SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 24, 1999
[ ] 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
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(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
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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 10, 1999, 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 10, 1999) held by non-affiliates of the registrant was
$21,401,924 (5,350,481 shares at $4.00 per share).
DOCUMENTS INCORPORATED BY REFERENCE:
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Portions of the Company's Annual Report to Stockholders for the
fiscal year ended June 24, 1999 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 27, 1999 are
incorporated by reference into Part III of this Report.
PART I
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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 1999 Annual Report to
Stockholders. On June 25, 1999 the Company dissolved two of
its three wholly owned subsidiaries, including Sunshine and
Quantz Acquisition Co., Inc., and merged such subsidiaries
into John B. Sanfilippo & Son, Inc. 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 1999 are to the fiscal year ended June 24, 1999.
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 are to the fiscal year
ended December 31, 1996.
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, 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 84.5%, 85.9%,
85.6% and 83.8% of the Company's gross sales for fiscal
1999, fiscal 1998, the Transition Period and fiscal 1996,
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, plastic jars 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, butter toffee, praline
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 1999, 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 4.4%,
4.3%, 4.9% and 5.3% of the Company's gross sales for fiscal
1999, fiscal 1998, the Transition Period and fiscal 1996,
respectively. Approximately 2.3%, 2.3% and 4.9% of the
Company's peanut butter products were sold during fiscal
1999, fiscal 1998 and fiscal 1996, 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 2.8%, 3.8%, 4.4% and 4.6% of the Company's
gross sales for fiscal 1999, fiscal 1998, the Transition
Period and fiscal 1996, 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 8.3%, 6.0%, 5.1% and 6.3% of the Company's
gross sales for fiscal 1999, fiscal 1998, the Transition
Period and fiscal 1996, 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, industrial and food
service customers; bulk food products sold to retail and
food service customers; an assortment of corn snacks,
sunflower seeds, party mixes, 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 10,900
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 3,500 retail stores
in Illinois and nine 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. accounted for
approximately $34.8 million, or 11.7%, of the Company's
gross sales for fiscal 1996. No single customer accounted
for more than 10% of the Company's gross sales for fiscal
1999, fiscal 1998 or for the Transition Period.
(iv) Sales, Marketing and Distribution
The Company markets its products through its own sales
department and through a network of over 215 independent
brokers and various independent distributors and suppliers.
The Company's sales department of 46 employees includes 14
regional managers, 7 sales specialists and 5 telemarketers.
The Company's marketing and promotional campaigns include
regional and national trade shows and limited newspaper
advertisements, including coupons, 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, Land O' Lakes
and 7-Up. 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 nine other states, JBSS distributes its
Evon's brand products to approximately 3,500 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 52
route salespeople covering routes located in Illinois,
Indiana, Iowa, Wisconsin, Ohio, Minnesota, Michigan,
Kentucky, North Dakota 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 1999 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 1999, less than 15% 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,
especially in the second and third quarters of the Company's
fiscal 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 1999
compared to Fiscal 1998 -- Gross Profit", "Fiscal 1998
Compared to the Fifty-two Weeks Ended June 26, 1997 -- Gross
Profit" and "The Transition Period Compared to the Twenty-
six Weeks Ended June 27, 1996 -- Gross Profit", under
"Management's Discussion and Analysis of Financial Condition
and Results of Operations", contained in the Company's 1999
Annual Report to Stockholders.
The Company purchases supplies, such as roasting oils,
seasonings, glass jars, plastic 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 73% of the farmer stock peanuts purchased by
the Company in fiscal 1999 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 Fisher, Evon's, Sunshine Country, Flavor
Tree, Texas Pride and Tom Scott brand names, which are
registered with the U.S. Patent and Trademark Office.
(viii) Employees
As of June 24, 1999 the Company had approximately 1,430
active employees, including 173 corporate staff employees
and 1,257 production and distribution employees. As a
result of the seasonal nature of the Company's business, the
number of employees peaked to approximately 1,692 in the
last four months of calendar 1998 and dropped to an average
of approximately 1,452 during the remainder of fiscal 1999.
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 1999
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; (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 1999 crop 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 1999 crop
year is approximately $610 per ton.
The 1996 Farm Bill extended the federal support and subsidy
program for peanuts for seven years. However, there are no
assurances that Congress will not change or eliminate the
program prior to its scheduled expiration. Changes in the
federal peanut program could significantly affect the supply
of, and price for, peanuts. While 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.
(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 $40 million which it and its
insurance carriers believe to be adequate.
Item 2 - Properties
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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
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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 24,
Location Footage Interest Principal Use Occupied 1999
- ------------------------------ ------- -------- ------------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Elk Grove Village, Illinois(1) 300,000 Leased/ Processing, 1981 58%
(Busse Road facility) Owned packaging,
warehousing,
distribution, JBSS
corporate offices
and thrift store
Elk Grove Village, Illinois(2) 83,000 Owned Processing, 1989 52%
(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 68%
purchasing,
processing,
packaging,
warehousing and
distribution
Garysburg, North Carolina 120,000 Owned Peanut shelling, 1994 60%
purchasing,
processing,
packaging,
warehousing and
distribution
Selma, Texas 200,000 Owned Pecan shelling, 1992 80%
processing,
packaging,
warehousing and
distribution
Walnut, California(5) 50,000 Leased Processing, 1991 55%
packaging,
warehousing and
distribution
Gustine, California 75,000 Owned Walnut shelling, 1993 59%
processing,
packaging,
warehousing and
distribution
Arlington Heights, Illinois(6) 83,000 Owned Processing, 1994 74%
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 1999 Annual Meeting.
(2) This facility was 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. The
Company paid its financial obligation on the maturity date.
(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 one related party
lessee. See the Section entitled "Compensation Committee
Interlocks and Insider Participation -- Lease
Arrangements" contained in the Company's Proxy Statement
for the 1999 Annual Meeting.
(4) The Bainbridge facility is subject to a mortgage and
deed of trust securing approximately $7.6 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 1999 Annual Report to Stockholders.
(5) The Walnut, California facility is leased under a
lease which expires on July 31, 2001. The Company has one
renewal option under the lease to extend the lease term
until July 31, 2006.
(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
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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 1999, 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 1999, the Selma facility processed approximately 3
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 1999, the Bainbridge
facility shelled approximately 76 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 1999, the Garysburg facility
processed approximately 26 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 1999, the
Gustine facility shelled approximately 23 million inshell
pounds of walnuts.
The Arlington Heights facility is used for the production
and packaging the majority of its Fisher Nut products, the
"stand-up pouch" packaging for its Flavor Tree brand
products and for the production and packaging of the
Company's sunflower meats.
Item 3 -- Legal Proceedings
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The Company is party to various lawsuits, proceedings and
other matters arising out of the conduct of its business.
Currently, 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.
A judgment was entered against the Company on November 19,
1998 in a lawsuit (the "Crane Litigation") filed by Bert S.
Crane, Nancy M. Crane, Bert A. Crane, Mary Crane Couchman
and Karen Crane (collectively, the "Crane Plaintiffs").
The judgment entitled the Crane Plaintiffs to recover from
the Company $540,000, plus statutory late payment penalties,
attorneys' fees and cost. On February 8, 1999, the Crane
Plaintiffs filed certain post-judgement motions requesting,
among other things, that the court (i) amend the total
judgment (exclusive of fees and costs) to reflect that the
total amount owed, inclusive of the late payment penalties,
was $726,179 as of November 19, 1998, and (ii) set the total
fees and expenses owed by the Company pursuant to the
judgement at $260,284. On March 24, 1999 the court granted
the motions filed by the Crane Plaintiffs. The lawsuit was
subsequently agreed to be settled. See "Fiscal 1999 Compared
to Fiscal 1998 -- Selling and Administrative Expenses" under
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the
Company's 1999 Annual Report to stockholders.
Item 4 -- Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
No matter was submitted during the fourth quarter of fiscal
1999 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 27, 1999:
JASPER B. SANFILIPPO, Chairman of the Board and Chief
Executive Officer, age 68 -- 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). Mr.
Sanfilippo was a member of the Board of Directors and a Vice
President of Sunshine from June 1992 until June 25, 1999
when Sunshine was merged into the Company.
MATHIAS A. VALENTINE, President, age 66 -- 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 was a member of the
Board of Directors and a Vice President of Sunshine from
June 1992 until June 25, 1999 when Sunshine was merged into
the Company.
GARY P. JENSEN, Executive Vice President Finance and Chief
Financial Officer, age 54 -- 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.
STEVEN G. TAYLOR, Executive Vice President, age 49 -- 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. Prior to his employment with the
Company, Mr. Taylor was Vice President of Sunshine from 1982
until June 25, 1999 when Sunshine was merged into the
Company. Mr. Taylor and the Company are parties to an
Employment Agreement pursuant to which Mr. Taylor is to be
employed by the Company until June 2000. See "Executive
Compensation -- Employment Contract", contained in the
Company's Proxy Statement for the 1999 Annual Meeting.
MICHAEL J. VALENTINE, Senior Vice President and Secretary,
age 40 -- Mr. Valentine has been employed by the Company
since 1987 and in August 1999 was named Senior Vice
President and Secretary. Mr. Valentine was elected as a
director of the Company in April 1997. Mr. Valentine served
as the Company's Vice President and Secretary from December
1995 to August 1999. 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.
JEFFREY T. SANFILIPPO, Senior Vice President Sales and
Marketing, age 36 -- Mr. Sanfilippo has been employed by the
Company since 1991 and was named its Senior Vice President
Sales and Marketing in August 1999. Mr. Sanfilippo was
named as a director of the Company in August 1999. He served
as General Manager West Coast Operations from September 1991
to September 1993. He served as Vice President West Coast
Operations and Sales from October 1993 to September 1995.
He served as Vice President Sales and Marketing from October
1995 to August 1999.
JASPER B. SANFILIPPO, JR., Senior Vice President and
Assistant Secretary, age 31 -- Mr. Sanfilippo has been
employed by the Company since 1991 and in August 1999 was
named Senior Vice President and Assistant Secretary. He has
served as an Assistant Secretary of the Company since 1993.
