pay any indebtedness
accruing hereunder or to personal liability to pay any
indebtedness accruing hereunder or to perform any covenant,
either express or implied, herein contained, or to keep,
preserve or sequester any property of said Trust, and that
all personal liability of said Trustee of every sort, if
any, is hereby expressly waived by said lessee and by every
person now or hereafter claiming any right or security
hereunder; and that so far as said Trustee is concerned the
owner of any indebtedness or liability accruing hereunder
shall look solely to the Premises hereby leased for the
payment thereof. It is further understood and agreed that
said Trustee has no agents or employees and merely holds
naked legal title to the property herein described; that
said Trustee has not control over, and under this Lease,
assumes no responsibility for (1) the management or control
of such property, (2) the upkeep, inspection, maintenance or
repair of such property, (3) the collection of rents or
rental of such property, or (4) the conduct of any business
which is carried on upon such Premises.
1998 ANNUAL REPORT
- ------------------
"A Different Kind of Nut Company"
John B. Sanfilippo & Son, Inc.
OUR BUSINESS
- ------------
John B. Sanfilippo & Son, Inc. together with its wholly owned subsidiaries,
including Sunshine Nut Co., Inc., (the "Company" or "JBSS"), is one of the
largest companies in the world dedicated primarily to processing, marketing
and distributing edible nut meats of all kinds, including peanuts, pecans,
almonds, walnuts, cashews, filberts (hazelnuts), pistachios, macadamias,
Brazil nuts and pine nuts. Vertically integrated (peanuts, pecans, almonds
and walnuts) from the grower to the consumer, the Company sells its
products under the Fisher, Evon's, Flavor Tree, Sunshine Country, Texas
Pride and Tom Scott brand names and more than 65 private label brands. The
Company also sells its products to industrial customers (e.g., bakeries,
dairies, food processors and candy manufacturers), and food service
customers (e.g., airlines, sport stadiums and restaurants), and
manufactures, processes and packs the retail brands of several other snack
food companies. To complement its nut meat products, the Company also
provides a diverse line of other food and snack items, including peanut
butter, candy, fruit and nut mixes, extruded corn snacks (e.g., cheese
curls), sesame sticks, chocolate chips and coconut. The Company's eight
facilities are located in: Elk Grove Village, IL (2); Arlington Heights,
IL; Bainbridge, GA; Selma, TX; Walnut, CA; Gustine, CA; and Garysburg, NC.
TABLE OF CONTENTS
- -----------------
1 Financial Highlights
2 Letter to Stockholders
3 Continued Focus on Retail Growth
8 Selected Historical Consolidated Financial Data
9 Management's Discussion and Analysis of Financial Condition and
Results of Operations
17 Report of Management
17 Report of Independent Accountants
18 Consolidated Financial Statements
22 Notes to Consolidated Financial Statements
32 Markets for the Company's Securities and Related Matters
33 Officers, Board of Directors and Corporate Information
FINANCIAL HIGHLIGHTS
- --------------------
(Dollars in thousands, except per share data)
Twenty-six
Year Ended Weeks Ended
June 25, June 26, Year Ended December 31,
1998 1997 1996 1995
---------- ----------- --------- ---------
Net sales $317,390 $133,064 $294,404 $277,741
Net income (loss) $ 5,122 $ 451 $ (2,991) $ 5,788
Basic earnings (loss)
per common share $ 0.56 $ 0.05 $ (0.33) $ 0.64
Diluted earnings (loss)
per common share $ 0.56 $ 0.05 $ (0.33) $ 0.63
Working capital $ 52,850 $ 49,866 $ 40,956 $ 58,148
Total assets $219,676 $187,417 $205,352 $219,002
Long-term debt $ 63,182 $ 68,862 $ 63,319 $ 74,681
Total debt $117,930 $ 92,833 $ 98,310 $106,849
Stockholders' equity $ 78,198 $ 73,071 $ 72,620 $ 75,611
Capital expenditures $ 4,227 $ 1,898 $ 9,198 $ 13,517
Debt/Equity ratio 1.5:1 1.3:1 1.4:1 1.4:1
Debt/Capital 60.1% 56.0% 57.5% 58.6%
Weighted average shares
outstanding - basic 9,147,862 9,147,666 9,147,666 9,070,000
Weighted average shares
outstanding - diluted 9,168,175 9,147,759 9,147,666 9,171,204
LETTER TO STOCKHOLDERS
- ----------------------
Dear Stockholder:
This is your Company's first annual report for our new fiscal year format
now ending in June. It is therefore fitting this annual report be one of a
profitable year with increasing sales and a solid base. Net income for
fiscal 1998 was $5.1 million or 56 cents per share.
In fiscal 1998 we grew your Company to $317 million in net sales in a very
competitive environment. This represented the 27th consecutive year of
increased net sales. The focus was and continues to be the growth of our
Fisher brand and the development of our consumer business. In the last
quarter of fiscal 1998, we introduced the Fisher Snack 'N Serve Nut Bowl.
This is a ready-to-serve, reclosable and microwaveable package.
Proprietary technology delivers excellent shelf life and insures the
quality the Fisher brand represents. In addition, the clear top allows the
product to be visible to the consumer. The Fisher Snack 'N Serve Nut Bowl
represents, I believe, the most innovative packaging concept in the snack
nut category in recent history. This represents the ongoing effort of your
Company's management team to develop the Fisher brand through new and
innovative products. The initial response from our customer base has been
favorable, and we are excited about this new product line.
The American Tasting Institute judged Fisher Nut snack and baking nuts the
"Best Tasting Nut in America". The award was determined by a panel of
Executive Chefs and Master Tasters located throughout the country. This
represented the third consecutive annual award received by Fisher Nut, an
excellent accomplishment and an outstanding performance by your management
team.
Also, we continue to use the Mediterranean Diet Pyramid as part of the
Fisher Chef's Naturals Ingredient packaging. The Mediterranean Diet
Pyramid suggests that nuts should be included in the healthy daily diet.
There are a number of recent medical research studies that promote the
healthy attributes of nuts. These attributes include no cholesterol, a
good source of fiber, protein, etc. We trust the emergence of this
knowledge will help grow the nut category.
Fiscal 1998 was also a continuation of your Company's efforts to keep
capital expenditures at a maintenance level for our operating plants and
upgrading our computer systems. In fiscal 1998, capital expenditures were
$4.2 million with cash generated from depreciation and amortization of $8.2
million. This cash plus the fiscal 1998 earnings were used to reduce long-
term debt. We plan to work within this program in fiscal 1999.
It is my intent as well as that of your Company's senior management and
Board of Directors to continue the growth of John B. Sanfilippo & Son, Inc.
We will continue to strive to deliver improved performance, category
growth, customer satisfaction and a positive future.
Sincerely,
/s/ JASPER B. SANFILIPPO
- ------------------------
Jasper B. Sanfilippo
Chairman and Chief Executive Officer
SALES BY CHANNEL OF TRADE
- -------------------------
Channel of Trade % of Sales
- ------------------ ----------
Consumer Products 56.8
Industrial 26.1
Food Service 10.0
Export 4.0
Contract Packaging 2.7
Government 0.4
SALES BY PRODUCT TYPE
- ---------------------
Product Type % of Sales
- -------------- ----------
Peanuts 27.0
Pecans 19.0
Other Products 15.1
Mixed Nuts 10.1
Almonds 9.7
Cashews 9.6
Walnuts 9.5
CONTINUED FOCUS ON RETAIL GROWTH
- --------------------------------
During fiscal year 1998, the Company continued to focus on and expand its
branded and private label snack nut and baking nut business. Utilizing its
portfolio of brands, the Company has expanded distribution of both Fisher
Snack Nuts and Fisher Chef's Naturals Ingredient Nuts across all retail
distribution channels. With this expanded distribution base, the Company
has increased consumer marketing activity designed to educate consumers on
the true health benefits of nuts, to use nuts as part of a healthy everyday
diet and to build awareness and consumption of the Fisher brand as part of
their everyday diet.
