JOHN B. SANFILIPPO & SON, INC.
ANNUAL REPORT 2000
BUILDING BRANDS
(RIGHT SIDE OF COVER CONTAINS PICTURES OF LABELS OF THREE OF THE
COMPANY'S PRODUCTS - FISHER GOLDEN ROAST PEANUTS, FISHER CHEF'S
NATURALS ALMONDS AND PRIVATE LABEL CASHEWS)
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share data)
Year Ended Year Ended Year Ended
June 29, 2000 June 24, 1999 June 25, 1998
------------- ------------- -------------
Net sales $333,318 $319,239 $317,390
Net income $ 6,757 $ 1,796 $ 5,122
Basic and diluted earnings
per common share $ 0.74 $ 0.20 $ 0.56
Working capital $ 60,168 $ 53,515 $ 52,850
Total assets $215,813 $205,224 $219,676
Long-term debt, less
current maturities $ 51,779 $ 57,508 $ 63,182
Total debt $ 99,355 $ 99,591 $115,145
Stockholders' equity $ 86,751 $ 79,994 $ 78,198
Capital expenditures $ 3,914 $ 3,960 $ 4,227
Debt/Equity ratio 1.1:1 1.2:1 1.5:1
Debt/Capital 53.4% 55.5% 59.6%
Weighted average shares
outstanding -- basic 9,148,565 9,148,565 9,147,862
Weighted average shares
outstanding -- diluted 9,148,727 9,148,931 9,168,175
(ACROSS FIRST TEN PAGES OF THE REPORT IS THE FOLLOWING: BY COMBINING
PRODUCT QUALITY AND INNOVATION WITH STRATEGIC MANAGEMENT AND EDUCATING
CONSUMERS ON THE HEALTH AND USAGE BENEFITS OF OUR PRODUCTS, YOUR COMPANY
IS SUCCESSFULLY BUILDING LOYALTY AND LASTING BRANDS FOR BOTH TODAY AND
TOMORROW.)
CONTENTS
Letter to Stockholders 1
Our Business 5
Building Brands for Tomorrow's Consumers Today 5
Selected Historical Consolidated Financial Data 10
Management's Discussion and Analysis
of Financial Condition and Results of Operations 11
Forward Looking Statements 15
Report of Management 17
Report of Independent Accountants 17
Consolidated Financial Statements 18
Notes to Consolidated Financial Statements 22
Supplementary Quarterly Data 31
Markets for the Company's Securities and Related Matters 32
Officers, Board of Directors and Corporate Information 33
LETTER TO STOCKHOLDERS
Dear Stockholder:
While JBSS has always prided itself on its impressive history, the real key to
your Company's success has been grounded in the future, rather than the past.
The ability to look ahead and plan strategically has allowed us to enjoy steady
growth and broader market reach, year after year. With clear focus on the
future, we have proven our prowess at building brands today that will continue
to meet the needs of consumers tomorrow. So the success of your Company in
fiscal year 2000 was, in large measure, the validation of prior years'
managerial decisions. It also represented a confirmation of our commitment
to performance improvement and complete customer satisfaction.
Indeed, fiscal 2000 was both profitable and strategically correct, with good
commodity positions and a focused direction. Net sales of approximately $333
million delivered net income of approximately $6.8 million or 74 cents per
share on a basic and diluted basis.
Fiscal 2000 was in large part driven by your Company's brand focus throughout
the consumer distribution channel. The snack and baking nut categories
continued to grow, as various studies confirmed that nuts are an integral
part of a healthy daily diet. Your Company has supported this position by
printing the Mediterranean Diet Pyramid on all Fisher Chef's Naturals
Ingredient Nut packaging. This respected nutritional template recommends
the inclusion of nuts in the daily diet.
Your Company also experienced expanded net sales and margins during fiscal
2000. Increased volume from the Fisher brand coupled with a targeted
Private Label program contributed to this improvement. Specific marketing
programs insured good product velocity throughout the consumer distribution
channel, while our vast product line and commitment to customer satisfaction
and delivery fueled sales and profit growth.
This increased unit volume allowed your Company to utilize its shelling and
processing facilities more efficiently in producing a quality product.
Prudent procurement and operational attention to cost control delivered
product availability and good margins, as well. Continual improvement in
operations and how we go to market will remain a key thrust for your Company.
In keeping with our management focus, your Company was able to continue
capital spending in the $4 million range for fiscal 2000. Long-term debt
was reduced by approximately $5.7 million. Due to the availability and cost
of certain commodities we were able to procure raw inventory that will be
carried over into fiscal 2001. This increased inventory will be moved
through normal distribution channels in the first half of fiscal 2001.
Senior management and I look forward to the challenge and opportunities in
fiscal 2001. We believe we have built the base for a solid and positively
performing Company that will deliver increased stockholder value now and far
into the future. People are an important part of any organization, and
senior management and I are proud of your Company's team and their
performance in fiscal 2000.