Mr. Sanfilippo served as a Vice President from December
1995 to August 1999. He served as General Manager of the
Walnut Processing Division from 1993 to December 1995. Mr.
Sanfilippo is responsible for the Company's walnut
operations, including plant operations and procurement.
WILLIAM R. POKRAJAC, Controller, age 45 -- 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.
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., an executive officer of
the Company and Jeffrey T. Sanfilippo, an executive officer
and a director 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 Jeffrey T. Sanfilippo, and (iii) the
father of Michael J. Valentine. Michael J. Valentine,
Senior 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 Jeffrey T. Sanfilippo.
Jeffrey T. Sanfilippo, Senior Vice President Sales and
Marketing and a director of the Company, is (i) the son of
Jasper B. Sanfilippo, (ii) the brother of Jasper B.
Sanfilippo Jr., (iii) the nephew of Mathias A Valentine, and
(iv) the cousin of Michael J. Valentine.
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 1999
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
years ended June 24, 1999, June 25, 1998, the twenty-six
weeks ended June 25, 1997, and the years ended December 31,
1996, 1995 and 1994 contained on page 9 of the Company's
1999 Annual Report to Stockholders is incorporated herein
by reference.
Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations
- -------------------------------------------------------
Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in pages 10
through 16, inclusive, of the Company's 1999 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 1999
and fiscal 1998. 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 1999 Annual Report to Stockholders. Such
quarterly consolidated data are not necessarily indicative
of future results of operations.
<TABLE>
<CAPTION>
June 24, Mar. 25, Dec. 24, Sep. 24, June 25, Mar. 26, Dec. 25, Sep. 25,
1999 1999 1998 1998 1998 1998 1997 1997
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales $74,316 $ 57,762 $113,332 $ 73,829 $ 69,306 $ 58,145 $112,683 $77,256
Gross profit 12,014 9,277 18,199 11,416 12,731 10,866 20,503 12,804
Income (loss) from
operations 2,902 972 5,404 2,650 3,279 2,153 8,110 3,420
Net income (loss) 467 (845) 1,887 287 500 (106) 3,713 1,015
Basic earnings (loss)
per common share(1) 0.05 (0.09) 0.21 0.03 0.05 (0.01) 0.41 0.11
Diluted earnings (loss)
per common share(1) 0.05 (0.09) 0.21 0.03 0.05 (0.01) 0.40 0.11
Balance Sheet Data
(at end of period):
Working capital $53,515 $ 52,662 $ 54,407 $ 51,702 $ 52,850 $ 53,147 $ 53,483 $49,161
Long-term debt 57,508 58,485 59,717 60,523 63,182 65,450 66,735 67,719
Total debt 99,591 123,474 114,057 109,152 115,145 116,958 98,653 86,785
</TABLE>
(1) Earnings (loss) per common share (basic and diluted)
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 1999 Annual Report to
Stockholders is incorporated herein by reference:
Report of Independent Accountants Page 17
Consolidated Balance Sheets at June 24, 1999 and
June 25, 1998 Pages 18 and 19
Consolidated Statements of Operations for the
Year Ended June 24, 1999, the Year Ended June 25,
1998, the Twenty-six Weeks Ended June 26, 1997
and June 27, 1996 (unaudited) and the Year
Ended December 31, 1996 Page 20
Consolidated Statements of Stockholders' Equity for
the Year Ended June 24, 1999, the Year Ended June
25, 1998, the Twenty-six Weeks Ended June 26, 1997
and the Year Ended December 31, 1996 Page 20
Consolidated Statements of Cash Flows for the Year
Ended June 24, 1999, the Year Ended June 25, 1998,
the Twenty-six Weeks Ended June 26, 1997 and June
27, 1996 (unaudited) and the Years Ended December
31, 1996 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 24, 1999, June 25, 1998, the twenty-six weeks ended
June 26, 1997 and the year ended December 31, 1996.
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 1999 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 1999
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 1999 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 1999
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 1999 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 24,
1999 and June 25, 1998 Pages 18 and 19
Consolidated Statements of Operations for the
Year Ended June 24, 1999, the Year Ended
June 25, 1998, the Twenty-six Weeks Ended June
26, 1997 and June 27, 1996 (unaudited) and
the Year Ended December 31, 1996 Page 20
Consolidated Statements of Stockholders' Equity
for the Year Ended June 24, 1999, the Year
Ended June 25, 1998, the Twenty-six Weeks Ended
June 26, 1997 and the Year Ended December 31, 1996 Page 20
Consolidated Statements of Cash Flows for The Year
Ended June 24, 1999, the Year Ended June 25, 1998,
the Twenty-six Weeks Ended June 26, 1997 and June
27, 1996 (unaudited) and the Year Ended December
31, 1996 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
On June 15, 1999, the Company filed a Current Report
on Form 8-K, dated June 15, 1999. The Current Report dated June 15,
1999 reported, on Item 5 thereof that John C. Taylor, a director
elected by the holders of the Registrant's Class A common stock
submitted his resignation from the Registrant's Board of Directors,
effective June 15, 1999. Mr. Taylor's resignation was for
personal reasons.
(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 17, 1999 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 Chief September 17, 1999
- ------------------------ Executive Officer and Director
Jasper B. Sanfilippo (Principal Executive Officer)
/s/ GARY P. JENSEN Executive Vice President Finance September 17, 1999
- ------------------------ and Chief Financial Officer
Gary P. Jensen (Principal Financial Officer)
/s/ WILLIAM R. POKRAJAC Controller September 17, 1999
- ------------------------ (Principal Accounting Officer)
William R. Pokrajac
/s/ MATHIAS A. VALENTINE Director September 17, 1999
- ------------------------
Mathias A. Valentine
/s/ WILLIAM D. FISCHER
- ------------------------ Director September 17, 1999
William D. Fischer
/s/ JOHN W.A. BUYERS Director September 17, 1999
- ------------------------
John W.A. Buyers
/s/ MICHAEL J. VALENTINE Director September 17, 1999
- ------------------------
Michael J. Valentine
/s/ J. WILLIAM PETTY Director September 17, 1999
- ------------------------
J. William Petty
/s/ JEFFREY T. SANFILIPPO Director September 17, 1999
- -------------------------
Jeffrey T. Sanfilippo
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 20, 1999
appearing on page 17 of the 1999 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 20, 1999
JOHN B. SANFILIPPO & SON, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the year ended June 24, 1999, the year ended June
25, 1998, the twenty-six weeks ended June 26, 1997 and
the year ended December 31, 1996
(Dollars in thousands)
Balance at
Beginning Balance at
Description of Period Additions Deductions End of Period
- ---------------------- ---------- --------- ---------- -------------
June 24, 1999
- -------------
Allowance for doubtful $846 $ 9 $(195) $660
accounts
June 25, 1998
- -------------
Allowance for doubtful $669 $338 $(161) $846
accounts
Twenty-six weeks ended
June 26, 1997
- ----------------------
Allowance for doubtful $676 $ 27 $ (34) $669
accounts
December 31,1996
- ----------------
Allowance for doubtful $434 $443 $(201) $676
accounts
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 Amendment and Waiver to the Second Amended and
Restated Note Agreement dated February 5, 1999 by and among
Prudential, the Registrant, Sunshine, JBSI and Quantz(24)
4.16 $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)
4.17 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)
4.18 Note Purchase Agreement dated as of August 30, 1995
between the Registrant and Teachers Insurance and Annuity
Association of America ("Teachers")(15)
4.19 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)
4.20 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)
4.21 Guaranty Agreement dated as of August 30, 1995 by
Sunshine in favor of Teachers (Senior Notes)(15)
4.22 Guaranty Agreement dated as of August 30, 1995 by
Sunshine in favor of Teachers (Senior Subordinated Notes)(15)
4.23 Amendment, Consent and Waiver, dated as of March 27,
1996, by and among Teachers, Sunshine and the Registrant(17)
4.24 Amendment No. 2 to Note Purchase Agreement dated as of
January 24, 1997 by and among Teachers, Sunshine and the
Registrant(19)
4.25 Amendment to Note Purchase Agreement dated May 19,
1997 by and among Teachers, Sunshine and the Registrant(21)
4.26 Amendment No. 3 to Note Purchase Agreement dated as of
March 31, 1998 by and among Teachers, Sunshine, Quantz and
the Registrant(21)
4.27 Guaranty Agreement dated as of March 31, 1998 by JBSI
in favor of Teachers (Senior Notes)(21)
4.28 Guaranty Agreement dated as of March 31, 1998 by JBSI
in favor of Teachers (Senior Subordinated Notes)(21)
4.29 Amendment and Waiver to Note Purchase Agreement dated
February 5, 1999 by and among Teachers, Sunshine, Quantz,
JBSI and the Registrant(24)
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(22)
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)
*10.44 The Registrant's 1998 Equity Incentive Plan(23)
11-12 None
13 1999 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 on 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).
(22) Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended June 25,
1998 (Commission file No. 0-19681).
(23) Incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q for the first quarter ended
September 24, 1998 (Commission file No. 0-19681).
(24) Incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q for the second quarter
ended December 24, 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-K. The charge for furnishing copies of the
exhibits is $.25 per page, plus postage.
1999 ANNUAL REPORT
- ------------------
QUALITY
GROWTH
SOLUTIONS
JOHN B. SANFILIPPO & SON, INC.