In addition to consumer marketing, the Company has developed a number of
cross promotions with other consumer product companies. The Company
participated in a coupon promotion with Mardi Gras napkins to promote the
Fisher Snack Nut brand with over 3,000,000 coupons distributed as part of a
late summer picnic theme.
The Company also worked with Kirin Beer on regional promotions offering
Fisher Snack Nuts free to consumers with purchase. The Company developed
retailer specific promotions with UDV (United Distillers & Vintners) North
America where consumers received coupons for free Fisher Snack Nuts with
the purchase of TGI Friday's cocktails. These programs were designed to
bring new users and increased consumption in the snack nut category.
In 1998, the Company became a member of the Home Baking Association
("HBA"). The purpose of the HBA is to build awareness of scratch baking
and to educate children on how to scratch bake at home. Through educators
and group leaders of children's organizations (e.g., 4H, Boy Scouts, Girl
Scouts, etc.), the HBA provides programs, materials and products so
children can learn the value and fun of scratch baking in their home. The
Company is committed to investing in future consumers with Fisher Chef's
Naturals Ingredient Nuts.
For the third year in a row, the American Tasting Institute awarded the
"Best Tasting Nut in America" to the Fisher brand. Fisher was judged
excellent when compared to other national and regional brands on the basis
of taste, freshness and appearance for both the snack nut and baking nut
categories.
The Company has continued its licensing agreement with Oldways Preservation
and Exchange Trust to utilize the Mediterranean Diet Pyramid ("MDP"). The
MDP groups nuts and legumes in its second tier with other foods from plant
sources. The MDP suggests that the amount of daily consumption from this
second tier food group should be second only to foods included in the base
tier of the MDP (e.g., grain and potato based foods). Participation in the
HBA and the MDP program, and the success of Fisher nuts in taste tests,
should help the Company educate current and future consumers on how to use
nuts in everyday meal planning and as part of a healthy diet and position
Fisher nuts as their nut of choice.
The Company has continued, and will continue, partnering with key retailers
to grow both the snack nut and baking nut categories in units, dollar and
volume consumption. The Company believes this growth can be accomplished
through our retail brand portfolio and the execution of our "one stop
category solution" plan. This plan includes the following brands:
- -- Private Label brands (800 items) for over 65 retailers across the U.S.
in the categories of snack nuts, baking nuts, salty snacks, candy, peanut
butter, non-nut baking and extruded snacks.
- -- Fisher (110 items) offering high quality nuts in the snack nut and
baking nut categories.
- -- Evon's (450 items) including snack nuts, baking nuts, candy, extruded
snacks and peanut butter.
- -- Sunshine Country (77 items) snack and baking nut items.
- -- Texas Pride pecans (10 items).
- -- Tom Scott (4 items) snack nut and mix items.
Building the Snack Nut and Baking Nut Category
- ----------------------------------------------
The Company's marketing and sales executives are focused on working with
all current private label customers to grow their private label programs in
terms of penetration, volume and profits. This is being implemented
through annual planning sessions where JBSS offers customers new private
label items, annual category promotion plans and new merchandising vehicles
to drive sales and better meet their customer needs. In addition, JBSS
endeavors to help its private label customers manage their categories
through programs and solutions designed to determine optimal product mix,
pricing strategies and merchandising frequency.
During the fourth quarter of fiscal year 1998, the Company began a national
rollout of Fisher Snack 'N Serve Nut Bowls. This product line is the first
major snack nut product launch since the Company acquired Fisher in 1995.
Fisher Snack 'N Serve Nut Bowls offer consumers snack nuts in a ready-to-
serve bowl that is both reclosable and microwaveable. Compared to
conventional nut package types, such as composite tin or jar, the Company's
new Snack 'N Serve Nut Bowls offer greater convenience in eating and
entertaining with nuts. The bowl's microwaveable feature allows consumers
to heat and serve warm roasted jumbo cashews, deluxe mixed nuts, or party
peanuts conveniently in the original, attractive container in which they
were purchased. This new product line includes the following items:
Fisher Snack 'N Serve Nut Bowl
- ------------------------------
- -- Jumbo Cashews -- Bayou Blend
11 oz. 10 oz.
- -- Deluxe Mixed Nuts -- California Mix
11 oz. 9 oz.
- -- Party Peanuts -- Fiesta Mix
12 oz. 7 oz.
In addition to these items, the Company will offer three holiday gift items
during Fall, 1998:
- -- Chocolate Covered Pecan Cashew Mix 13 oz.
- -- Chocolate Covered Almonds 13 oz.
- -- Natural Pistachios 9 oz.
We believe the Company is well positioned to grow both the snack nut and
baking nut categories through strategic retailer partnerships and
innovative consumer marketing programs. The Company's portfolio of brands,
coupled with our one stop category solutions for retailers, offers
retailers the advantage of "one stop shopping".
For additional and updated information on JBSS and the Company's brands,
please visit our new web site at:
www.jbssinc.com
www.fishernuts.com
www.evonsnuts.com
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
- -----------------------------------------------
The following historical consolidated financial data as of and for the year
ended June 25, 1998, the twenty-six weeks ended June 26, 1997 and the years
ended December 31, 1996, 1995, 1994, and 1993 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 its
wholly owned subsidiaries, including Sunshine Nut Co., Inc. ("Sunshine").
<TABLE>
Statement of Operations Data:
($ in thousands, except per share data)
<CAPTION>
Twenty-six Year Ended December 31,
Year Ended Weeks Ended --------------------------------------------
June 25, 1998 June 26, 1997 1996 1995 1994 1993
------------- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales $317,390 $133,064 $294,404 $277,741 $208,970 $202,583
Cost of sales 260,486 111,580 255,204 230,691 177,728 167,403
-------- -------- -------- -------- -------- --------
Gross profit 56,904 21,484 39,200 47,050 31,242 35,180
Selling and
administrative expenses 39,942 16,762 35,410 30,338 25,857 21,762
-------- -------- -------- -------- -------- --------
Income from operations 16,962 4,722 3,790 16,712 5,385 13,418
Interest expense 8,776 4,135 9,051 7,673 6,015 4,224
Other income 525 252 450 607 889 1,011
-------- -------- -------- -------- -------- --------
Income (loss) before
income taxes 8,711 839 (4,811) 9,646 259 10,205
Income tax (expense) benefit (3,589) (388) 1,820 (3,858) (210) (4,082)
-------- -------- -------- -------- -------- --------
Net income (loss) $ 5,122 $ 451 $ (2,991) $ 5,788 $ 49 $ 6,123
======== ======== ======== ======== ========= ========
Basic earnings (loss)
per common share $ 0.56 $ 0.05 $ (0.33) $ 0.64 $ 0.00 $ 0.74
Diluted earnings (loss)
per common share $ 0.56 $ 0.05 $ (0.33) $ 0.63 $ 0.00 $ 0.68
Dividends declared per
common share $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.05
</TABLE>
<TABLE>
Balance Sheet Data:
($ in thousands)
<CAPTION>
December 31,
June 25, June 26, --------------------------------------------
1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Working capital $ 52,850 $ 49,866 $ 40,956 $ 58,148 $ 36,418 $ 56,221
Total assets 219,676 187,417 205,352 219,002 199,714 157,011
Long-term debt 63,182 68,862 63,319 74,681 52,804 46,409
Total debt 117,930 92,833 98,310 106,849 106,716 70,926
Stockholders' equity 78,198 73,071 72,620 75,611 68,092 69,247
</TABLE>
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 (including statements concerning the Company's expectations
regarding the upcoming year 2000 and market risk) 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" or are identified by the use of forward-looking
words and phrases such as "intent", "may", "believes" and "expects",
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", as well as the timing
and occurrence (or non-occurrence) of transactions and events which may be
subject to circumstances beyond the Company's control. Results actually
achieved thus may differ materially from expected results included in these
statements. As used herein, unless the context otherwise indicates, the
terms "Company" and "JBSS" refer collectively to John B. Sanfilippo &
Son, Inc. and its wholly owned subsidiaries, including Sunshine Nut Co.,
Inc. ("Sunshine").