Sincerely,
/s/ JASPER B. SANFILIPPO
------------------------
Jasper B. Sanfilippo
Chairman and Chief Executive Officer
(ENLARGED PICTURE OF FISHER GOLDEN ROAST DRY ROASTED PEANUTS WITH TWO
CHILDREN)
(PIE CHARTS WITH THE FOLLOWING INFORMATION)
SALES BY CHANNEL OF TRADE SALES BY PRODUCT TYPE
Consumer Products 54% Peanuts 28%
Industrial 23% Pecans 22%
Food Service 12% Walnuts 12%
Export 6% Mixed Nuts 11%
Contract Packaging 5% Cashews 9%
Almonds 7%
Other Products 11%
(PICTURE OF CHILD HOLDING UP AN ENLARGED PACKAGE OF FISHER CHEF'S NATURALS
ALMONDS)
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. Having achieved vertical integration for several products
(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.
BUILDING BRANDS FOR TOMORROW'S CONSUMERS TODAY
Fiscal year 2000 was another year of growth and expansion for the Consumer
Distribution Channel. Our emphasis on product quality and product versatility
continues to fuel this growth and helps your Company build a dynamic
portfolio of strong brands with lasting value for tomorrow's consumers today.
It is a successful strategy driven by the Fisher brand, with the powerful
support of our private label product lines. Since acquiring the Fisher brand
four years ago, we have increased consumer awareness of the brand and
expanded its presence in both the snack nut and baking nut categories. Our
performance in fiscal year 2000 was the direct result of this focus, as well
as a strengthening of our private label product lines.
Quality
-------
Product quality is the sustaining characteristic of all strong brands. The
exceptional quality that your Company delivers to consumers each and every
day is the backbone of both the Fisher brand and all our private label
products.
For the fourth consecutive year, Fisher has been awarded the "Best Tasting
Nut in America" designation by the American Tasting Institute. This
prestigious award recognizes the consistent high quality standards of the
Fisher brand. It is based on Fisher's rating of "excellent" versus all other
brands for taste, freshness and appearance. Your Company is pleased to
receive this award and will continue to capitalize on the high quality of our
products by consistently delivering superior snacking and baking nut
experiences. This strategy will allow us to continue to build powerful
brands that meet the needs of consumers both today and tomorrow.
Innovation
----------
Product innovation and the introduction of new snacking experiences also are
important when building brands for tomorrow's consumers. In fiscal year 2000,
your Company introduced many exciting new products under branded and private
label programs. These new products afford your Company a unique and critical
opportunity to better partner with our customers and more effectively meet the
needs of consumers. Highlights of our latest new product introductions
include:
(PICTURE OF CHILD ON TOP OF ENLARGED CAN OF PRIVATE LABEL CASHEWS)
-- Hot & Spicy Peanuts -- Natural Smoked Almonds
-- Roasted Almonds -- Roasted Macadamia Nuts
-- Confetti Mix -- Chocolate Covered Macadamia Nuts
In addition to these popular items, your Company also introduced new larger
sized containers to meet consumer demand. These product innovations provide
consumers with better everyday value while expanding category consumption
with increased transaction size.
With the highest quality products and exciting innovation, your Company
continues to invest in our brand portfolio - both to provide lasting value
and to build strong brand loyalty by better meeting consumer needs today and
tomorrow.
Baking Nut Category/Brands
--------------------------
Fiscal year 2000 was a breakthrough year for the Fisher brand in the baking
nut category. Fisher Chef's Naturals Ingredient Nuts ("FCNIN") were first
introduced to consumers in 1997 as a unique product line in the baking nut
category. Designed to meet the needs of both the baker and the cook, these
versatile products are marketed as complementary ingredients in a wide range
of recipes. By positioning the line as ingredient nuts versus just baking
nuts, your Company has been able to increase usage and consumption in this
important category.
Some of these FCNIN innovations include Pine Nuts, Cashews, Sunflower Kernels
and Raw Peanuts. These items, coupled with traditional Pecan, Walnut and
Almond varieties, encourage cooks to be creative in the kitchen and to choose
FCNIN products when they want a baking nut brand with versatility for
everyday cooking and consumption.
The timing could not be better. The baking nut category continues to grow,
providing your Company with more profitable opportunities to grow the FCNIN
brand. According to ACNielsen, for the 52-week period ending May 13, 2000,
the baking nut category grew to approximately $370 million across the
Food/Drug/Mass ("FDM") distribution channels, for a 10.7% growth rate.
During this same time period, FCNIN reached a 10.4% market share - an
impressive performance for a brand that was launched less than three years
ago. FCNIN is now one of the leading brands in the category.