FINANCIAL HIGHLIGHTS
- --------------------
(Dollars in thousands, except per share data)
Twenty-six
Year Ended Year Ended Weeks Ended Year Ended
June 24, June 25, June 26, December 31,
1999 1998 1997 1996
---------- ---------- ----------- ------------
Net sales $319,239 $317,390 $133,064 $294,404
Net income (loss) $ 1,796 $ 5,122 $ 451 $ (2,991)
Basic and diluted earnings
(loss) per common share $ 0.20 $ 0.56 $ 0.05 $ (0.33)
Working capital $ 53,515 $ 52,850 $ 49,866 $ 40,956
Total assets $205,224 $219,676 $187,417 $205,352
Long-term debt $ 57,508 $ 63,182 $ 68,862 $ 63,319
Total debt $ 99,591 $115,145 $ 90,286 $ 94,792
Stockholders' equity $ 79,994 $ 78,198 $ 73,071 $ 72,620
Capital expenditures $ 3,960 $ 4,227 $ 1,898 $ 9,198
Debt/Equity ratio 1.2:1 1.5:1 1.2:1 1.3:1
Debt/Capital 55.5% 59.6% 55.3% 56.7%
Weighted average shares
outstanding -- basic 9,148,565 9,147,862 9,147,666 9,147,666
Weighted average shares
outstanding -- diluted 9,148,931 9,168,175 9,147,759 9,147,666
CONTENTS
- --------
Letter to Stockholders 1
Our Business 3
Consumer and Retail Focus Fuel Growth 4
Selected Historical Consolidated Financial Data 9
Management's Discussion and Analysis 10
of Financial Condition and Results of Operations
Report of Management 17
Report of Independent Accountants 17
Consolidated Financial Statements 18
Notes to Consolidated Financial Statements 22
Markets for the Company's Securities 32
and Related Matters
Officers, Board of Directors and 33
Corporate Information
LETTER TO STOCKHOLDERS
- ----------------------
Dear Stockholder:
In many ways fiscal 1999 was a trying year and one where significant
actions were taken to build the future of your Company. Fiscal 1999 was
profitable; however, the operating results were not what is necessary to
drive stockholder value. In fiscal 1999 your Company had net sales of
approximately $319 million and net income of approximately $1.8
million or 20 cents per share on a basic and diluted basis.
Your Company's mission is to improve its focus and execution internally
and in the marketplace. During the year, significant actions were taken
to build for the future. We reorganized your Company's sales and marketing
teams to help us meet and exceed customer and consumer expectations in
fiscal 2000 and beyond. I believe this reorganization, as presented at your
fiscal 1998 Annual Meeting, represents an important strategic direction for
your Company. During the fourth quarter of fiscal 1999, we also
consolidated the administrative functions of Sunshine Nut Co., Inc.
(a subsidiary of your Company) with your Company's administrative functions.
Subsequently we dissolved Sunshine Nut Co., Inc. and merged it into your
Company. The resulting elimination in redundancy will add to our bottom
line in the future. I, along with your Company's senior management and
Board of Directors, believe these actions will aid in accomplishing our
mission.
In fiscal 1999 we continued your Company's objective of controlling
capital spending. Our computer systems and information technology received
a good portion of the capital dollars. Capital expenditures for fiscal 1999
were approximately $4 million with depreciation and amortization of
approximately $8 million. Your Company was able to reduce long-term debt
by approximately $6 million. We intend to operate in the same manner in
fiscal 2000.
For the fourth consecutive year, Fisher snack and baking nuts have been
judged by a panel of Executive Chefs and Master Tasters, located throughout
the country, the "Best Tasting Nut in America". This award represents an
independent testimonial of the quality of your Company's products.
With this level of product quality and increased knowledge of the healthy
attributes of nuts, we expect continued category growth. Your Company will
continue in its efforts to increase consumer awareness of the healthy
benefits of nuts as demonstrated through the continued use of the
Mediterranean Diet Pyramid as part of Fisher Chef's Naturals Ingredient Nut
packaging. We believe the daily consumption of nuts should be considered
a healthy segment of the American diet.
I, and your Company's senior management, believe that the future is
positive and your Company's direction is correct. We are committed to
improving our focus and execution in order to deliver increased stockholder
value.
Sincerely,
/s/ Jasper B. Sanfilippo
Jasper B. Sanfilippo
Chairman and Chief Executive Officer
(PICTURE OF JASPER B. SANFILIPPO, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
WITH A SHOPPING CART OF COMPANY PRODUCTS)
SALES BY CHANNEL OF TRADE
- -------------------------
Consumer Products 55%
Industrial 26%
Food Service 11%
Export 5%
Contract Packaging 3%
SALES BY PRODUCT TYPE
- -------------------------
Peanuts 26%
Pecans 22%
Other Products 14%
Mixed Nuts 10%
Cashews 10%
Walnuts 9%
Almonds 9%
OUR BUSINESS
- ------------
John B. Sanfilippo & Son, Inc. (the "Company" or "JBSS") is one of the
largest companies in the world dedicated primarily to processing, marketing
and distributing edible nuts of all kinds, including peanuts, pecans,
walnuts, cashews, almonds, filberts (hazelnuts), pistachios, macadamias,
Brazil nuts and pine nuts. Vertically integrated (peanuts, pecans, walnuts
and almonds) from the grower to the consumer, the Company sells its products
under the Fisher, Evon's, Sunshine Country, Flavor Tree, Texas Pride and Tom
Scott brand names and more than 65 private label brands. The Company also
sells its products internationally and 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 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.
(GRAPHIC IMAGES OF THE COMPANY'S BRANDS: FISHER, EVON'S, SUNSHINE COUNTRY,
FLAVOR TREE, TEXAS PRIDE AND TOM SCOTT)
CONSUMER AND RETAIL FOCUS FUEL GROWTH
- -------------------------------------
(GRAPHIC IMAGE OF FISHER 10 oz. SUNFLOWER SEEDS IN A RECLOSABLE ZIPPER BAG
AND FISHER BUTTER TOFFEE PEANUTS IN A 12 oz. CAN)
Consumer Focus
- --------------
The Company is leading, and will continue to lead, the way in educating
consumers about the true health benefits of nuts, the part nuts play in a
healthy diet and the ease of incorporating nuts into everyday meal
preparation. In influencing consumption of both snack nuts and baking
nuts, the Company benefits from its associations with Oldways Preservation
and Exchange Trust ("Oldways"), The Home Baking Association ("HBA") and the
American Tasting Institute. Through a licensing agreement with Oldways,
the Company utilizes the Mediterranean Diet Pyramid ("MDP"), a nutritional
model that groups nuts and legumes in the second tier with other foods from
plant sources and promotes consumption of these foods on a daily basis as
part of a balanced diet. The MDP and other published
(GRAPHIC IMAGE OF THE MEDITERRANEAN DIET PYRAMID SHOWING NUTS IN THE
SECOND TIER WITH OTHER FOODS FROM PLANT SOURCES PROMOTING DAILY
CONSUMPTION)
studies have led to increased nut consumption by alerting consumers to the
fact that nuts are healthy and versatile in an everyday diet. Targeting the
youth market, the HBA promotes awareness of scratch baking at home.
Through family and consumer science educators and group leaders of
children's organizations (e.g., 4H, Boy Scouts, Girl Scouts, etc.), the
HBA provides programs and educational materials to teach children the value
and fun of scratch baking at home. By contributing Fisher Chef's Naturals
Ingredient Nut line to the HBA program, the Company is today investing in
tomorrow's consumers. For the fourth year in a row, the American Tasting
Institute awarded the "Best Tasting Nut in America" designation to the
Fisher snack and baking nuts. Fisher was judged excellent in comparison to
other national and regional brands on the basis of taste, freshness and
appearance. We expect these programs will continue to help the Company
educate current and future consumers, position Fisher as their nut of
choice and help drive growth in both the snack nut and baking nut
categories.
Retail Focus
- ------------
JBSS also continues partnering with key domestic and international
retailers to grow both the snack nut and baking nut categories in unit,
dollars and volume consumption. During fiscal year 1999, many of the
Company's key customers grew by acquisition or merged with other retailers,
thereby securing a larger share of the retail industry. The Company believes
this consolidation trend will continue and that JBSS is well-positioned
to benefit because of its vertical integration and its deep brand portfolio
which offers retailers category solutions and one-stop shopping for all of
their nut needs.
During fiscal year 1999, the Company continued to expand nationwide
distribution of Fisher and private label. For example, Fisher Snack 'N Serve
Nut Bowls (introduced in fiscal year 1998) continued to gain distribution
and market share across all retail channels and can now be found in
approximately 20% of all grocery retailers nationwide.
(GRAPHIC IMAGE OF 1999 BEST OF SHOW TASTE AWARD MEDAL FROM THE
AMERICAN TASTING INSTITUTE)
In addition to growing the Fisher Snack 'N Serve program, the Company
undertook many other initiatives to strengthen the Fisher snack nut brand.
First, the Company gave Fisher snack nuts a "facelift", with an overall
label redesign on the can and jar product lines. Based upon consumer
research, the new design gives Fisher a fresh look, increasing the
appetite appeal to consumers and making the products "pop" off the shelf.
The new label design began showing up at retail at the end of fiscal year
1999 and will continue to rollout during fiscal year 2000.
As part of the label redesign, the Company also introduced new items to
provide consumers with exciting new snacking experiences. Some of the new
items in the snack nut category introduced under the Fisher brand include
butter toffee peanuts, an upgraded honey roasted peanut formula, sunflower
kernels and sunflower seeds in a convenient, reclosable zipper bag (10 oz.).
In addition, the Company promoted an expanded Fisher Chef's Naturals
Ingredient Nut product line to existing and new customers during
fiscal year 1999.
These programs have led to continued growth with the Fisher brand in terms
of sales revenue and market share. In fact, the Fisher snack nut brand
recently regained the #1 market share position in Minneapolis, its biggest
market, and Fisher is currently the number two national brand based upon
unit sales, according to ACNielsen data. To continue its success from fiscal
year 1999, JBSS is securing its position as a one-stop category solution
with the following brand portfolio:
PRIVATE LABEL (1,070 items) brands for over 65 retailers across the U.S.
in the categories of snack nuts, baking nuts, salted snacks, candy, peanut
butter, non-nut baking products and extruded snacks.
FISHER (122 items) offering the highest quality nuts in the snack nut and
baking nut categories.
EVON'S (512 items) including snack nuts, baking nuts, candy, extruded snacks
and peanut butter.
SUNSHINE COUNTRY (70 items) snack and baking nut items.