General
- -------
On April 30, 1997, the Board of Directors of the Company voted to change
the Company's fiscal year from a calendar year to a fiscal year that ends
on the final Thursday of June each year. References herein to fiscal 1998
are to the fiscal year ended June 25, 1998. References herein to the
"Transition Period" are to the twenty-six weeks ended June 26, 1997.
References herein to fiscal 1996 and fiscal 1995 are to the fiscal years
ended December 31, 1996 and December 31, 1995, respectively.
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 year, especially during the
second and third quarters of the Company's fiscal year. Fluctuations in
the market prices of such nuts may affect the value of the Company's
inventory and thus the Company's profitability. For example, declines in
the market prices for pecans required the Company to record a $2.6 million
charge in the third quarter of fiscal 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 -- Fiscal
1998 Compared to the Fifty-Two Weeks Ended June 26, 1997 -- Gross Profit"
and "Results of Operations - Fiscal 1996 Compared to Fiscal 1995 - 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 25, 1998, the Company's inventories totalled approximately
$99.5 million compared to approximately $63.0 million at June 26, 1997.
Inventory levels at June 25, 1998 were higher than inventories at June 26,
1997 due primarily to increased levels of purchases for certain nuts,
especially walnuts and 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. Also, there have been various medical studies detailing the
healthy attributes of nuts and the Mediterranean Diet Pyramid promotes the
daily consumption of nuts as part of a healthy diet. 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, over
the last two years 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 the Company's business. Furthermore, the Company
does not presently believe that nut-related allergies will have a material
adverse affect on the Company in the foreseeable future. However, the U.S.
Department of Transportation has recently proposed a set of guidelines to
the major airlines which would require airlines to accommodate passengers
with peanut allergies by providing peanut-free "buffer zones" on request
to passengers with medically documented severe allergies to peanuts. Under
the guidelines these buffer zones would consist, at a minimum, of the
passenger's row and the rows immediately in front or behind his or her row.
Medical experts estimate that only one-tenth of 1% of the population is
affected by peanut allergies. There can be no assurance that the airlines,
some of which are customers of the Company, will not materially reduce or
eliminate peanuts and other nut-related snacks in response to these
guidelines, the Company believes that, while such a decision by its airline
customers would reduce the Company's revenues, given the relatively low
percentage of the Company's total revenues represented by sales to these
customers, such a decision would not otherwise have a material adverse
effect on the Company's results of operations.
Results of Operations
- ---------------------
The following tables present certain items of the Company's results of
operations for fiscal 1998 and the fifty-two weeks ended June 26, 1997, the
Transition Period and the twenty-six weeks ended June 27, 1996, and fiscal
1996 and fiscal 1995. The results of operations for the fifty-two weeks
ended June 26, 1997 and the twenty-six weeks ended June 27, 1996 were not
audited (since the Company changed its fiscal year end to the final
Thursday in June, effective June 26, 1997), but are presented to provide a
more meaningful comparison of the Company's results of operations. Dollars
are presented in thousands.
Fifty-Two
Year Ended % of Weeks Ended % of % Increase
June 25, 1998 Net Sales June 26, 1997 Net Sales (Decrease)
------------- --------- ------------- --------- -----------
Net sales $317,390 100.0 $309,500 100.0 2.6
Gross profit 56,904 17.9 43,209 14.0 31.7
Selling expenses 29,475 9.3 25,290 8.2 16.5
Administrative expenses 10,467 3.3 10,828 3.5 (3.3)
Income from operations 16,962 5.3 7,091 2.3 139.2
Twenty-Six Twenty-Six
Weeks Ended % of Weeks Ended % of % Increase
June 26, 1997 Net Sales June 27, 1996 Net Sales (Decrease)
------------- --------- ------------- --------- -----------
Net sales $133,064 100.0 $117,968 100.0 12.8
Gross profit 21,484 16.1 17,475 14.8 22.9
Selling expenses 11,787 8.9 10,406 8.8 13.3
Administrative expenses 4,975 3.7 5,644 4.8 (11.9)
Income from operations 4,722 3.5 1,425 1.2 231.4
Year Ended Year Ended
December 31, % of December 31, % of % Increase
1996 Net Sales 1995 Net Sales (Decrease)
------------- --------- ------------- --------- -----------
Net sales $294,404 100.0 $277,741 100.0 6.0
Gross profit 39,200 13.3 47,050 16.9 (16.7)
Selling expenses 23,909 8.1 20,231 7.3 18.2
Administrative expenses 11,501 3.9 10,107 3.6 13.8
Income from operations 3,790 1.3 16,712 6.0 (77.3)
Fiscal 1998 Compared to the Fifty-Two Weeks Ended June 26, 1997
- ---------------------------------------------------------------
Net Sales. Net sales increased from approximately $309.5 million for
the fifty-two weeks ended June 26, 1997 to approximately $317.4 million for
fiscal 1998, an increase of approximately $7.9 million or 2.6%. 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. These increases were slightly offset by lower
industrial sales, primarily at Sunshine. As discussed above, the U.S.
Department of Transportation has recently proposed guidelines that could
result in a reduction by airline customers of their purchases of peanuts and
other nut snacks from the Company. See "General."
Gross Profit. Gross profit in fiscal 1998 increased 31.7% to $56.9
million from $43.2 million for the fifty-two weeks ended June 26, 1997.
Gross profit margin increased from 14.0% for the fifty-two weeks ended June
26, 1997 to 17.9% for fiscal 1998. 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) a $2.6 million write-down of the Company's pecan
inventory as of the end of the quarter ended September 26, 1996 to reflect
the lower of cost or market value of such inventory as a result of decreased
prices for pecan meats, as well as corresponding low margins on pecan sales
during the first half of the fifty-two week period ended June 26, 1997.
Selling and Administrative Expenses. Selling and administrative
expenses as a percentage of net sales increased from 11.7% for the fifty-two
weeks ended June 26, 1997 to 12.6% for fiscal 1998. Selling expenses as a
percentage of net sales increased from 8.2% for the fifty-two-weeks ended
June 26, 1997 to 9.3% for fiscal 1998. This increase was due primarily to
higher promotional allowances to support the growth in the Company's sales
to retail customers. Administrative expenses as a percentage of net sales
decreased from 3.5% for the fifty-two weeks ended June 26, 1997 to 3.3% for
fiscal 1998. This decrease was due primarily to the Company's efforts to
control administrative expenses coupled with a higher revenue base.
Income from Operations. Due to the factors discussed above, income
from operations increased from approximately $7.1 million, or 2.3% of net
sales, for the fifty-two weeks ended June 26, 1997 to approximately $17.0
million, or 5.3% of net sales, for fiscal 1998.
Interest Expense. Interest expense increased from approximately
$8.4 million for the fifty-two weeks ended June 26, 1997 to approximately
$8.8 million for fiscal 1998. This increase was due primarily to a higher
average level of borrowings during fiscal 1998 compared to the fifty-two
weeks ended June 26, 1997 to finance a higher level of inventory purchases.
Income Taxes. The Company recorded income tax expense of
approximately $3.6 million, or 41.2% of income before income taxes, for
fiscal 1998.