FCNIN was the fastest growing brand with significant increases in unit
and dollar sales across the FDM channels.* In the food channel, FCNIN had
the highest unit and dollar sales per million dollars All Commodity Volume
("ACV") versus all other brands in the category. FCNIN sells $436.00 for
every million dollars of grocery ACV and 171.3 units for every million
dollars of ACV distribution across the food channel.* In the food channel,
FCNIN ACV distribution increased from 7.5% to 10.1%.*
Brand FCNIN Diamond Planters Azar Private Label
------------ ----- ------- -------- ----- -------------
$/MM ACV $436 $284 $340 $325 $335
Units/MM ACV 171.3 95.5 143.1 123.9 141.5
* ACNielsen report for the 52-week period ending May 13, 2000.
Snack Nut Category/Brands
-------------------------
The snack nut category continued to be very competitive on both the branded
and private label front during fiscal year 2000, and the Fisher brand
continued to grow with the category momentum. Overall, the snack nut
category extended its three year resurgence. According to ACNielsen, for
the 52-week period ending May 13, 2000, the snack nut category grew to
approximately $1.3 billion across the FDM channels, representing a 13% growth
rate. For this same time period, unit sales grew 10% and volume sales grew
9%. This surge of activity provided expanded opportunities to grow the
Fisher snack nut brand.
The Fisher Snack 'N Serve Nut Bowl product line continued to grow in its
primary distribution channels of food and drug. Introduced in 1998, Fisher
Snack 'N Serve meets the key consumer needs for convenience, increased
appetite appeal, better everyday value and new snacking experiences. These
attributes have helped Fisher Snack 'N Serve attain and sustain steady
progress:
(CHART SHOWING FISHER SNACK 'N SERVE NUT BOWL PERCENT GROWTH VERSUS
PREVIOUS YEAR AT FOOD AND DRUG FOR THE 52-WEEK PERIOD ENDING MAY 13, 1999
VS. MAY 12, 2000, WITH THE FOLLOWING INFORMATION)
FOOD CHANNEL DRUG CHANNEL
Unit Sales +36.2% +11.2%
Dollar Sales +38.4% +11.8%
Distribution +48.0% +27.1%
During fiscal year 2000, your Company expanded these gains by introducing
product line extensions under Fisher Snack 'N Serve Nut Bowls, including Dry
Roasted Macadamia Nuts and Chocolate Covered Macadamia Nuts. These gourmet
items were introduced to offer indulgent, value added products to the mix in
a category segment realizing consistent strong development.
Private Label Snack Nut Category
--------------------------------
Private label snack nuts also continued to advance, by providing high quality
at a better everyday value versus the brand standard. According to ACNielsen,
for the 52-week period ending May 13, 2000, private label snack nuts had a
unit share of 20.4%, with unit growth of 7%. For the same period, private
label snack nut dollar share was 21.7%, with a growth rate of 10.8%.
JBSS continues to be a leader in private label snack nuts by growing current
private label snack programs and being awarded new private label business.
Historically, your Company has fostered and maintained successful partnerships
with key retailers across North America to provide the highest quality consumer
focused snack nut programs. During fiscal year 2000, your Company initiated
additional private label partnerships with many large retailers both national
and international in scope.
During fiscal year 2000, your Company also worked with all retailers to improve
private label snack nut merchandising programs and increase year-round sales.
For example, the Company was successful in getting customers to increase
promotional frequency during the non-holiday selling period. This activity led
to increased growth by keeping the category top of mind with consumers.
Private label is and will remain an integral part of our brand portfolio by
consistently and reliably providing consumers with high quality and better
everyday value.
Strategic Management
--------------------
During fiscal year 2000, your Company executed plans to both grow our brands
and to optimize efficiency. In Southern and Southwestern markets, your
Company began to transition the Sunshine Country baking nut line and snack
nut line to the Fisher product line at all retailers. With this plan, the
Fisher brand will continue to grow ACV distribution, unit sales and dollar
sales in these markets and reinforce its position as a strong baking nut and
snack nut brand for today and tomorrow. Your Company expects this transition
from Sunshine to Fisher to be completed during fiscal 2001. The end result
will be more people in more markets aware of and purchasing more of the
Fisher product line.
Consumer Education
------------------
Your Company also continues to invest in consumer education programs to grow
not only our brands, but also a new generation of loyal consumers. Through a
licensing agreement with Oldways, your Company promotes the Mediterranean Diet
Pyramid ("MDP") on its packaging and in consumer education programs. The MDP
is a nutritional model that groups nuts and legumes in the second tier with
other foods from plant sources. It encourages daily consumption of these
foods as part of a balanced diet.
In affiliation with the Home Baking Association, your Company also provides
schools, scout groups and other organizations with instructional and
informational materials that help teach children how to bake and cook from
scratch. These kinds of educationally focused programs not only encourage
increased nut consumption today, they also reach tomorrow's consumers with the
message that nuts are healthy and versatile in an everyday diet.