FLAVOR TREE (9 items) sesame snacks.
TEXAS PRIDE (14 items) pecans.
TOM SCOTT (4 items) snack nut and mix items.
To further grow its base retail business, the Company started a produce sales
program within consumer sales and increased export sales during fiscal year
1999. The produce program was started to develop incremental business outside
the grocery aisle by leveraging the Company's vertical integration and brand
portfolio capabilities. By expanding into produce -- and offering another
one-stop shopping solution -- the Company hopes to strengthen current
relationships with its customers and develop new partnerships with retailers.
Internationally, the Company now exports branded, private label and bulk
products to twenty-seven countries and began selling branded and private
label products to key retailers in Canada. The Company's focus on retail,
coupled with current business, has allowed it to open up new opportunities
and enhance its position as a leader in the growing nut categories.
Snack Nut and Baking Nut Categories on the Rise
- -----------------------------------------------
After many years of flat and declining sales trends in unit sales, dollar
sales and volume (pounds) sales, both the snack nut and baking nut
categories are showing growth again. According to ACNielsen data,
which compares the fifty-two week period ending July 10, 1999 with the
previous year, the snack nut category has shown double-digit growth in
units, dollars and volume across the Grocery, Drug and Mass Merchandiser
channels.
(GRAPH USING ACNIELSEN DATA FOR THE SNACK NUT CATEGORY FOR THE FIFTY-TWO
WEEKS ENDED 7/10/99 VERSUS 7/11/98 FOR ALL U.S. OUTLETS COMBINED FOR
THE GROCERY, DRUG AND MASS MERCHANDISER CHANNELS. THE GRAPH SHOWS THE
FOLLOWING DATA:)
7/10/99 7/11/98
----------- -----------
TOTAL UNITS 495,539,676 404,904,202 22% INCREASE
TOTAL DOLLARS $1,181,846,194 $982,534,997 20% INCREASE
TOTAL VOLUME (LBS) 349,185,374 277,913,759 26% INCREASE
Total snack nut units sales showed a 22% increase, from approximately 405
million units to approximately 496 million units. Total snack nut dollar
sales increased by 20% and total snack nut volume sales increased by 26%.
This growth has resulted primarily from increased promotions and consumer
acceptance of nuts as part of a healthy overall diet.
During the same time period, ACNielsen data shows the baking nut category
flat in unit sales and dollar sales. However, there was an increase in
volume sales.
(GRAPH USING ACNIELSEN DATA FOR THE BAKING NUT CATEGORY FOR THE FIFTY-TWO
WEEKS ENDED 7/10/99 VERSUS 7/11/98 FOR ALL U.S. OUTLETS COMBINED FOR
THE GROCERY, DRUG AND MASS MERCHANDISER CHANNELS. THE GRAPH SHOWS THE
FOLLOWING DATA:)
7/10/99 7/11/98
----------- -----------
TOTAL UNITS 127,481,349 127,021,960 LESS THAN 1% INCREASE
TOTAL DOLLARS $336,846,194 $338,534,997 1% DECREASE
TOTAL VOLUME (LBS) 58,639,544 57,082,011 3% INCREASE
The baking category volume sales increase is being driven by larger size
packages, thereby increasing the amount per transaction at retail. Also,
according to the ACNielsen data, consumers are expanding the use of baking
nuts in everyday cooking, using them as featured ingredients in entrees
and side dishes.
(GRAPHIC IMAGES OF: (1) FISHER CHEF'S NATURALS BAKING NUT COUPON
PROMOTION; (2) COVER OF "NUT STYLE" WITH FISHER'S NEW LABEL ON A
GOLDEN ROAST PEANUT JAR; AND (3) FISHER SNACK 'N SERVE NUT BOWL COUPON
PROGRAM)
The Company's management team believes that the Company is well-positioned
to grow both the snack nut and baking nut categories through expanded
retail partnerships, high quality products and innovative marketing
programs. Now and in the future, the Company's one-stop category solutions,
coupled with its portfolio of brands, offer retailers many benefits and
choices.
For more information, please visit JBSS on the Internet 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
years ended June 24, 1999 and June 25, 1998, the twenty-six weeks ended
June 26, 1997 and the years ended December 31, 1996, 1995 and 1994 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. Effective as of June 25, 1999, Sunshine Nut Co., Inc.
and Quantz Acquisiton Co., Inc., two of the Company's three wholly owned
subsidiaries, were merged into and with the Company.
<TABLE>
<CAPTION>
Twenty-six
Year Year Weeks
Ended Ended Ended
June 24, June 25, June 26, Year Ended December 31,
1999 1998 1997 1996 1995 1994
-------- -------- ---------- -------- -------- --------
Statement of Operations Data:
($ in thousands, except per
share data)
<S> <C> <C> <C> <C> <C> <C>
Net sales $319,239 $317,390 $133,064 $294,404 $277,741 $208,970
Cost of sales 268,333 260,486 111,580 255,204 230,691 177,728
-------- -------- ---------- -------- -------- --------
Gross profit 50,906 56,904 21,484 39,200 47,050 31,242
Selling and administrative
expenses 38,978 39,942 16,762 35,410 30,338 25,857
-------- -------- ---------- -------- -------- --------
Income from operations 11,928 16,962 4,722 3,790 16,712 5,385
Interest expense 9,269 8,776 4,135 9,051 7,673 6,015
Other income 510 525 252 450 607 889
-------- -------- ---------- -------- -------- --------
Income (loss) before income
taxes 3,169 8,711 839 (4,811) 9,646 259
Income tax (expense) benefit (1,373) (3,589) (388) 1,820 (3,858) (210)
-------- -------- ---------- -------- -------- --------
Net income (loss) $ 1,796 $ 5,122 $ 451 $ (2,991) $ 5,788 $ 49
======== ======== ========== ======== ======== ========
Basic earnings (loss) per
common share $ 0.20 $ 0.56 $ 0.05 $ (0.33) $ 0.64 $ 0.00
Diluted earnings (loss) per
common share $ 0.20 $ 0.56 $ 0.05 $ (0.33) $ 0.63 $ 0.00
</TABLE>
June 24, June 25, June 26, December 31,
1999 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
Balance Sheet Data:
($ in thousands)
Working capital $ 53,515 $ 52,850 $ 49,866 $ 40,956 $ 58,148 $ 36,418
Total assets 205,224 219,676 187,417 205,352 219,002 199,714
Long-term debt, less
current maturities 57,508 63,182 68,862 63,319 74,681 52,804
Total debt 99,591 115,145 90,286 94,792 104,989 105,178
Stockholders' equity 79,994 78,198 73,071 72,620 75,611 68,092
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 "intend", "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. Consequently,
results actually achieved may differ materially from the expected results
included in these statements.
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 1999 are to
the fiscal year ended June 24, 1999. 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 are to the fiscal year ended December 31, 1996. 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").
Effective as of June 25, 1999, Sunshine and Quantz Acquisition Co., Inc.,
two of the Company's three wholly owned subsidiaries, were merged into and
with the Company.
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".
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 24, 1999, the Company's inventories totalled approximately $89.0
million compared to approximately $99.5 million at June 25, 1998.
Inventory levels at June 24, 1999 were lower than inventories at June 25,
1998 due primarily to decreased levels on hand of certain nuts,
especially walnuts and pecans. These decreased levels were due primarily
to lower purchases of walnuts and pecans in the 1998 crop year than in the
preceding crop year offset partially by higher purchases of peanuts in the
1998 crop year than in the preceding crop year. See "Factors That May
Affect Future Results -- Availability of Raw Materials and Market Price
Fluctuations".
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 change in nut consumption. Also, over the last three years there
has been some publicity concerning allergic reactions to peanuts and other
nuts. However, the Company has no experience or data that indicates 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's financial
results in the foreseeable future.
RESULTS OF OPERATIONS
- ---------------------
The following tables present certain items of the Company's results of
operations for fiscal 1999, fiscal 1998, the fifty-two weeks ended June 26,
1997, the Transition Period and the twenty-six weeks ended June 27, 1996. 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.
Year Ended Year Ended
June 24, % of Net June 25, % of Net % Increase
1999 Sales 1998 Sales (Decrease)
---------- -------- ---------- -------- ----------
Net sales $319,239 100.0 $317,390 100.0 0.6
Gross profit 50,906 15.9 56,904 17.9 (10.5)
Selling expenses 29,870 9.4 29,475 9.3 1.3
Administrative expenses 9,108 2.9 10,467 3.3 (13.0)
Income from operations 11,928 3.7 16,962 5.3 (29.7)
Year Ended Fifty-two
June 25, % of Net Weeks Ended % of Net % Increase
1998 Sales June 26, 1997 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 Net Weeks Ended % of Net % Increase
June 26, 1997 Sales June 27, 1996 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
Fiscal 1999 Compared to Fiscal 1998
- -----------------------------------
Net Sales. Net sales increased from approximately $317.4 million for fiscal
1998 to approximately $319.2 million for fiscal 1999, an increase of
approximately $1.8 million or 0.6%. The increase in net sales was due
primarily to increased unit volume sales to the Company's export and food
service customers. These increases were partially offset by decreased unit
volume sales to the Company's retail customers. The decrease in
retail sales was caused primarily by declines in regional brand and private
label sales as a result of increased competitive activity. See "Factors
That May Affect Future Results -- Competitive Environment".
Gross Profit. Gross profit in fiscal 1999 decreased 10.5% to approximately
$50.9 million from approximately $56.9 million for fiscal 1998. Gross profit
margin decreased from 17.9% for fiscal 1998 to 15.9% for fiscal 1999. This
decrease was due primarily to (i) decreases in net sales as a percentage
of total sales to retail customers, which sales generally carry higher
margins than sales to the Company's other customers, and (ii) increased
competitive activity.
Selling and Administrative Expenses. Selling and administrative expenses
as a percentage of net sales decreased from 12.6% for fiscal 1998 to 12.2%
for fiscal 1999. Selling expenses as a percentage of net sales increased
slightly from 9.3% for fiscal 1998 to 9.4% for fiscal 1999. This slight
increase was due primarily to increases in promotional activity.