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. As discussed above, the U.S. Department of
Transportation has recently proposed guidelines that could result in a
reduction by airline customers of their purchases of peanuts and other nut
snacks from the Company. See "General." Net sales to the Company's
industrial customers declined slightly in the Transition Period compared to
the twenty-six weeks ended June 27, 1996.
Gross Profit. Gross profit in the Transition Period increased 22.9%
to $21.5 million from $17.5 million for the twenty-six weeks ended June 27,
1996. 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 gross profit margin for the
twenty-six weeks ended June 27, 1996.
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
the twenty-six weeks ended June 27,1996 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.
Fiscal 1996 Compared to Fiscal 1995
- -----------------------------------
Net Sales. Net sales increased from $277.7 million in fiscal 1995
to $294.4 million in fiscal 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 fiscal
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 fiscal 1996, the Company was outbid for
Sam's Club business, which accounted for approximately $23.4 million of the
Company's net sales in fiscal 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. As discussed above, the U.S. Department of
Transportation has recently proposed guidelines that could result in a
reduction by airline customers of their purchases of peanuts and other nut
snacks from the Company. See "General". In fiscal 1996, net sales to
government customers declined, as the Company chose to bid on fewer
government contracts.
Gross Profit. Gross profit in fiscal 1996 decreased 16.7% to $39.2
million from $47.1 million in fiscal 1995. Gross profit margin decreased
from 16.9% in fiscal 1995 to 13.3% in fiscal 1996. This decrease was due
primarily to (i) declines in the market price for processed pecan meats
throughout fiscal 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 fiscal 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 fiscal 1995, the new facility was not fully operational
until midway through the first quarter of fiscal 1996 and, consequently,
the Company was not able to fully absorb the overhead expenses of that
facility during the first quarter of fiscal 1996.
Selling and Administrative Expenses. Selling and administrative
expenses as a percentage of net sales increased from 10.9% in fiscal 1995
to 12.0% in fiscal 1996. Selling expenses as a percentage of net sales
increased from 7.3% in fiscal 1995 to 8.1% in fiscal 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 fiscal 1995 to 3.9% in fiscal 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 fiscal 1995 to $3.8 million
in fiscal 1996, a decrease of $12.9 million, or 77.3%. As a percentage of
net sales, operating income decreased from 6.0% in fiscal 1995 to 1.3% in
fiscal 1996.
Interest Expense. Interest expense increased from $7.7 million in
fiscal 1995 to $9.1 million in fiscal 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 fiscal 1996, capital expenditures and the impact of the net loss for
fiscal 1996.
Income Taxes. The Company recorded an income tax benefit of
approximately $1.8 million, or 37.8% of the loss before income taxes for
fiscal 1996.
Liquidity and Capital Resources
- -------------------------------
General
- -------
During fiscal 1998, the Company continued to finance its activities
through a bank credit facility entered into on March 31, 1998 (the "Bank
Credit Facility"), a bank credit facility which was replaced by the Bank
Credit Facility (the "Prior 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").
Net cash used in operating activities was approximately $19.9 million
for fiscal 1998 compared to net cash provided by operating activities of
approximately $25.9 million for the fifty-two weeks ended June 26, 1997.
The significant increase in cash used in operating activities was due
primarily to increased purchases of certain nuts, especially pecans and
walnuts, and to a lesser extent, increased costs of pecans, which resulted
in an increase of approximately $36.5 million in inventories from June 26,
1997 to June 25, 1998. As a result of the increase in inventories, notes
payable increased to approximately $49.0 million at June 25, 1998 from
approximately $19.0 million at June 26, 1997. The largest component of net
cash used in investing activities during fiscal 1998 was approximately $4.2
million in capital expenditures. During fiscal 1998, the Company repaid
approximately $4.9 million of long-term debt, compared to approximately $4.6
million for the year ended June 26, 1997.
Financing Arrangements
- ----------------------
The unsecured Bank Credit Facility is comprised of (i) a working
capital revolving loan which provides working capital financing of up to
approximately $61.7 million, in the aggregate, and matures on March 31,
2001, and (ii) an $8.3 million letter of credit (the "IDB Letter of
Credit") to secure the industrial development bonds described below which
mature on June 1, 2002. Borrowings under the working capital revolving loan
accrue interest at a rate (the weighted average of which was 6.68% at June
25, 1998) determined pursuant to a formula based on the agent bank's quoted
rate and the Eurodollar Interbank rate.
Of the total $35.0 million of borrowings under the Long-Term
Financing Facility, $25.0 million matures on August 15, 2004, bears interest
at 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. The Long-
Term Financing Facility was amended on March 31, 1998 to, among other
things, convert it from a secured to an unsecured credit facility and
conform it to certain terms of the Bank Credit Facility. As of June 25,
1998, there was approximately $24.1 million total principal amount
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. The Additional Long-Term
Financing was amended on March 31, 1998 to, among other things, convert it
from a secured to an unsecured credit facility and conform it to certain
terms of the Bank Credit Facility. As of June 25, 1998, the total principal
amount outstanding under the Additional Long-Term Financing was $25.0
million.
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 Company's annual capital
expenditures to $7.5 million; 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 Long-Term Financing Facility limits 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 limits dividends to the
lesser of (a) 25% of net income for the previous fiscal year, or (b) $5.0
million, and prohibits the Company from redeeming shares of capital stock.
As of June 25, 1998, the Company was in compliance with all restrictive
covenants, as amended, under its financing facilities.
The Company has approximately $7.8 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 bear interest payable
semiannually 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 $185,000 in fiscal 1999 to
$780,000 in fiscal 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 calendar 1993 through calendar 1996. These
programs are now completed. For fiscal 1998, capital expenditures were
approximately $4.3 million. The Company believes that capital expenditures
for fiscal 1999 will be comparable to the levels incurred in fiscal 1998.
Capital Resources
As of June 25, 1998, the Company had approximately $14.2 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.
Year 2000
- ---------
The Company has substantially completed its review of its internal systems,
processes and facilities to determine if it has software or hardware
applications that are unable to appropriately interpret or recognize the
calendar tear 2000 (the "Year 2000"). In addition, the Company is in the
process of conducting a survey of third parties with whom it has material
business relationships (such as customers, suppliers and financial
institutions) to determine if they have Year 2000 issues that will
materially and adversely impact the Company.
The Company believes, based on representations from its software vendors,
that its internal computer system (which was installed in 1991) and
applications are Year 2000 compliant. Furthermore, the internal computer
system will be undergoing a regularly scheduled upgrade to the latest
release by the end of the September 1998 quarter. The internal computer
system is responsible for inventory control applications, financial
reporting and payroll. In addition, the Company has reviewed its
manufacturing operations and has determined that no material portion of such
operations is date sensitive. Certain of the Company's customers submit
orders through Electronic Data Interchange ("EDI"), a third party computer
system utilized by the Company. The Company's EDI system is currently
undergoing a regularly scheduled upgrade which is expected to be completed
by the end of calendar 1998. Upon completion of this upgrade, the Company
expects, based on representations from software vendors, that its EDI system
will be Year 2000 compliant. The Company is also reviewing its desktop
computer systems and facilities for Year 2000 issues (and expects to
complete that review early in calendar 1999), but does not presently believe
that any Year 2000 issues related to such systems and facilities would have
a material adverse effect on the Company.
Also, the Company is in the process of making initial inquiries of third
parties with whom it has material business relationships to determine
whether they will be able to resolve in a timely manner any Year 2000
problems materially and adversely affecting the Company. In the course of
these initial inquiries, which have focused primarily on the Company's major
customers, the Company has not been made aware of any material Year 2000
issues which would adversely affect the Company. In addition, the Company's
major vendors are growers, and the Company believes they are not dependent
upon computers in order to transact business. The Company expects to
complete a survey of such third parties by the end of calendar 1998.