This important message is being reinforced on an almost daily basis in the
media, from respected research publications such as the Mayo Clinic Health
Letter, to food industry publications, women's magazines, health oriented
newsletters and broadcast media. They are touting the healthy benefits of
substituting nuts for other foods, including lowering total cholesterol;
providing important protein; contributing fiber, vitamins and minerals; being
a terrific source of monounsaturated fats (the good type of fat that can help
lower heart attack risk); providing valuable omega-3 oil; and even offering
natural headache relief.
Growth and Rebuilding
---------------------
During fiscal year 2000, your Company continued the growth and rebuilding of
the Fisher brand by expanding its influence in both the snack and baking nut
categories. This, coupled with our private label growth, allowed the Company
to offer category solutions to retailers that benefit consumers across all
retail trade channels. By combining product quality and innovation with
strategic management and educating consumers on the health and usage benefits
of our products, your Company is successfully building loyalty and lasting
brands for both today and tomorrow.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following historical consolidated financial data as of and for the years
ended June 29, 2000, June 24, 1999 and June 25, 1998, the twenty-six weeks
ended June 26, 1997 and the years ended December 31, 1996 and 1995 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
subsidiary. Effective as of June 25, 1999, Sunshine Nut Co., Inc. and Quantz
Acquisition Co., Inc., two of the Company's three wholly owned subsidiaries,
were merged into and with the Company. No dividends were declared from 1995
to 2000.
Statement of Operations Data:
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Twenty-six
Weeks
Year Ended Year Ended Year Ended Ended Year Ended Year Ended
June 29, June 24, June 25, June 26, Dec. 31, Dec. 31,
2000 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales $333,318 $319,239 $317,390 $133,064 $294,404 $277,741
Cost of sales 272,025 268,333 260,486 111,580 255,204 230,691
---------- ---------- ---------- ---------- ---------- ----------
Gross profit 61,293 50,906 56,904 21,484 39,200 47,050
Selling and administrative expenses 42,696 38,978 39,942 16,762 35,410 30,338
---------- ---------- ---------- ---------- ---------- ----------
Income from operations 18,597 11,928 16,962 4,722 3,790 16,712
Interest expense 8,036 9,269 8,776 4,135 9,051 7,673
Other income 701 510 525 252 450 607
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes 11,262 3,169 8,711 839 (4,811) 9,646
Income tax expense (benefit) 4,505 1,373 3,589 388 (1,820) 3,858
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) $ 6,757 $ 1,796 $ 5,122 $ 451 $ (2,991) $ 5,788
========== ========== ========== ========== ========== ==========
Basic earnings (loss) per common share $ 0.74 $ 0.20 $ 0.56 $ 0.05 $ (0.33) $ 0.64
========== ========== ========== ========== ========== ==========
Diluted earnings (loss) per common share $ 0.74 $ 0.20 $ 0.56 $ 0.05 $ (0.33) $ 0.63
========== ========== ========== ========== ========== ==========
</TABLE>
Balance Sheet Data:
($ in thousands)
<TABLE>
<CAPTION
June 29, June 24, June 25, June 26, Dec. 31, Dec. 31,
2000 1999 1998 1997 1996 1995
--------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Working capital $ 60,168 $ 53,515 $ 52,850 $ 49,866 $ 40,956 $ 58,148
Total assets 215,813 205,224 219,676 187,417 205,352 219,002
Long-term debt, less
current maturities 51,779 57,508 63,182 68,862 63,319 74,681
Total debt 99,355 99,591 115,145 90,286 94,792 104,989
Stockholders' equity 86,751 79,994 78,198 73,071 72,620 75,611
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
-------
The Company's fiscal year ends on the final Thursday of June each year,
and typically consists of fifty-two weeks (four thirteen week quarters). The
fiscal year ended June 29, 2000 ("fiscal 2000") consisted of fifty-three weeks,
with the fourth quarter containing fourteen, rather than thirteen, weeks.
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.
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 subsidiary. Effective as of June 25, 1999, Sunshine Nut Co.,
Inc. ("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. 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 "Forward
Looking Statements -- Factors That May Affect Future Results -- Availability
of Raw Materials and Market Price Fluctuations."
At June 29, 2000, the Company's inventories totalled approximately $105.8
million compared to approximately $89.0 million at June 24, 1999. Inventory
levels at June 29, 2000 were significantly higher than at June 24, 1999 due
primarily to increased levels (volume and dollars) of pecans on hand. These
increased levels were due primarily to significantly higher purchases of
pecans in the 1999 crop year than in the preceding crop year. See "Forward
Looking Statements --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 consumers 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 few 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 table sets forth the percentage relationship of certain items to
net sales for the periods indicated and the percentage increase or decrease of
such items from fiscal 1999 to fiscal 2000 and from fiscal 1998 to fiscal 1999.