Administrative expenses as a percentage of net sales decreased from 3.3%
for fiscal 1998 to 2.9% for fiscal 1999. This decrease was due
primarily to decreases in expenses related to compensation programs and the
Company's efforts to control administrative expenses. These decreases were
partially offset by increases in the reserve for the Crane Litigation.
See Note 11 to the Consolidated Financial Statements.
Income from Operations. Due to the factors discussed above, income from
operations decreased from approximately $17.0 million, or 5.3% of net sales,
for fiscal 1998 to approximately $11.9 million, or 3.7% of net sales,
for fiscal 1999.
Interest Expense. Interest expense increased from approximately $8.8 million
for fiscal 1998 to approximately $9.3 million for fiscal 1999. This increase
was due primarily to a higher average level of borrowings for the first half
of fiscal 1999 compared to fiscal 1998 to support higher levels
of inventories.
Income Taxes. The Company recorded income tax expense of approximately
$1.4 million, or 43.3% of income before income taxes, for fiscal 1999.
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.
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. 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 fiscal 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.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
General
- -------
During fiscal 1999, the Company continued to finance its activities
through a bank credit facility entered into on March 31, 1998 (the
"Bank Credit Facility"), $35.0 million borrowed under a long-term financing
facility originally entered into by the Company in 1992 (the "Long-Term
Financing Facility") and $25.0 million borrowed on September 12, 1995
under a long-term financing arrangement (the "Additional Long-Term
Financing").
Net cash provided by operating activities was approximately $20.2 million
for fiscal 1999 compared to net cash used in operating activities of
approximately $19.7 million for fiscal 1998. The significant increase in
cash provided by operating activities was due primarily to decreased
purchases of certain nuts, especially pecans and walnuts, which resulted
in a decrease of approximately $10.5 million in inventories from June 25,
1998 to June 24, 1999. As a result of the decrease in inventories, notes
payable decreased to approximately $36.4 million at June 24, 1999 from
approximately $46.2 million at June 25, 1998. The largest component of net
cash used in investing activities during fiscal 1999 was approximately
$4.0 million in capital expenditures. During fiscal 1999, the Company
repaid approximately $5.8 million of long-term debt, compared to
approximately $4.9 million for fiscal 1998.
Financing Arrangements
- ----------------------
The Bank Credit Facility is comprised of (i) a working capital revolving
loan which provides working capital financing of up to approximately
$62.3 million, in the aggregate, and matures on March 31, 2001, and (ii)
a $7.7 million letter of credit (the "IDB Letter of Credit") to secure
the industrial development bonds described below which matures on June 1,
2002. Borrowings under the working capital revolving loan accrue
interest at a rate (the weighted average of which was 6.33% at June 24,
1999) 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 through maturity. 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 through maturity.
As of June 24, 1999, there was approximately $20.6 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 total $25.0 million of borrowings
thereunder, 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 total borrowings thereunder, 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. As of June 24, 1999, 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 also prohibits the Company from
redeeming shares of capital stock.
As of June 24, 1999, the Company was in compliance with all restrictive
covenants, as amended, under its financing facilities. The Company was not,
however, in compliance with certain restrictive covenants under its
financing facilities as of the end of the second quarter of fiscal 1999
and received waivers from its lenders for such non-compliance.
Moreover, it is probable that the Company will not comply with the fixed
charge coverage covenant under the Additional Long-Term Financing for the
first quarter of fiscal 2000 and it is possible that the Company will not
comply with the fixed charge coverage covenant under the Long-Term
Financing Facility and the Additional Long-Term Financing for the second
quarter and remainder of fiscal 2000. Because a default under any of the
Company's financing arrangements constitutes a default under each of its
other financing arrangements, any such non-compliance will require the
Company to obtain waivers from each of its lenders under the Bank Credit
Facility, Long-Term Financing Facility and Additional Long-Term Financing
to avoid acceleration of the maturity date under each arrangement. While
the Company has always obtained waivers from its lenders for past
non-compliance with this covenant, and believes it will be able to obtain
similar waivers in fiscal 2000, there can be no assurance that such waivers
will be obtained. If the Company is unable to secure the necessary waivers
from its lenders, the lenders will have the right to accelerate the payment
of balances due under these credit facilities.
The Company has approximately $7.6 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 remarketed 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 approximately $0.2 million in fiscal 2000
to approximately $0.8 million 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 1999, capital expenditures were
approximately $4.0 million. The Company believes that capital expenditures
for fiscal 2000 will be comparable to the levels incurred in fiscal 1999.
Capital Resources
- -----------------
As of June 24, 1999, the Company had approximately $24.6 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
(assuming the Company maintains compliance with the restrictive covenants
under the Bank Credit Facility currently in effect, or, in the event of any
subsequent non-compliance, is able to obtain any necessary waivers) will be
sufficient to meet working capital requirements, anticipated capital
expenditures and debt service requirements 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
year 2000 (the "Year 2000"). In addition, the Company is 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 its
applications are Year 2000 compliant. Furthermore, a regularly scheduled
upgrade of the internal computer system to the latest release was
implemented during the first quarter of fiscal 1999. 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. A regularly scheduled upgrade of
the Company's EDI system was performed during the second quarter of fiscal
1999. The Company believes, based on representations from its software
vendors, that its EDI system is Year 2000 compliant. The Company has also
completed the review of its desktop computer systems and facilities for
Year 2000 issues, and believes that any Year 2000 issues related to such
systems and facilities would not 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 the first quarter of fiscal 2000.
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, to the extent necessary, is 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 other 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 conditions 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 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. This competitive pricing 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 approximately 10% 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 will 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; (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 1999 crop 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 1999
crop year is approximately $610 per ton.
The 1996 Farm Bill extended the federal support and subsidy program for
peanuts for seven years. However, there are no assurances that Congress will
not change or eliminate the program prior to its scheduled expiration.
Changes in the federal peanut program could significantly affect the
supply of, and price for, peanuts. While 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.
Financial Covenants
- -------------------
From time to time, the Company has not complied with certain financial
covenants under its three primary financing facilities, and it is probable
that the Company will not comply with the fixed charge coverage covenant for
one of its primary lenders in the first quarter of fiscal 2000 and it is
possible that it may not comply with this covenant for two of its primary
lenders during the remainder of fiscal 2000. A default under one of the
Company's three primary financing arrangements constitutes a cross-default
under the other primary financing arrangements. Therefore, the Company must
obtain a waiver from each of its three primary lenders for a single default.
While the Company has always obtained waivers from its primary lenders for
past noncompliance with its financial covenants, and believes it will be able
to obtain similar waivers in the future, there can be no assurance that the
Company's lenders will always provide such waivers. If the Company is unable
to secure the necessary waivers from its primary lenders, the primary lenders
will have the right to accelerate the balances due under the financing
facilities. If such balances are accelerated, the Company may be required to
borrow money at higher costs. See "Liquidity and Capital Resources --
Financing Arrangements".
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 discussed
under "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 accountants, 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 the issuance of an opinion on the
fairness of such financial statements.