Based upon the Company's review of its systems and the current status of the
Company's survey of third parties with whom it has material business
relationships, the Company has not identified any material costs to address,
or material risks related to, Year 2000 issues. There can be no assurance,
however, that Year 2000 issues will not have a material adverse effect on
the Company if the Company and/or those with whom it conducts business are
unsuccessful in identifying or implementing timely solutions to any Year
2000 issues. The Company intends to continue its review of its Year 2000
status with the intention of completing that review on the schedule
described above and, as to the extent necessary, developing Year 2000
contingency plans for critical business processes. In a worst case Year
2000 scenario, the Company presently believes it would revert back to manual
applications to perform order entry, billing and similar functions.
Factors That May Affect Future Results
- --------------------------------------
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 (the "USDA") 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 (to the extent that cost increases cannot be
passed on to customers) 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 fiscal
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".
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 the Company, such as
Planters Livesavers Company (a subsidiary of RJR Nabisco, Inc.) and Ralcorp
Holdings, Inc. The Company 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.
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 with 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.
Federal Regulation of Peanut Prices, Quotas and Poundage Allotments
- -------------------------------------------------------------------
Peanuts are an important part of the Company's product line. Approximately
50% of the total pounds of products processed annually by the Company are
peanuts, peanut butter and other products containing peanuts. 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 (other than as
described below pursuant to the North American Free Trade Agreement and the
Uruguay Round Agreement of the General Agreement on Trade and Tariffs), (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
1998 calendar year is approximately 1.2 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 1998
calendar year is approximately $615 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 the Company has successfully operated in
a market shaped by the federal peanut program for many years, the Company
believes that it could adapt to a market without federal regulation if that
were to become necessary. However, the Company 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 the Company'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 were replaced by a
tariff rate quota, initially set at 3,377 tons and which increases 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 tariffs. The tariffs are being phased out gradually and are scheduled
to be eliminated 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, and
import quotas on peanuts were replaced by high ad valorem tariffs, which
must be reduced annually pursuant to the terms of GATT. Also under GATT,
the United States may continue to limit imports of peanut butter but is
permitted to establish a tariff rate quota for peanut butter imports based
on 1993 import levels. Peanut butter imports above the quota are subject to
an over-quota ad valorem tariff which also must be reduced annually pursuant
to the terms of GATT.
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.
Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------
The Company has not entered into transactions using derivative financial
instruments. The Company believes that its exposure to market risk related
to its other financial instruments (which are the debt instruments under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources") is not material.
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 Annual
Report, 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, PricewaterhouseCoopers 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 25,
1998 and June 26, 1997, and the results of their operations and their cash
flows for the year ended June 25, 1998, for the twenty-six week period
ended June 26, 1997 and for the years ended December 31, 1996 and 1995, 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/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
August 18, 1998
CONSOLIDATED BALANCE SHEETS
- ---------------------------
June 25, 1998 and June 26, 1997
(dollars in thousands)
June 25, June 26,
1998 1997
-------- --------
ASSETS
CURRENT ASSETS:
Cash $ 549 $ 631
Accounts receivable, including related
party receivables of $1,010 and $290,
respectively, less allowance for doubtful
accounts of $846 and $669, respectively 23,901 25,200
Inventories 99,535 62,988
Deferred income taxes 417 618
Income taxes receivable 1,454 2,830
Prepaid expenses and other current assets 3,024 1,419
-------- --------
TOTAL CURRENT ASSETS 128,880 93,686
-------- --------
PROPERTIES :
Buildings 55,318 55,211
Machinery and equipment 70,099 66,019
Furniture and leasehold improvements 5,001 4,956
Vehicles 4,260 4,190
-------- --------
134,678 130,376
Less: Accumulated depreciation 60,943 53,749
-------- --------
73,735 76,627
Land 1,892 1,892
-------- --------
TOTAL PROPERTIES 75,627 78,519
-------- --------
OTHER ASSETS:
Goodwill and other intangibles 7,754 8,667
Miscellaneous 7,415 6,545
-------- --------
TOTAL OTHER ASSETS 15,169 15,212
-------- --------
TOTAL ASSETS $219,676 $187,417
======== ========
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED BALANCE SHEETS
- ---------------------------
June 25, 1998 and June 26, 1997
(dollars in thousands, except per share amounts)
June 25, June 26,
1998 1997
-------- --------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 48,959 $ 19,034
Current maturities of long-term debt 5,789 4,937
Accounts payable, including related party
payables of $591 and $334 12,038 11,193
Accrued expenses 9,244 8,656
-------- --------
TOTAL CURRENT LIABILITIES 76,030 43,820
-------- --------
LONG-TERM LIABILITIES
Long-term debt 63,182 68,862
Deferred income taxes 2,266 1,664
-------- --------
TOTAL LONG-TERM LIABILITIES 65,448 70,526
-------- --------
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
Common Stock, noncumulative voting rights
of one vote per share, $.01 par value;
10,000,000 shares authorized, 5,579,039
and 5,578,140 shares issued and outstanding 56 56
Capital in excess of par value 57,196 57,191
Retained earnings 22,113 16,991
Treasury stock, at cost (1,204) (1,204)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 78,198 73,071
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $219,676 $187,417
======== ========
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------
<TABLE>
For the year ended June 25, 1998, the twenty-six weeks ended June 26, 1997
and June 27, 1996 and the years ended December 31, 1996, and 1995
(dollars in thousands, except for earnings per share)
<CAPTION>
Twenty-six Weeks Ended
------------------------
Year Ended June 27, Year Ended December 31,
June 25, June 26, 1996 -----------------------
1998 1997 (Unaudited) 1996 1995
---------- ----------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Net sales $317,390 $133,064 $117,968 $294,404 $277,741
Cost of sales 260,486 111,580 100,493 255,204 230,691
---------- ----------- ---------- --------- --------
Gross profit 56,904 21,484 17,475 39,200 47,050
---------- ----------- ---------- --------- --------
Selling expenses 29,475 11,787 10,406 23,909 20,231
Administrative expenses 10,467 4,975 5,644 11,501 10,107
---------- ----------- ---------- --------- --------
Total selling and administrative
expenses 39,942 16,762 16,050 35,410 30,338
---------- ----------- ---------- --------- --------
Income from operations 16,962 4,722 1,425 3,790 16,712
---------- ----------- ---------- --------- --------
Other income (expense):
Interest expense ($963,$440,
$453, $899 and $936 to related
parties) (8,776) (4,135) (4,822) (9,051) (7,673)
Interest income ($0,$0, $7, $7
and $135 from related parties) 29 16 17 27 188
(Loss) gain on disposition of
properties (4) 3 7 12 26
Rental income 500 233 215 411 393
---------- ----------- ---------- --------- --------
Total other income (expense) (8,251) (3,883) (4,583) (8,601) (7,066)
---------- ----------- ---------- --------- --------
Income (loss) before income taxes 8,711 839 (3,158) (4,811) 9,646
Income tax (expense) benefit (3,589) (388) 1,211 1,820 (3,858)
---------- ----------- ---------- --------- --------
Net income (loss) $ 5,122 $ 451 $ (1,947) $ (2,991) $ 5,788
========== =========== ========== ========= ========
Basic earnings (loss) per common share $ 0.56 $ 0.05 $ (0.21) $ (0.33) $ 0.64
========== =========== ========== ========= ========
Diluted earnings (loss) per common share $ 0.56 $ 0.05 $ (0.21) $ (0.33) $ 0.63
========== =========== ========== ========= ========
Weighted average shares outstanding - basic 9,147,862 9,147,666 9,147,666 9,147,666 9,070,000