<TABLE>
<CAPTION>
Percentage Percentage
Increase Increase
Percentage Percentage Percentage (Decrease) (Decrease)
of Net Sales of Net Sales of Net Sales Fiscal 2000 Fiscal 1999
Fiscal 2000 Fiscal 1999 Fiscal 1998 vs. 1999 vs. 1998
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 4.4% 0.6%
Gross profit 18.4 15.9 17.9 20.4 (10.5)
Selling expenses 10.2 9.4 9.3 13.8 1.3
Administrative expenses 2.6 2.9 3.3 (4.5) (13.0)
Income from operations 5.6 3.7 5.3 55.9 (29.7)
</TABLE>
Fiscal 2000 Compared to Fiscal 1999
-----------------------------------
NET SALES. Net sales increased from approximately $319.2 million for
fiscal 1999 to approximately $333.3 million for fiscal 2000, an increase of
approximately $14.1 million or 4.4%. The increase in net sales was due
primarily to increased unit volume sales to the Company's contract packaging,
export and food service customers. These increases were partially offset by
decreased unit volume sales to the Company's industrial customers, and
generally lower unit selling prices due to lower commodity costs. Sales to
retail customers increased slightly, as increases in sales of the Company's
Fisher brand were partially offset by decreases in sales of regional brands.
Also, sales were favorably impacted due to fiscal 2000 consisting of
fifty-three rather than fifty-two weeks.
GROSS PROFIT. Gross profit in fiscal 2000 increased 20.4% to approximately
$61.3 million from approximately $50.9 million for fiscal 1999. Gross
profit margin increased from 15.9% for fiscal 1999 to 18.4% for fiscal 2000.
This increase was due primarily to (i) increases in net sales of the
Company's Fisher brand as a percentage of total sales, which sales generally
carry higher margins than sales to the Company's other customers, (ii)
decreases in net sales to industrial customers, which sales generally carry
lower margins than sales to the Company's other customers, (iii) generally
lower commodity costs in fiscal 2000, and (iv) improved controls over
manufacturing costs.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
as a percentage of net sales increased from 12.2% for fiscal 1999 to 12.8%
for fiscal 2000. Selling expenses as a percentage of net sales increased
from 9.4% for fiscal 1999 to 10.2% for fiscal 2000. This increase was due
primarily to increases in promotional activity to support the Company's
growth in its retail business. Administrative expenses as a percentage of
net sales decreased from 2.9% for fiscal 1999 to 2.6% for fiscal 2000. This
decrease was due primarily to (i) the consolidation of the administrative
functions of Sunshine with the Company's administrative functions during the
fourth quarter of fiscal 1999, (ii) the spreading of administrative expenses
over a larger revenue base, and (iii) recognition of litigation expenses in
fiscal 1999 pertaining to a lawsuit that was subsequently settled. These
decreases were partially offset by increases in expenses related to the
Company's compensation programs due to improved operating results.
INCOME FROM OPERATIONS. Due to the factors discussed above, income from
operations increased from approximately $11.9 million, or 3.7% of net sales,
for fiscal 1999 to approximately $18.6 million, or 5.6% of net sales, for
fiscal 2000.
INTEREST EXPENSE. Interest expense decreased from approximately $9.3
million for fiscal 1999 to approximately $8.0 million for fiscal 2000. This
decrease was due primarily to a lower average level of borrowings for the
first three quarters of fiscal 2000 compared to fiscal 1999 resulting from
lower average levels of inventories during the first three quarters of
fiscal 2000.
INCOME TAXES. The Company recorded income tax expense of approximately
$4.5 million, or 40.0% of income before income taxes, for fiscal 2000,
compared to approximately $1.4 million, or 43.3% of income before income
taxes, for fiscal 1999.
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 "Forward Looking
Statements -- 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 to support the Company's
retail business. 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 an increase in litigation expense in
fiscal 1999 pertaining to a lawsuit that was subsequently settled.
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,
compared to approximately $3.6 million, or 41.2% of income before income
taxes, for fiscal 1998.
Liquidity and Capital Resources
-------------------------------
General
-------
During fiscal 2000, the Company continued to finance its activities through
a bank revolving credit facility entered into on March 31, 1998 and amended
on May 31, 2000 (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 $2.6 million
for fiscal 2000 compared to approximately $20.2 million for fiscal 1999. The
decrease in cash provided by operating activities was due primarily to
increased purchases of certain nuts, especially pecans, which resulted in an
increase of approximately $16.7 million in inventories from June 24, 1999 to
June 29, 2000. As a result of the increase in inventories, notes payable
increased to approximately $41.9 million at June 29, 2000 from approximately
$36.4 million at June 24, 1999. The largest component of net cash used in
investing activities during fiscal 2000 was approximately $3.9 million in
capital expenditures. During fiscal 2000, the Company repaid approximately
$5.7 million of long-term debt, compared to approximately $5.8 million for
fiscal 1999.
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, as amended, on May 31, 2003, 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 7.60% at June 29, 2000) determined
pursuant to a formula based on the agent bank's quoted rate and the
Eurodollar Interbank rate.