The Company has an Audit Committee that meets periodically with management
and the independent accountants to review the manner in which they are
performing their responsibilities and to discuss auditing, internal
accounting controls and financial reporting matters. The independent
accountants 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 24, 1999 and
June 25, 1998, and the results of their operations and their cash flows for
the years ended June 24, 1999 and June 25, 1998, for the twenty-six week
period ended June 26, 1997 and for the year ended December 31, 1996 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/PRICEWATERHOUSECOOPERS LLP
-----------------------------
PricewaterhouseCoopers LLP
Chicago, Illinois
August 20, 1999
CONSOLIDATED BALANCE SHEETS
- ---------------------------
June 24, 1999 and June 25, 1998 (dollars in thousands)
June 24, June 25,
Assets 1999 1998
-------- --------
Current Assets:
Cash $ 1,393 $ 549
Accounts receivable, including related
party receivables of $253 and $1,010,
less allowance for doubtful accounts
of $660 and $846 24,105 23,901
Inventories 89,033 99,535
Deferred income taxes 519 417
Income taxes receivable 94 1,454
Prepaid expenses and other current assets 3,355 3,024
-------- --------
Total Current Assets 118,499 128,880
-------- --------
Properties:
Buildings 55,452 55,318
Machinery and equipment 73,794 70,099
Furniture and leasehold improvements 5,049 5,001
Vehicles 4,137 4,260
-------- --------
138,432 134,678
Less: Accumulated depreciation 67,550 60,943
-------- --------
70,882 73,735
Land 1,892 1,892
-------- --------
Total Properties 72,774 75,627
-------- --------
Other Assets:
Goodwill and other intangibles, less
accumulated amortization of $3,483
and $2,670 6,941 7,754
Miscellaneous 7,010 7,415
-------- --------
Total Other Assets 13,951 15,169
-------- --------
Total Assets $205,224 $219,676
======== ========
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED BALANCE SHEETS
- ---------------------------
June 24, 1999 and June 25, 1998 (dollars in thousands,
except per share amounts)
June 24, June 25,
Liabilities & Stockholders' Equity 1999 1998
-------- --------
Current Liabilities:
Notes payable $ 36,411 $ 46,174
Current maturities of long-term debt 5,672 5,789
Accounts payable, including related
party payables of $475 and $591 9,839 12,038
Drafts payable 5,540 2,785
Accrued expenses 7,522 9,244
-------- --------
Total Current Liabilities 64,984 76,030
Long-term Liabilities:
Long-term debt, less current maturities 57,508 63,182
Deferred income taxes 2,738 2,266
-------- --------
Total Long-term Liabilities 60,246 65,448
-------- --------
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
shares issued and outstanding 56 56
Capital in excess of par value 57,196 57,196
Retained earnings 23,909 22,113
Treasury stock, at cost; 117,900 shares (1,204) (1,204)
-------- --------
Total Stockholders' Equity 79,994 78,198
-------- --------
Total Liabilities & Stockholders' Equity $205,224 $219,676
========= ========
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------
For the years ended June 24, 1999 and June 25, 1998, the twenty-six weeks
ended June 26, 1997 and June 27, 1996 and the year ended December 31, 1996
(dollars in thousands, except for earnings (loss) per share)
<TABLE>
<CAPTION>
Twenty-six Weeks Ended
Year Ended Year Ended June 27, Year Ended
June 24, June 25, June 26, 1996 December 31,
1999 1998 1997 (Unaudited) 1996
---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales $319,239 $317,390 $133,064 $117,968 $294,404
Cost of sales 268,333 260,486 111,580 100,493 255,204
---------- ---------- ---------- ----------- ------------
Gross profit 50,906 56,904 21,484 17,475 39,200
---------- ---------- ---------- ----------- ------------
Selling expenses 29,870 29,475 11,787 10,406 23,909
Administrative expenses 9,108 10,467 4,975 5,644 11,501
---------- ---------- ---------- ----------- ------------
Total selling and
administrative expenses 38,978 39,942 16,762 16,050 35,410
---------- ---------- ---------- ----------- ------------
Income from operations 11,928 16,962 4,722 1,425 3,790
---------- ---------- ---------- ----------- ------------
Other income (expense):
Interest expense ($987,
$963, $440, $453 and
$899 to related parties) (9,269) (8,776) (4,135) (4,822) (9,051)
Interest income ($0, $0,
$0, $7 and $7 from
related parties) 31 29 16 17 27
Gain (loss) on disposition
of properties 20 (4) 3 7 12
Rental income 459 500 233 215 411
---------- ---------- ---------- ----------- ------------
Total other income (expense) (8,759) (8,251) (3,883) (4,583) (8,601)
---------- ---------- ---------- ----------- ------------
Income (loss) before income taxes 3,169 8,711 839 (3,158) (4,811)
Income tax (expense) benefit (1,373) (3,589) (388) 1,211 1,820
---------- ---------- ---------- ----------- ------------
Net income (loss) $ 1,796 $ 5,122 $ 451 $ (1,947) $ (2,991)
========== ========== ========== =========== ============
Basic and diluted earnings (loss)
per common share $ 0.20 $ 0.56 $ 0.05 $ (0.21) $ (0.33)
========== ========== ========== =========== ============
Weighted average shares
outstanding - basic 9,148,565 9,147,862 9,147,666 9,147,666 9,147,666
Weighted average shares
outstanding - diluted 9,148,931 9,168,175 9,147,759 9,147,666 9,147,666
</TABLE>
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- -----------------------------------------------
For the years ended June 24, 1999 and June 25, 1998, the twenty-six weeks
ended June 26, 1997 and the year ended December 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Capital in
Class A Common Excess of Retained Treasury
Common Stock Stock Par Value Earnings Stock Total
------------ ------ ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
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
Net income 1,796 1,796
------------ ------ ---------- -------- -------- -------
Balance, June 24, 1999 $37 $56 $57,196 $23,909 $(1,204) $79,994
============ ====== ========== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
For the years ended June 24, 1999 and June 25, 1998, the twenty-six weeks
ended June 26, 1997 and June 27, 1996 and the year ended December 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Twenty-six Weeks Ended
Year Ended Year Ended June 27, Year Ended
June 24, June 25, June 26, 1996 December 31,
1999 1998 1997 (Unaudited) 1996
---------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss) $ 1,796 $ 5,122 $ 451 $ (1,947) $ (2,991)
Adjustments:
Depreciation and amortization 7,908 8,226 4,322 4,139 8,629
(Gain) loss on disposition
of properties (20) 4 (4) (7) (8)
Deferred income taxes 370 804 915 390
Change in current assets and
current liabilities:
Accounts receivable, net (204) 1,299 2,186 7,021 403
Inventories 10,502 (36,547) 14,117 13,178 19,255
Prepaid expenses and other
current assets (331) (1,605) (595) (329) (142)
Accounts payable (2,199) 845 (12,650) (17,039) (2,884)
Drafts payable 2,755 238 (971) 196 1,658
Accrued expenses (1,722) 588 (736) (729) 724
Income taxes receivable/payable 1,360 1,376 (621) (2,279) (2,853)
---------- ---------- --------- ----------- ------------
Net cash provided by (used in)
operating activities 20,215 (19,650) 6,414 2,204 22,181
---------- ---------- --------- ----------- ------------
Cash flows from investing
activities:
Acquisition of properties (3,960) (4,227) (1,898) (5,246) (9,198)
Proceeds from disposition of
properties 36 7 7 10 13
Stockholder note receivable 354 354
Other 107 (961) 147 (61) (1,437)
---------- ---------- --------- ----------- ------------
Net cash used in investing
activities (3,817) (5,181) (1,744) (4,943) (10,268)
---------- ---------- --------- ----------- ------------
Cash flows from financing
activities:
Net (repayments) borrowings
on notes payable (9,763) 29,687 (2,288) 4,172 (7,947)
Principal payments on
long-term debt (5,791) (4,938) (2,353) (1,565) (3,772)
---------- ---------- --------- ----------- ------------
Net cash (used in) provided by
financing activities (15,554) 24,749 (4,641) 2,607 (11,719)
---------- ---------- --------- ----------- ------------
Net increase (decrease) in cash 844 (82) 29 (132) 194
Cash:
Beginning of period 549 631 602 408 408
---------- ---------- --------- ----------- ------------
End of period $ 1,393 $ 549 $ 631 $ 276 $ 602
========== ========== ========= =========== ============
Supplemental disclosures of
cash flow information:
Interest paid $ 9,270 $ 8,422 $ 4,127 $ 4,694 $ 8,785
Income taxes paid 182 3,421 194 1,104 1,187
Supplemental schedule of noncash
investing and financing
activities:
Capital lease obligation incurred 110 136 191 270
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
- ------------------------------------------
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. On June 25, 1999, the
Company dissolved two of its three wholly owned subsidiaries, Sunshine Nut
Co., Inc. and Quantz Acquisition Co., Inc. and merged such subsidiaries
into John B. Sanfilippo & Son, Inc.
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.
Fisher Nut acquisition
- ----------------------
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.
Inventories
- -----------
Inventories are stated at the lower of cost (first-in, first-out) or market.
The value of inventories may be impacted by market price fluctuations.
Properties
- ----------
Properties are stated at cost. Cost 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 shorter. See also Note 7.
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, or 11.7%, of total gross sales
for the year ended December 31, 1996.
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
- ------------------------------------
Goodwill, which represents the excess purchase price over the fair value of
net tangible and identifiable intangible assets acquired, is amortized
on a straight line basis over periods ranging from 15 to 20 years. Other
intangible assets, which represent amounts assigned at the time of a purchase
acquisition, consist of patents and are being amortized over 6 years.
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
and eventual disposition 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 period.
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 Year Ended Weeks Year Ended
June 24, June 25, Ended December 31,
1999 1998 June 26, 1997 1996
---------- ---------- ------------- ------------
Net income (loss) $1,796 $5,122 $ 451 $(2,991)
Weighted average
shares outstanding 9,148,565 9,147,862 9,147,666 9,147,666
Basic earnings (loss)
per share $ 0.20 $ 0.56 $0.05 $ (0.33)
Effect of dilutive
securities:
Stock options 366 20,313 93
Weighted average
shares outstanding 9,148,931 9,168,175 9,147,759 9,147,666
Diluted earnings (loss)
per share $ 0.20 $ 0.56 $0.05 $ (0.33)
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 24, 1999 359,712 $10.24
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
Note 3 - COMMON STOCK
- ---------------------
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 to 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 years ended June 24, 1999
and June 25, 1998, the twenty-six weeks ended June 26, 1997 and the year
ended December 31, 1996 are as follows:
June 24, June 25, June 26, December 31,
1999 1998 1997 1996
-------- -------- -------- ------------
Current:
Federal $ 811 $2,261 $(431) $(1,870)
State 192 524 (96) (340)
Deferred: 370 804 915 390
-------- -------- -------- ------------
Total provision (benefit)
for income taxes $1,373 $3,589 $ 388 $(1,820)
======== ======== ======== ============
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 years
ended June 24, 1999 and June 25, 1998, the twenty-six weeks ended June 26,
1997 and the year ended December 31, 1996 are as follows:
June 24, June 25, June 26, December 31,
1999 1998 1997 1996
-------- -------- -------- ------------
Federal statutory
income tax rate 34.0% 34.0% 34.0% 34.0%
State income taxes, net
of federal benefit 5.1 5.1 5.6 4.7
Nondeductible items,
principally goodwill 1.4 1.1 4.7 (2.0)
Other 2.8 1.0 1.9 1.1
-------- -------- -------- ------------
Effective tax rate 43.3% 41.2% 46.2% 37.8%
======== ======== ======== ============
The deferred tax assets and liabilities are comprised of the following:
June 24, 199 June 25, 1998
Asset Liability Asset Liability
------ --------- ------ ---------
Current:
Allowance for doubtful
accounts $ 264 $ $ 338 $
Employee compensation 377 298
Inventory 92 71
Accounts receivable 356 488
Other 142 198
------ --------- ------ ---------
Total current $ 875 $ 356 $ 905 $ 488
------ --------- ------ ---------
Long-term:
Depreciation 4,654 4,066
Capitalized leases 1,460 1,407
Other 456 393
------ --------- ------ ---------
Total long-term 1,916 4,654 1,800 4,066
------ --------- ------ ---------
Total $2,791 $5,010 $2,705 $4,554
====== ========= ====== =========
Note 5 - INVENTORIES
- --------------------
Inventories consist of the following:
June 24, June 25,
1999 1998
-------- --------
Raw material and supplies $33,998 $52,589
Work-in-process and finished goods 55,035 46,946
-------- --------
Total inventories $89,033 $99,535
======== ========
Note 6 - NOTES PAYABLE
- ----------------------
Notes payable consist of the following:
June 24, June 25,
1999 1998
-------- --------
Revolving bank loan $36,411 $46,174
======== ========
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 $62,343, in the
aggregate, and matures on March 31, 2001, and (ii) a $7,657 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 6.33% at June 24, 1999) 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, 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 financial 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 7 - LONG-TERM DEBT
- -----------------------
Long-term debt consists of the following:
June 24, June 25,
1999 1998
-------- --------
Industrial development bonds, secured by
building, machinery and equipment with
a cost aggregating $8,000 $ 7,645 $ 7,830
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
Capitalized lease obligations 7,361 7,644
Series A note payable, interest payable
quarterly at 8.72%, principal payable in
semi-annual installments of $200 beginning
February 1995 2,200 2,600
Series B note payable, interest payable
quarterly at 9.07%, principal payable in
semi-annual installments of $300 beginning
February 1995 3,300 3,900
Series C note payable, interest payable
quarterly at 9.07%, principal payable in
semi-annual installments of $200 beginning
February 1995 2,200 2,600
Series D note payable, interest payable
quarterly at 9.18%, principal payable in
semi-annual installments of $150 beginning
May 1995 1,650 1,950
Series E note payable, interest payable
quarterly at 7.34%, principal payable in
semi-annual installments of $400 beginning
May 1995 4,400 5,200
Series F notes payable, interest payable
quarterly at 9.16%, principal payable in
semi-annual installments ranging from $550
to $475 beginning November 1996 6,825 7,875
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 installments of $5,000 beginning
on September 1, 2003 15,000 15,000
Arlington Heights facility, first mortgage,
principal and interest payable at 8.875%,
in monthly installments of $22 beginning
November 1, 1995 through October 1, 2015 2,298 2,358
Other 301 429
Current maturities (5,672) (5,789)
------- -------
Total long-term debt $57,508 $63,182
======= =======
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 $200 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.