Weighted average shares outstanding - diluted 9,168,175 9,147,759 9,147,666 9,147,666 9,171,204
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- -----------------------------------------------
For the year ended June 25, 1998, the twenty-six weeks ended June 26,
1997 and the years ended December 31, 1996 and 1995
(dollars in thousands, except per share amounts)
<CAPTION>
Class A Capital in
Common Common Excess of Retained Treasury
Stock Stock Par Value Earnings Stock Total
------- ------ ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
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
Net income -- -- -- 5,122 -- 5,122
Stock options exercised -- -- 5 -- -- 5
------- ------ ---------- -------- -------- -------
Balance, June 25, 1998 $37 $56 $57,196 $22,113 $(1,204) $78,198
======= ====== ========== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
For the year ended June 25, 1998, the twenty-six weeks ended June 26,
1997 and June 27, 1996 and the years ended December 31, 1996 and 1995
(dollars in thousands)
<CAPTION>
Twenty-six Weeks Ended
----------------------
Year Ended June 27, Year Ended December 31,
June 25, June 26, 1996 -----------------------
1998 1997 (Unaudited) 1996 1995
---------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,122 $ 451 $ (1,947) $ (2,991) $ 5,788
Adjustments:
Depreciation and amortization 8,226 4,322 4,139 8,629 7,551
Loss (gain) on disposition of
properties 4 (4) (7) (8) (26)
Deferred income taxes 804 915 -- 390 621
Change in current assets and current
liabilities:
Accounts receivable, net 1,299 2,186 7,021 403 (5,165)
Inventories (36,547) 14,117 13,178 19,255 (7,345)
Prepaid expenses and other
current assets (1,605) (595) (329) (142) 1,455
Accounts payable 845 (12,650) (17,039) (2,884) 7,124
Accrued expenses 588 (736) (729) 724 3,365
Income taxes receivable/payable 1,376 (621) (2,279) (2,853) 644
---------- --------- ----------- --------- ----------
Net cash (used in) provided by
operating activities (19,888) 7,385 2,008 20,523 14,012
---------- --------- ----------- --------- ----------
Cash flows from investing activities:
Acquisition of properties (4,227) (1,898) (5,246) (9,198) (13,517)
Proceeds from disposition of
properties 7 7 10 13 50
Stockholder note receivable -- -- 354 354 200
Purchase of Fisher Nut business -- -- -- -- (5,779)
Note receivable from affiliate,
net of repayments -- -- -- -- 5,790
Other (961) 147 (61) (1,437) (3,268)
---------- --------- ----------- --------- ----------
Net cash used in investing activities (5,181) (1,744) (4,943) (10,268) (16,524)
---------- --------- ----------- --------- ----------
Cash flows from financing activities:
Net borrowings (repayments)
on notes payable 29,925 (3,259) 4,368 (6,289) (21,714)
Principal payments on long-term debt (4,938) (2,353) (1,565) (3,772) (3,591)
Proceeds from issuance of long-term debt -- -- -- -- 27,500
Proceeds from issuance of Common Stock -- -- -- -- 210
---------- --------- ----------- --------- ----------
Net cash provided by (used in) financing
activities 24,987 (5,612) 2,803 (10,061) 2,405
---------- --------- ----------- --------- ----------
Net (decrease) increase in cash (82) 29 (132) 194 (107)
Cash:
Beginning of period 631 602 408 408 515
---------- --------- ----------- --------- ----------
End of period $ 549 $ 631 $ 276 $ 602 $ 408
========== ========= =========== ========= ==========
Supplemental disclosures of cash flow
information:
Interest paid $ 8,422 $ 4,127 $ 4,694 $ 8,785 $ 7,229
Taxes paid 3,421 194 1,104 1,187 2,959
Supplemental schedule of noncash
investing and financing activities:
Capital lease obligation incurred 110 136 191 270 --
Acquisition of Machine Design
Incorporated -- -- -- -- 1,520
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.
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 $427 for the year ended June 25, 1998, $208
for the twenty-six weeks ended June 26, 1997 and $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
period presented and reflect estimated purchase accounting and other
adjustments related to the acquisition.
(Unaudited)
Year Ended
December 31,
1995
------------
Net sales $319,540
Net (loss) $ (7,960)
Basic and diluted (loss) per common share $ (0.88)
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 $261 for
the year ended June 25, 1998, $131 for the twenty-six weeks ended June
26, 1997 and $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.
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
- ------------------------------------
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.
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 -EARNINGS PER SHARE
- --------------------------
Earnings per common share is calculated using the weighted average
number of shares of Common Stock and Class A Common Stock outstanding
during the period. In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
128 "Earnings Per Share" ("SFAS 128") which is effective for all
prior periods presented. The following table presents the required
disclosures under SFAS 128:
Twenty-six
Year Ended Weeks Ended Year Ended Year Ended
June 25, June 26, December 31, December 31,
1998 1997 1996 1995
---------- ----------- ------------ ------------
Net income (loss) $ 5,122 $ 451 $ (2,991) $ 5,788
Shares outstanding 9,147,862 9,147,666 9,147,666 9,070,000
Basic earnings (loss)
per share $ 0.56 $ 0.05 $ (0.33) $ 0.64
Effect of dilutive
securities:
Stock options 20,313 93 -- 101,204
Shares outstanding 9,168,175 9,147,759 9,147,666 9,171,204
Diluted earnings (loss)
per share $ 0.56 $ 0.05 $ (0.33) $ 0.63
The following table summarizes the weighted-average number of options
which were outstanding for the periods presented but were not included
in the computation of diluted earnings per share because the exercise
prices of the options were greater than the average market price of the
Common Stock, or because the options were anti-dilutive due to a net
loss for the period.
Weighted-Average
Number of Options Exercise Price
----------------- ----------------
Year ended June 25, 1998 268,864 $12.17
Twenty-six weeks ended June 26, 1997 332,767 $11.11
Year Ended December 31, 1996 409,189 $11.68
Year Ended December 31, 1995 389,011 $12.36
NOTE 3 - 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.
NOTE 4 - INCOME TAXES
- ---------------------
The provision (benefit) for income taxes for the year ended June 25,
1998, the twenty-six weeks ended June 26, 1997 and the years ended
December 31, 1996 and 1995 are as follows:
June 25, June 26, December 31, December 31,
1998 1997 1996 1995
-------- -------- ------------ ------------
Current:
Federal $2,261 $(431) $(1,870) $2,496
State 524 (96) (340) 741
Deferred: 804 915 390 621
-------- -------- ------------ ------------
Total provision (benefit)
for income taxes $3,589 $ 388 $(1,820) $3,858
======== ======== ============ ============
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 year ended June 25, 1998, the twenty-six weeks ended
June 26, 1997 and the years ended December 31, 1996 and 1995 are as
follows:
June 25, June 26, December 31, December 31,
1998 1997 1996 1995
-------- -------- ------------ ------------
Federal statutory income
tax rate 34.0% 34.0% 34.0% 34.0%
State income and replacement
taxes, net of federal benefit 5.1 5.6 4.7 5.1
Nondeductible items,
principally goodwill 1.1 4.7 (2.0) 0.8
Other 1.0 1.9 1.1 0.1
-------- -------- ------------ -----------
Effective tax rate 41.2% 46.2% 37.8% 40.0%
======== ======== ============ ===========
The deferred tax assets and liabilities are comprised of the following:
June 25, 1998 June 26, 1997
Asset Liability Asset Liability
------ --------- ------ ---------
Current:
Allowance for doubtful
accounts $ 338 $ -- $ 268 $ --
Employee compensation 298 -- 388 --
Inventory 71 -- 75 --
Accounts receivable -- 488 -- 405
Other 198 -- 292 --
------ --------- ------ ---------
Total current $ 905 $ 488 $1,023 $ 405
------ --------- ------ ---------
Long-Term:
Depreciation -- 4,066 -- 3,373
Capitalized leases 1,407 -- 1,342 --
Other 393 -- 367 --
Total long-term 1,800 4,066 1,709 3,373
------ --------- ------ ---------
Total $2,705 $4,554 $2,732 $3,778
====== ========= ====== =========
NOTE 5 - INVENTORIES
- --------------------
Inventories consist of the following:
June 25, June 26,
1998 1997
-------- --------
Raw material and supplies $52,589 $29,713
Work-in-process and finished goods 46,946 33,275
-------- --------
Total $99,535 $62,988
======== ========
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. For the years ended December 31,
1996 and 1995, the Company recognized $7 and $39, 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
June 25, 1998 and December 31, 1996 and 1995 aggregating $2,619, $532
and $1,205, respectively. Accounts payable to Navarro aggregated $104
at June 25, 1998. The Company sold products to Navarro aggregating
$2,991 during the year ended June 25, 1998, $379 during the twenty-six
weeks ended June 26, 1997 and $1,233 and $1,209 during the years ended
December 31, 1996 and 1995, respectively. Accounts receivable from
Navarro aggregated $1,005 and $197 at June 25, 1998 and June 26, 1997,
respectively.