Of the total $35.0 million of borrowings under the Long-Term Financing
Facility, $25.0 million matures on August 15, 2004, bears interest at rates
ranging from 7.34% to 9.18% per annum payable quarterly, and requires equal
semi-annual principal installment payments based on a ten-year amortization
schedule. The remaining $10.0 million of this indebtedness matures on May
15, 2006, bears interest at the rate of 9.16% per annum payable quarterly,
and requires semi-annual principal installment payments ranging from $475
thousand to $500 thousand through maturity. As of June 29, 2000, there was
approximately $17.1 million total principal amount outstanding under the
Long-Term Financing Facility.
The Additional Long-Term Financing has a maturity date of September 1, 2005
and (i) as to $10.0 million of the total $25.0 million of borrowings
thereunder, bears interest at an annual rate of 8.30% payable semiannually
and 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 annual principal payments of $5.0 million beginning on September
1, 2003 through maturity. As of June 29, 2000, the total principal amount
outstanding under the Additional Long-Term Financing was approximately $23.6
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; and (iii) require that Jasper B. Sanfilippo (the Company's
Chairman of the Board and Chief Executive Officer) and Mathias A. Valentine
(a director and the Company's President) together with their respective
immediate family members and certain trusts created for the benefit of their
respective sons and daughters, continue to own shares representing the right
to elect a majority of the directors of the Company. In addition, (i) the
Long-Term Financing Facility limits the Company's payment of dividends to a
cumulative amount not to exceed 25% of the Company's cumulative net income
from and after January 1, 1996, (ii) the Additional Long-Term Financing
limits cumulative dividends to the sum of (a) 50% of the Company's
cumulative net income (or minus 100% of the Company's cumulative net loss)
from and after January 1, 1995 to the date the dividend is declared, (b) the
cumulative amount of the net proceeds received by the Company during the same
period from any sale of its capital stock, and (c) $5.0 million, and (iii)
the Bank Credit Facility limits dividends to the lesser of (a) 25% of net
income for the previous fiscal year, or (b) $5.0 million, and prohibits the
Company from redeeming shares of capital stock. As of the end of the first
quarter of fiscal 2000, the Company was not in compliance with the fixed
charge coverage covenant under the Additional Long-Term Financing. The
Company received a waiver for this non-compliance along with waivers from the
lenders under the Bank Credit Facility and the Long-Term Financing Facility
for any cross-default caused by the non-compliance under the Additional
Long-Term Financing. As of June 29, 2000, the Company was in compliance
with all restrictive covenants, as amended, under its financing facilities.
The Company has approximately $7.4 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 2001 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
-------------------------------------------------
For fiscal 2000, capital expenditures were approximately $3.9 million. The
Company believes that capital expenditures for fiscal 2001 will be more
substantial with the planned expansion of its walnut shelling operations at
the Gustine, California facility and the addition of processing lines at the
Company's other facilities. The Company expects to remain in compliance with
all restrictive covenants regarding capital expenditures under its financing
facilities.
Capital Resources
-----------------
As of June 29, 2000, the Company had approximately $18.2 million of available
credit under the Bank Credit Facility. The Company believes that cash flow
from operating activities and funds available under the Bank Credit Facility
(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 and anticipated capital
expenditures for the foreseeable future.
Recent Accounting Pronouncements
--------------------------------
In June 1998, Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," was issued and is
effective for fiscal years beginning after June 15, 2000. The standard
requires that all derivative instruments be recorded on the balance sheet at
fair value. Changes in the fair value of derivatives are recorded in
earnings or other comprehensive income, based on whether the instrument is
designated as part of a hedge transaction and, if so, the type of hedge
transaction. Based on the Company's current portfolio, it is not expected
that adoption of this statement will have a material effect on the Company's
results of operations, financial condition or cash flows.
Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The Company has not entered into transactions using derivative financial
instruments. The Company believes that its exposure to market risk related to
its other financial instruments (which are the debt instruments under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources") is not material.
Forward Looking Statements
--------------------------
The statements contained in this Annual Report which are not historical
(including statements concerning the Company's expectations regarding market
risk) are "forward looking statements". These forward looking statements,
which generally are 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.
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 and other nuts 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 may affect the value of the Company's inventories and the
Company's profitability. The Company has significant inventories of nuts
that would be adversely affected by any decrease in the market price of such
raw materials. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- 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 (which has recently agreed to be acquired by Philip Morris Companies
Inc. to be combined with Kraft Foods, 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. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Results of Operations -- Fiscal 1999 Compared to Fiscal 1998 -- Gross Profit."
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. However, the Company expects to continue
to enter into fixed price commitments with respect to certain of its nut
products prior to fixing its acquisition cost when, in management's judgment,
market or crop harvest conditions so warrant. To the extent the Company does
so, these fixed price commitments may result in losses. Historically,
however, such losses have generally been offset by gains on other fixed price
commitments. However, there can be no assurance that losses from fixed price
commitments may not have a material adverse effect on the Company's results
of operations.