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. As of June 24, 1999, the
Company was in compliance with all restrictive covenants, as amended, under
the Long-Term Financing Facility. However, the Company was not in compliance
with certain restrictive covenants under the Long-Term Financing Facility
as of the end of the second quarter of fiscal 1999. The Company received
waivers for the non-compliance with these restrictive covenants. Also, it
is possible that the Company will not comply with the fixed charge coverage
covenant under the Long-Term Financing Facility for the second quarter and
remainder of fiscal 2000. While the Company has always obtained waivers for
past non-compliance with this covenant, and believes it will be able to
obtain similar waivers, if necessary, in fiscal 2000, there can be no
assurance that such waivers will be obtained. If the Company is unable to
secure the necessary waivers, the lenders will have the right to accelerate
the balances due under the Long-Term Financing Facility.
On September 12, 1995, the Company borrowed an additional $25,000 under an
unsecured long-term financing arrangement (the "Additional Long-Term
Financing"). The Additional Long-Term Financing has a maturity date of
September 1, 2005 and (i) as to $10,000 of the principal amount thereof,
bears interest at an annual rate of 8.3% and, beginning on September 1, 1999,
requires annual principal payments of approximately $1,429 each through
maturity, and (ii) as to the other $15,000 of the principal amount thereof
(which is subordinated to the Company's other debt facilities), bears
interest at an annual rate of 9.38% and requires annual principal payments
of $5,000 beginning on September 1, 2003 through maturity.
The Additional Long-Term Financing includes certain restrictive covenants
that, among other things: (i) require the Company to maintain specified
financial ratios; (ii) require the Company to maintain a minimum tangible net
worth; and (iii) limit cumulative dividends to the sum of (a) 50% of the
Company's cumulative net income (or minus 100% of a cumulative net loss) from
and after January 1, 1995 to the date the dividend is declared, (b) the
cumulative amount of the net proceeds received by the Company during the same
period from any sale of its capital stock, and (c) $5,000. As of June 24,
1999, the Company was in compliance with all restrictive covenants, as
amended, under the Additional Long-Term Financing. However, the Company
was not in compliance with certain restrictive covenants under the Additional
Long-Term Financing as of the end of the second quarter of fiscal 1999. The
Company received waivers for the non-compliance with these restrictive
covenants. Also, it is probable that the Company will not comply with the
fixed charge coverage covenant under the Additional Long-Term Financing for
the first quarter of fiscal 2000, and it is possible that the Company will
not comply with the fixed charge coverage covenant for the remainder of
fiscal 2000. Because a default under any of the Company's financing
arrangements constitutes a default under each of its financing arrangements,
any such non-compliance will require the Company to obtain waivers from each
of its lenders under the Bank Credit Facility, Long-Term Financing Facility
and the Additional Long-Term Financing to avoid acceleration of the maturity
date under each arrangement. While the Company has always obtained waivers
for past non-compliance with this covenant, and believes it will be able to
obtain similar waivers, if necessary, in fiscal 2000, there can be no
assurance that such waivers will be obtained. If the Company is unable to
secure the necessary waivers, the lenders will have the right to accelerate
the balances due under these credit facilities.
Aggregate maturities of long-term debt, excluding capitalized lease
obligations, are as follows for the years ending:
June 29, 2000 $ 5,354
June 28, 2001 5,360
June 27, 2002 5,260
June 26, 2003 5,215
June 24, 2004 10,242
Subsequent years 24,388
-------
Total $55,819
=======
The accompanying financial statements include the following amounts
related to assets under capital leases:
June 24, June 25,
1999 1998
-------- --------
Buildings $9,520 $9,520
Less: Accumulated amortization 5,797 5,386
-------- --------
Total $3,723 $4,134
======== ========
Amortization expense aggregated $411 and $412 for the years ended June 24,
1999 and June 25, 1998, respectively, $206 for the twenty-six weeks
ended June 26, 1997, and $411 for the year ended December 31, 1996.
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 29, 2000 $ 1,269
June 28, 2001 1,269
June 27, 2002 1,269
June 26, 2003 1,269
June 24, 2004 1,269
Subsequent years 7,572
-------
Total minimum lease payments 13,917
Less: Amount representing interest 6,556
-------
Present value of minimum lease payments $ 7,361
=======
JBSS also leases buildings and certain equipment pursuant to agreements
accounted for as operating leases. Rent expense under these operating
leases aggregated $620 and $863 for the years ended June 24, 1999 and
June 25, 1998, respectively, $387 for the twenty-six weeks ended
June 26, 1997 and $777 for the year ended December 31, 1996. Aggregate
noncancelable lease commitments under these operating leases are as
follows for the years ending:
June 29, 2000 $ 542
June 28, 2001 376
June 27, 2002 77
June 26, 2003 30
------
$1,025
======
Note 8 - 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 24, 1999, the Company contributed 50%
of the amount contributed by each employee up to certain maximums specified
in the plan. Additional contributions are determined at the discretion of
the Board of Directors. No additional contributions were made for the years
ended June 24, 1999 and June 25, 1998, the twenty-six weeks ended June 26,
1997 or the year ended December 31, 1996.
JBSS contributed $87 and $99 for the years ended June 24, 1999 and June 25,
1998, respectively, $53 for the twenty-six weeks ended June 26, 1997 and $86
for the year ended December 31, 1996 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 9 - TRANSACTIONS WITH RELATED PARTIES
- ------------------------------------------
In addition to the related party transactions described in Note 7, JBSS also
entered into transactions with the following related parties:
Equipment purchases
- -------------------
JBSS purchases customized manufacturing equipment, inventories 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. Purchases
aggregated $436 and $504 for the years ended June 24, 1999 and June 25, 1998,
respectively, $76 for the twenty-six weeks ended June 26, 1997 and $442 for
the year ended December 31, 1996. In addition, JBSS leases office and
warehouse space to the entity. Rental income from the entity aggregated $138
and $118 for the years ended June 24, 1999 and June 25, 1998, respectively,
$49 for the twenty-six weeks ended June 26, 1997 and $62 for the year ended
December 31, 1996. Accounts receivable aggregated $34 and $5 at June 24, 1999
and June 25, 1998, respectively. Accounts payable aggregated $6 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 $4,670 and $6,245 for the years ended June 24, 1999 and June 25,
1998, respectively, $2,261 for the twenty-six weeks ended June 26, 1997 and
$5,049 for the year ended December 31, 1996. Accounts payable aggregated
$436 and $481 at June 24, 1999 and June 25, 1998, respectively.
JBSS purchases materials from a company whose owner is related to the
Company's Chairman of the Board and Chief Executive Officer. Material
purchases aggregated $84 and $108 for the years ended June 24, 1999 and
June 25, 1998, respectively and $31 for the twenty-six weeks
ended June 26, 1997. Accounts payable aggregated $2 at June 24, 1999.
Brokerage commissions
- ---------------------
JBBS paid brokerage commissions of $414 during the year ended June 24, 1999
to a food brokerage company. The president of this company is related to a
former executive officer and director of the Company. Accounts payable
aggregated $37 at June 24, 1999.
JBSS paid brokerage commissions of $43 during the year ended June 25, 1998,
$16 during the twenty-six weeks ended June 26, 1997 and $90 during the year
ended December 31, 1996 to food brokerage companies, of which the president
was related to the Company's President.
Product purchases and sales
- ---------------------------
The Company purchases material from and sells products to a company which is
owned 33% by the Company's Chairman of the Board and Chief Executive Officer.
Material purchases aggregated $559, $2,619 and $532 for the years ended
June 24, 1999, June 25, 1998 and December 31, 1996, respectively. The Company
sold products to the same company aggregating $1,700 and $2,991 during the
years ended June 24, 1999 and June 25, 1998, respectively, $379 during the
twenty-six weeks ended June 26, 1997 and $1,233 during the year ended
December 31, 1996. Accounts payable aggregated $104 at June 25, 1998.
Accounts receivable aggregated $219 and $1,005 at June 24, 1999 and June 25,
1998, respectively. Additionally, during the year ended December 31, 1996,
the Company received the final scheduled payment on a note receivable from
its Chairman of the Board and Chief Executive Officer related to the Company
assigning to him rights in the company referred to in this section. The
Company recognized $7 of interest income during the year ended December
31, 1996 related to this note receivable.