NOTE 7 - NOTES PAYABLE
- ----------------------
Notes payable consist of the following:
June 25, June 26,
1998 1997
-------- --------
Revolving bank loan $48,959 $19,034
On March 31, 1998, the Company entered into a new unsecured credit
facility, with certain banks, totaling $70,000 (the "Bank Credit
Facility"). The Bank Credit Facility is comprised of (i) a working
capital revolving loan which provides for working capital financing of
up to approximately $61,740, in the aggregate, and matures on March 31,
2001, 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 6.68% at June 25,
1998) determined pursuant to a formula based on the agent bank's quoted
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 Bank Credit Facility replaced the Company's prior
secured 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 annual capital expenditures to $7,500; (iv) restrict dividends to
the lesser of 25% of net income for the previous fiscal year or $5,000;
(v) prohibit the Company from redeeming shares of capital stock; and
(vi) 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:
June 25, June 26,
1998 1997
-------- --------
Industrial development bonds, secured by building,
machinery and equipment with a cost
aggregating $8,000 $ 7,830 $ 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 1,585 1,620
Capitalized lease obligations 7,644 7,899
Series A note payable, interest payable quarterly at
8.72%, principal payable in semi-annual installments of
$200 beginning February 1995 2,600 3,000
Series B note payable, interest payable quarterly at
9.07%, principal payable in semi-annual installments of
$300 beginning February 1995 3,900 4,500
Series C note payable, interest payable quarterly at
9.07%, principal payable in semi-annual installments of
$200 beginning February 1995 2,600 3,000
Series D note payable, interest payable quarterly at
9.18%, principal payable in semi-annual installments of
$150 beginning May 1995 1,950 2,250
Series E note payable, interest payable quarterly at
7.34%, principal payable in semi-annual installments of
$400 beginning May 1995 5,200 6,000
Series F notes payable, interest payable quarterly at
9.16%, principal payable in semi-annual installments
ranging from $550 to $475 beginning November 1996 7,875 8,925
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
Note payable, subordinated, interest payable semi-
annually at 9.38%, principal payable in three annual 15,000 15,000
installments of $5,000 beginning on September 1, 2003
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 2,358 2,414
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
Other 429 455
------- -------
68,971 73,799
Less: Current maturities 5,789 4,937
------- -------
Total long-term debt $63,182 $68,862
======= =======
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 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 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 $185 to $780 annually 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
its prior 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.
On March 31, 1998, the Long-Term Financing Facility was amended
to, among other things, convert it from a secured to an unsecured
credit facility and conform it to certain terms of the Bank
Credit Facility.
The Long-Term Financing Facility 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; (iii) restrict dividends
to a maximum of 25% of cumulative net income from and after
January 1, 1995 to the date the dividend is declared; and (iv)
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.
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.
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 March 31, 1998, the Additional Long-
Term Financing was amended to, among other things, convert it
from a secured to an unsecured credit facility and conform it to
certain terms of the Bank Credit Facility.
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.
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. The final
installments of this note were paid during the year ended June
25, 1998.
Aggregate maturities of long-term debt, excluding capitalized
lease obligations, are as follows for the years ending:
June 24, 1999 $ 5,509
June 29, 2000 5,354
June 28, 2001 5,360
June 27, 2002 5,260
June 26, 2003 5,215
Subsequent years 34,629
-------
Total $61,327
=======
The accompanying financial statements include the following
amounts related to assets under capital leases:
June 25, June 26,
1998 1997
-------- --------
Buildings $9,520 $9,520
Less: Accumulated amortization 5,386 4,974
-------- --------
Total $4,134 $4,546
======== ========
Amortization expense aggregated $412 for the year ended June 25,
1998, $206 for the twenty-six weeks ended June 26, 1997, and
$411 and $412 for the years ended December 31, 1996 and 1995,
respectively.
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 24, 1999 $ 1,269
June 29, 2000 1,269
June 28, 2001 1,269
June 27, 2002 1,269
June 26, 2003 1,269
Subsequent years 8,841
-------
Total minimum lease payments 15,186
Less: Amount representing interest 7,542
-------
Present value of minimum lease payments,
including amounts due to related parties of $7,644 $ 7,644
=======
JBSS also leases buildings and certain equipment pursuant to
agreements accounted for as operating leases. Rent expense under
these operating leases aggregated $863 for the year ended June
25, 1998, $387 for the twenty-six weeks ended June 26, 1997 and
$777 and $805 for the years ended December 31, 1996 and 1995,
respectively. Aggregate noncancelable lease commitments under
these operating leases are as follows for the years ending:
June 24, 1999 $ 493
June 29, 2000 193
June 28, 2001 110
June 27, 2002 30
June 26, 2003 30
-----
$ 856
=====
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 25, 1998, 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 year ended June 25, 1998, the twenty-six weeks ended
June 26, 1997 or the year ended December 31, 1996. For the year
ended December 31, 1995, the additional contribution was $383,
which was paid in 1996.
JBSS contributed $99 for the year ended June 25, 1998, $53 for
the twenty-six weeks ended June 26, 1997 and $86 and $73 for the
years ended December 31, 1996 and 1995, 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 RELATED PARTIES
- -------------------------------------------
In addition to the related party transactions described in Notes
6 and 8, JBSS also entered into transactions with the following
related parties:
Equipment purchases
- -------------------
JBSS purchases 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. Purchases aggregated $504 for the year ended June 25,
1998, $76 for the twenty-six weeks ended June 26, 1997, and $442
and $681 for the years ended December 31, 1996 and 1995,
respectively. In addition, JBSS leases office and warehouse
space to the entity. Rent collected from the entity aggregated
$118 for the year ended June 25, 1998, $49 for the twenty-six
weeks ended June 26, 1997 and $62 and $12 for the years ended
December 31, 1996 and 1995, respectively. Accounts receivable
aggregated $5 and $16 at June 25, 1998 and June 26, 1997,
respectively. Accounts payable aggregated $37 at June 25, 1998.
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 $6,245 for the year ended June 25,
1998, $2,261 for the twenty-six weeks ended June 26, 1997and
$5,049 and $3,255 for the years ended December 31, 1996 and 1995,
respectively. Accounts payable aggregated $481 and $334 at June
25, 1998 and June 26, 1997, respectively.
Brokerage commissions
- ---------------------
JBSS paid brokerage commissions of $22 during the year ended June
25, 1998, $16 during the twenty-six weeks ended June 26, 1997 and
$90 and $43 during the years ended December 31, 1996 and 1995,
respectively, to food brokerage companies. In addition, JBSS
paid brokerage commissions to a trading company of $89 during the
year ended December 31, 1995. The President of the food
brokerage companies and the trading company is related to the
Company's President.