Federal Regulation of Peanut Prices, Quotas and Poundage Allotments
-------------------------------------------------------------------
Peanuts are an important part of the Company's product line. Approximately
50% of the total pounds of products processed annually by the Company are
peanuts, peanut butter and other products containing peanuts. The production
and marketing of peanuts are regulated by the USDA under the Agricultural
Adjustment Act of 1938 (the "Agricultural Adjustment Act"). The Agricultural
Adjustment Act, and regulations promulgated thereunder, support the peanut
crop by: (i) limiting peanut imports; (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 2000 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 2000 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.
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
and Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS (LOGO)
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 29, 2000 and June
24, 1999, and the results of their operations and their cash flows for each
of the three years in the period ended June 29, 2000, in conformity with
accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, 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 11, 2000
CONSOLIDATED BALANCE SHEETS
June 29, 2000 and June 24, 1999
(dollars in thousands)
June 29, June 24,
2000 1999
-------- --------
ASSETS
CURRENT ASSETS:
Cash $ 1,113 $ 1,393
Accounts receivable (including related
party receivables of $137 and $253),
less allowance for doubtful accounts of
$769 and $660 24,068 24,105
Inventories 105,760 89,033
Deferred income taxes 910 519
Income taxes receivable -- 94
Prepaid expenses and other current assets 2,708 3,355
-------- --------
TOTAL CURRENT ASSETS 134,559 118,499
-------- --------
PROPERTIES :
Buildings 55,462 55,452
Machinery and equipment 77,108 73,794
Furniture and leasehold improvements 5,175 5,049
Vehicles 4,163 4,137
-------- --------
141,908 138,432
Less: Accumulated depreciation 74,039 67,550
-------- --------
67,869 70,882
Land 1,892 1,892
-------- --------
TOTAL PROPERTIES 69,761 72,774
-------- --------
OTHER ASSETS:
Goodwill and other intangibles, less
accumulated amortization of $4,295 and $3,483 6,129 6,941
Miscellaneous 5,364 7,010
-------- --------
TOTAL OTHER ASSETS 11,493 13,951
-------- --------
TOTAL ASSETS $215,813 $205,224
======== ========
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED BALANCE SHEETS
June 29, 2000 and June 24, 1999
(dollars in thousands, except per share amounts)
June 29, June 24,
2000 1999
-------- --------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 41,874 $ 36,411
Current maturities of long-term debt 5,702 5,672
Accounts payable, including related party
payables of $403 and $475 11,851 9,839
Drafts payable 5,747 5,540
Accrued expenses 8,756 7,522
Income taxes payable 461 --
-------- --------
TOTAL CURRENT LIABILITIES 74,391 64,984
-------- --------
LONG-TERM LIABILITIES
Long-term debt, less current maturities 51,779 57,508
Deferred income taxes 2,892 2,738
-------- --------
TOTAL LONG-TERM LIABILITIES 54,671 60,246
-------- --------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY:
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 30,666 23,909
Treasury stock, at cost; 117,900 shares (1,204) (1,204)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 86,751 79,994
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $215,813 $205,224
======== ========
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended June 29, 2000, June 24, 1999 and June 25, 1998
(dollars in thousands, except for earnings per share)
Year Ended Year Ended Year Ended
June 29, 2000 June 24, 1999 June 25, 1998
------------- ------------- -------------
Net sales $333,318 $319,239 $317,390
Cost of sales 272,025 268,333 260,486
Gross profit 61,293 50,906 56,904
------------- ------------- -------------
Selling expenses 34,000 29,870 29,475
Administrative expenses 8,696 9,108 10,467
------------- ------------- -------------
Total selling and administrative
expenses 42,696 38,978 39,942
------------- ------------- -------------
Income from operations 18,597 11,928 16,962
------------- ------------- -------------
Other income (expense):
Interest expense ($955, $987 and
$963 to related parties) (8,036) (9,269) (8,776)
Rental income 584 459 500
Miscellaneous 117 51 25
------------- ------------- -------------
Total other income (expense) (7,335) (8,759) (8,251)
------------- ------------- -------------
Income before income taxes 11,262 3,169 8,711
Income tax expense 4,505 1,373 3,589
------------- ------------- -------------
Net income $ 6,757 $ 1,796 $ 5,122
============= ============= =============
Basic and diluted earnings per
common share $ 0.74 $ 0.20 $ 0.56
============= ============= =============
Weighted average shares
outstanding - basic 9,148,565 9,148,565 9,147,862
============= ============= =============
Weighted average shares
outstanding - diluted 9,148,727 9,148,931 9,168,175
============= ============= =============
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended June 29, 2000, June 24, 1999 and June 25, 1998
(dollars in thousands)
<TABLE>
<CAPTION>
Class A Capital in
Common Common Excess of Retained Treasury