JBSS purchased products aggregating $137 during the year ended December 31,
1996 from a trading company whose president was related to the
Company's President. JBSS sold products to the same company aggregating $6
during the year ended December 31, 1996.
Additionally, JBSS sold products aggregating $423 during the twenty-six weeks
ended June 26, 1997 and $1,014 during the year ended December 31, 1996 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. JBSS also purchased products
aggregating $38 during the year ended June24, 1999 from this company.
Building space rental
- ---------------------
The Company rented office and warehouse space to a company whose president is
related to the Company's Chairman of the Board and Chief Executive Officer.
Rental income was $14 and $75 for the years ended June 24, 1999 and June 25,
1998, respectively, $32 for the twenty-six weeks ended June 26, 1997 and $66
for the year ended December 31, 1996.
Note 10 - 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 years
ended June 24, 1999 and June 25, 1998, the twenty-six weeks ended June 26,
1997 and the year ended December 31, 1996 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 could be awarded to certain executives and key employees of JBSS and
its subsidiaries. The exercise price of the options was determined as set
forth in the 1991 Stock Option Plan by the Board of Directors. The exercise
price for the stock options was at least fair market value with the
exception of nonqualified stock options which had 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").
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 24,
1999 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, 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
Canceled (14,750) $12.86
---------
Outstanding at June 24, 1999 194,950 $12.19
=========
Options exercisable at June 24, 1999 194,950 $12.19
=========
Options exercisable at June 25, 1998 202,762 $12.45
Options exercisable at June 26, 1997 197,825 $12.67
Options exercisable at December 31, 1996 229,263 $12.98
Exercise prices for options outstanding as of June 24, 1999 ranged from
$6.00 to $15.00. The weighted average remaining contractual life of those
options is 3.2 years. The options outstanding at June 24, 1999 may be
segregated into two ranges:
Option Price Per Option Price Per
Share Range Share Range
$6.00-$6.60 $12.25-$15.00
---------------- ----------------
Number of options 26,100 168,850
Weighted average exercise price $6.08 $13.13
Weighted average remaining life (years) 4.8 3.0
Number of options exercisable 26,100 168,850
Weighted average exercise price for
exercisable options $6.08 $13.13
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. The 1995 Equity Incentive Plan was terminated early
by the Board of Directors on August 27, 1998. Pursuant to the terms of the
1995 Equity Incentive Plan, options to purchase up to 200,000 shares of
Common Stock could 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 was 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 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
or 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 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.
Effective August 27, 1998, the Board terminated early the 1995 Equity
Incentive Plan. The termination of the 1995 Equity Incentive Plan did not,
however, affect options granted under the 1995 Equity Incentive Plan which
remained outstanding as of the effective date of such termination.
Accordingly, the unexercised options outstanding under the 1995 Equity
Incentive Plan at June 24, 1999 will continue to be governed by the terms
of the 1995 Equity Incentive Plan.
The following is a summary of activity under the 1995 Equity Incentive Plan:
Weighted Average
Number of Shares Exercise Price
---------------- ----------------
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
Canceled (11,100) $7.51
----------------
Outstanding at June 24, 1999 149,500 $7.75
================
Options exercisable at June 24, 1999 93,700 $8.08
================
Options exercisable at June 25, 1998 60,250 $8.28
Options exercisable at June 26, 1997 22,225 $9.38
Options exercisable at December 31, 1996 20,375 $9.48
Exercise prices for options outstanding as of June 24, 1999 ranged from
$6.00 to $10.50. The weighted average remaining contractual life of those
options is 6.6 years. The options outstanding at June 24, 1999 may be
segregated into two ranges:
Option Price Per Option Price Per
Share Range Share Range
$6.00-$6.88 $8.25-$10.50
---------------- ----------------
Number of options 82,700 66,800
Weighted average exercise price $6.33 $9.51
Weighted average remaining life (years) 7.3 5.7
Number of options exercisable 42,350 51,350
Weighted average exercise price
for exercisable options $6.34 $9.52
At the Company's annual meeting of stockholders on October 28, 1998, the
Company's stockholders approved, and the Company adopted, effective as
of September 1, 1998, a new stock option plan (the "1998 Equity Incentive
Plan") to replace the 1995 Equity Incentive Plan. Pursuant to the terms of
the 1998 Equity Incentive Plan, options to purchase up to 350,000 shares of
Common Stock could 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 will be determined as
set forth in the 1998 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 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 1998 Equity Incentive Plan options expire upon termination of
employment or directorship. The options granted under the 1998 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. The options granted under the
1998 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 1998 Equity Incentive Plan:
Weighted Average
Number of Shares Exercise Price
---------------- ----------------
Outstanding at June 25, 1998
Granted 49,500 $4.01
----------------
Outstanding at June 24, 1999 49,500 $4.01
================
Exercise prices for options outstanding as of June 24, 1999 ranged from
$4.00 to $4.25. The weighted average remaining contractual life of those
options is 9.6 years.
Note 11 - 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.
In March 1995, a lawsuit was filed (the "Crane Litigation") against the
Company alleging that the Company had incorrectly calculated the purchase
price due the plaintiffs for walnuts purchased by the Company under a Walnut
Purchase Agreement entered into on April 15, 1993. On November 19, 1998, the
United States District Court for the Eastern District of California issued
its opinion in the Crane Litigation finding that the plaintiffs are
entitled to judgment against the Company. The lawsuit was subsequently
agreed to be settled.
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 23, 1999 (through August 31, 1999) $4.06 $3.50
June 24, 1999 4.06 3.00
March 25, 1999 4.25 3.44
December 24, 1998 4.94 3.38
September 24, 1998 6.50 4.50
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
As of August 31, 1999, there were approximately 195 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 paymentof annual dividends to amounts specified in the loan
agreements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources".
OFFICERS
- --------
Chairman of the Board and
Chief Executive Officer
Jasper B. Sanfilippo
President
Mathias A. Valentine
Executive Vice President Finance and Chief Financial Officer
Gary P. Jensen
Executive Vice President
Steven G. Taylor
Senior Vice President and Secretary
Michael J. Valentine
Senior Vice President Sales and Marketing
Jeffrey T. Sanfilippo
Senior Vice President and Assistant Secretary
Jasper B. Sanfilippo, Jr.
Controller
William R. Pokrajac
Two of your CompanyOs Directors, Bill Fischer and Bill Petty, have advised me
that they will be retiring from the Board of Directors. Bill Fischer has
served since December 1991 and Bill Petty has served since August 1995.
Both have greatly contributed to your Company and their objective counsel
will be missed.
The JBSS senior management, Matt Valentine and I extend our sincere
professional and personal appreciation for their many contributions.
/s/ JASPER B. SANFILIPPO
------------------------
Jasper B. Sanfilippo
Chairman and Chief Executive Officer
BOARD OF DIRECTORS
- ------------------
Jasper B. Sanfilippo (a)
Chairman of the Board and
Chief Executive Officer
Mathias A. Valentine (a)
President
Michael J. Valentine
Senior Vice President and Secretary
Jeffrey T. Sanfilippo
Senior Vice President Sales and Marketing
William D. Fischer (a)(b)
Former President and Director of Dean Foods Company, a dairy and
specialty food products company, and former 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 27, 1999 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. Form 10-K is also available through the
JBSS website, www.jbssinc.com.
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, L.L.C.
Chicago, Illinois
Jenner & Block
Chicago, Illinois
Independent Accountants
- -----------------------
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, Sunshine Country,
Flavor Tree, Texas Pride and Tom Scott. Any other product or brand names are
trademarks or registered trademarks of their respective companies.
Corporate Office, Production and Distribution Facility
- ------------------------------------------------------
John B. Sanfilippo & Son, Inc.
2299 Busse Road
Elk Grove Village, Illinois 60007
Production and Distribution Facilities
- --------------------------------------
1851 Arthur Avenue
Elk Grove Village, Illinois 60007
3001 Malmo Drive
Arlington Heights, Illinois 60005
Highway 27 North
Bainbridge, Georgia 31717
16435 IH 35 North
Selma, Texas 78154
515 South Lemon Avenue
Walnut, California 91789
29241 Cottonwood Road
Gustine, California 95322
Rt. 1, Box 13
Garysburg, North Carolina 27831
Web Addresses
- -------------
www.jbssinc.com
www.fishernuts.com
www.evonsnuts.com
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 (a) 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 (a) various
patents
(a) Effective June 25, 1999, Sunshine Nut Co., Inc. and Quantz Acquisition
Co., Inc. were dissolved and merged into and with John B. Sanfilippo
& Son, Inc.
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 20, 1999 relating to the consolidated financial
statements, which appears in the 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 dated August 20, 1999 relating
to the Financial Statement Schedule, which appears in this Form 10-K.
/s/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PricewaterhouseCoopers LLP
Chicago, Illinois
September 17, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the John B.
Sanfilippo & Son, Inc. Consolidated Statement of Operations for the year ended
June 24, 1999 and Consolidated Balance Sheet as of June 24, 1999 and is
qualified in its entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-24-1999
<PERIOD-END> JUN-24-1999
<CASH> 1,393
<SECURITIES> 0
<RECEIVABLES> 24,765
<ALLOWANCES> 660
<INVENTORY> 89,033
<CURRENT-ASSETS> 118,499
<PP&E> 140,324
<DEPRECIATION> 67,550
<TOTAL-ASSETS> 205,224
<CURRENT-LIABILITIES> 64,984
<BONDS> 57,508
0
0
<COMMON> 93
<OTHER-SE> 79,901
<TOTAL-LIABILITY-AND-EQUITY> 205,224
<SALES> 319,239
<TOTAL-REVENUES> 319,239
<CGS> 268,333
<TOTAL-COSTS> 268,333
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 9,269
<INCOME-PRETAX> 3,169
<INCOME-TAX> 1,373
<INCOME-CONTINUING> 1,796
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,796
<EPS-BASIC> 0.20
<EPS-DILUTED> 0.20
</TABLE>