Product purchases and sales
- ---------------------------
JBSS also purchased products aggregating $137 and $458 during the
years ended December 31, 1996 and 1995, respectively, from the
trading company referred to in the preceding paragraph. JBSS
sold products to the same company aggregating $6 and $12 and
during the years ended December 31, 1996 and 1995, respectively.
Additionally, JBSS made sales aggregating $423 during the twenty-
six weeks ended June 26, 1997 and $1,014 and $276 during the
years ended December 31, 1996 and 1995, 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 $74 during the year
ended June 25, 1998, $38 during the twenty-six weeks ended June
26, 1997 and $105 and $74 during the years ended December 31,
1996 and 1995, respectively.
Building space rental
- ---------------------
The Company rents 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 was $75 for the year
ended June 25, 1998, $32 for the twenty-six weeks ended June 26,
1997 and $66 and $10 for the years ended December 31, 1996 and
1995, respectively.
Note receivable
- ---------------
For the year ended December 31, 1995, the Company recognized $96
of interest income related to a note receivable from 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.
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 year ended June
25, 1998, the twenty-six weeks ended June 26, 1997 and the years
ended December 31, 1996 and 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,
options to purchase 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 June 25, 1998
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
Exercised (899) $ 6.00
Canceled (16,001) $13.57
---------
Outstanding at June 25, 1998 209,700 $12.24
=========
Options exercisable at June 25, 1998 202,762 $12.45
=========
Exercise prices for options outstanding as of June 25, 1998
ranged from $6.00 to $15.13. The weighted-average remaining
contractual life of those options is 4.2 years. The options
outstanding at June 25, 1998 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-$15.13
---------------- ----------------
Number of options 27,750 181,950
Weighted-average exercise price $6.08 $13.17
Weighted-average remaining life
(years) 5.9 3.9
Number of options exercisable 20,812 181,950
Weighted average exercise price
for exercisable options $6.08 $13.17
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,
options to purchase 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, except those granted to outside
directors, 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:
Number of Weighted-Average
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
Canceled (25,100) $7.27
---------
Outstanding at June 25, 1998 160,600 $7.73
=========
Options exercisable at June 25, 1998 60,250 $8.28
=========
Exercise prices for options outstanding as of June 25, 1998
ranged from $6.00 to $10.50. The weighted-average remaining
contractual life of those options is 7.6 years. The options
outstanding at June 25, 1998 may be segregated into two ranges,
as is shown in the following:
Option Price Per Option Price Per
Share Range Share Range
$6.00-$6.88 $8.25-$10.50
---------------- ----------------
Number of options 89,200 71,400
Weighted-average exercise price $6.32 $9.49
Weighted-average remaining life
(years) 8.3 6.7
Number of options exercisable 23,300 36,950
Weighted average exercise price
for exercisable options $6.34 $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.
MARKETS FOR THE COMPANY'S SECURITIES AND RELATED 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 24, 1998 (through September 1, 1998) $6.00 $4.63
June 25, 1998 8.00 4.75
March 27, 1998 8.50 6.88
December 25, 1997 8.63 7.25
September 25, 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
As of September 1, 1998, there were approximately 228 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 from 1995 through 1998. 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".
OFFICERS
- --------
Chairman of the Board and Chief Executive Officer
Jasper B. Sanfilippo
President
Mathias A. Valentine
Executive Group Vice President
John C. Taylor
Executive Vice President, Finance and Chief Financial Officer
Gary P. Jensen
Executive Vice President
Steven G. Taylor
Vice President and Secretary
Michael J. Valentine
Vice President and Treasurer
James J. Sanfilippo
Vice President and Assistant Secretary
Jasper B. Sanfilippo, Jr.
Controller
William R. Pokrajac
BOARD OF DIRECTORS
- ------------------
Jasper B. Sanfilippo (a)
Chairman of the Board and Chief Executive Officer
Mathias A. Valentine (a)
President
John C. Taylor
Executive Group Vice President
Michael J. Valentine
Vice President and Secretary
William D. Fischer (a)(b)
Former President of Dean Foods Company, a dairy and specialty
food products company, and Director of Allied Products
Corporation, a manufacturer of agricultural and industrial equipment.
John W. A. Buyers (a)(b)
Chairman, Chief Executive Officer and Director of C. Brewer
and Company, Limited, Hawaii's oldest company which is engaged in
producing, marketing and distributing macadamia nuts, guava and
guava juice, Kona Coffee and Hawaiian fruit jams and jellies.
C. Brewer and Company, Limited also provides products and services
for the agricultural, environmental and construction industries and is a
developer of agricultural and commercial real estate.
J. William Petty (b)
Retired President, Chief Executive Officer and Director of
Curtice Burns Foods, Inc., a manufacturer and marketer of a diversified
line of food products. Presently, President, Chief Executive Officer
and Director of the Orval Kent Holding Company, Inc. and its
subsidiaries, Orval Kent Food Company and Mrs. Crockett's Kitchens,
manufacturers of refrigerated salads, side dishes and entrees. Former
member of the Boards of Directors of the Grocery Manufacturers of
America and the National Food Processors Association. Current member
of the Board of Directors of the Refrigerated Foods Association.
(a) Member of the Compensation Committee
(b) Member of the Audit Committee
CORPORATE INFORMATION
- ---------------------
Annual Meeting
- --------------
The Annual Meeting of Stockholders of John B. Sanfilippo & Son,
Inc. will be held at 10:00 a.m. on Wednesday, October 28, 1998 at
the Wyndham Hotel Northwest Chicago, 400 Park Boulevard, Itasca,
Illinois 60143.
Annual Report on Form 10-K
- --------------------------
Single copies of the Company's Annual Report on Securities and
Exchange Commission Form 10-K (without exhibits) will be provided
without charge to stockholders upon written request directed to
Michael J. Valentine, Secretary, at the Corporate Office.
Common Stock
- ------------
The Common Stock of John B. Sanfilippo & Son, Inc. is traded
over-the-counter on the Nasdaq National Market under the symbol
"JBSS".
Counsel
- -------
Katz, Karacic, Helmin & Addis, P.C.
Chicago, Illinois
Jenner & Block
Chicago, Illinois
Auditors
- --------
PricewaterhouseCoopers LLP
Chicago, Illinois
Transfer Agent and Registrar
- ----------------------------
American Stock
Transfer & Trust Company
New York, New York
This report contains the following trademarks of the Company,
some of which are registered: Fisher, Snack 'N Serve Nut Bowl,
Evon's, Flavor Tree, Sunshine Country, Texas Pride and Tom Scott.
Any other product or brand names are trademarks or registered
trademarks of their respective companies.
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 18, 1998 appearing on page 17 of the 1998 Annual
Report to Stockholders which is incorporated in this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our
report on the Financial Statement Schedule, which appears on page 19
of this Form 10-K.
/s/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PricewaterhouseCoopers LLP
Chicago, Illinois
September 21, 1998
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<LEGEND>
This schedule contains summary financial information extracted from the John B.
Sanfilippo & Son, Inc. Consolidated Statement of Operations for the fiscal year
ended June 25, 1998 and Consolidated Balance Sheet as of June 25, 1998 and is
qualified in its entirety by reference to such statements.
</LEGEND>
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<FISCAL-YEAR-END> JUN-25-1998
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<INVENTORY> 99,535
<CURRENT-ASSETS> 128,880
<PP&E> 136,570
<DEPRECIATION> 60,943
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<COMMON> 93
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<TOTAL-LIABILITY-AND-EQUITY> 219,676
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<CGS> 260,486
<TOTAL-COSTS> 260,486
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<INTEREST-EXPENSE> 4,135
<INCOME-PRETAX> 8,711
<INCOME-TAX> 3,589
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<NET-INCOME> 5,122
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<EPS-DILUTED> .56
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