Stock Stock Par Value Earnings Stock Total
------- ------ ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 26, 1997 $37 $56 $57,191 $16,991 $(1,204) $73,071
Net income and comprehensive
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 and comprehensive
income 1,796 1,796
------- ------ ---------- -------- -------- -------
Balance, June 24, 1999 37 56 57,196 23,909 (1,204) 79,994
Net income and comprehensive
income 6,757 6,757
------- ------ ---------- -------- -------- -------
Balance, June 29, 2000 $37 $56 $57,196 $30,666 $(1,204) $86,751
======= ====== ========== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended June 29, 2000, June 24, 1999 and June 25, 1998
(dollars in thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
June 29, 2000 June 24, 1999 June 25, 1998
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 6,757 $ 1,796 $ 5,122
Adjustments:
Depreciation and amortization 8,171 7,908 8,226
(Gain) loss on disposition of properties (84) (20) 4
Deferred income taxes (237) 370 804
Change in current assets and current liabilities:
Accounts receivable, net 37 (204) 1,299
Inventories (16,727) 10,502 (36,547)
Prepaid expenses and other current assets 647 (331) (1,605)
Accounts payable 2,012 (2,199) 845
Drafts payable 207 2,755 238
Accrued expenses 1,234 (1,722) 588
Income taxes receivable/payable 555 1,360 1,376
------------- ------------- -------------
Net cash provided by (used in) operating activities 2,572 20,215 (19,650)
------------- ------------- -------------
Cash flows from investing activities:
Acquisition of properties (3,914) (3,960) (4,227)
Proceeds from disposition of properties 90 36 7
Other 1,208 107 (961)
------------- ------------- -------------
Net cash used in investing activities (2,616) (3,817) (5,181)
------------- ------------- -------------
Cash flows from financing activities:
Net borrowings (repayments) on notes payable 5,463 (9,763) 29,687
Principal payments on long-term debt (5,699) (5,791) (4,938)
------------- ------------- -------------
Net cash (used in) provided by financing activities (236) (15,554) 24,749
------------- ------------- -------------
Net (decrease) increase in cash (280) 844 (82)
Cash:
Beginning of period 1,393 549 631
------------- ------------- -------------
End of period $ 1,113 $ 1,393 $ 549
============= ============= =============
Supplemental disclosures of cash flow information:
Interest paid $ 7,671 $ 9,270 $ 8,422
Income taxes paid 4,315 182 3,421
Supplemental schedule of noncash investing and
financing activities:
Capital lease obligation incurred -- -- 110
</TABLE>
The accompanying notes are an integral part of these financial statements.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------
Basis of consolidation
----------------------
The consolidated financial statements include the accounts of John B.
Sanfilippo & Son, Inc. and its wholly owned subsidiary (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.
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 is 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.
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.
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. The following table presents the required earnings per share
disclosures:
Year Ended Year Ended Year Ended
June 29, 2000 June 24, 1999 June 25, 1998
------------- ------------- -------------
Net income $6,757 $1,796 $5,122
Weighted average shares
outstanding 9,148,565 9,148,565 9,147,862
Basic earnings per common share $ 0.74 $ 0.20 $ 0.56
Effect of dilutive securities:
Stock options 162 366 20,313
Weighted average shares
outstanding 9,148,727 9,148,931 9,168,175
Diluted earnings per common share $ 0.74 $ 0.20 $ 0.56
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:
Weighted Average
Number of Options Exercise Price
----------------- ----------------
Year ended June 29, 2000 406,239 $ 8.63
Year ended June 24, 1999 359,712 $10.24
Year ended June 25, 1998 268,864 $12.17
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 converts 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 for income taxes for the years ended June 29, 2000, June 24,
1999 and June 25, 1998 are as follows:
June 29, June 24, June 25,
2000 1999 1998
-------- -------- --------
Current:
Federal $3,840 $ 811 $2,261
State 902 192 524
Deferred (237) 370 804
-------- -------- --------
Total provision for income taxes $4,505 $1,373 $3,589
======== ======== ========
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 29, 2000, June 24, 1999 and June 25, 1998 are as follows:
June 29, June 24, June 25,
2000 1999 1998
-------- -------- --------
Federal statutory income tax rate 34.0% 34.0% 34.0%
State income taxes, net of
federal benefit 5.2 5.1 5.1
Nondeductible items 1.7 1.4 1.1
Other (0.9) 2.8 1.0
-------- -------- --------
Effective tax rate 40.0% 43.3% 41.2%
======== ======== ========
The deferred tax assets and liabilities are comprised of the following:
June 29, 2000 June 24, 1999
Asset Liability Asset Liability
------ --------- ------ ---------
Current:
Allowance for doubtful accounts $ 308 $ $ 264 $
Employee compensation 492 377
Inventory 85 92
Accounts receivable 237 356
Other 262 142
------ --------- ------ ---------
Total current $1,147 $ 237 $ 875 $ 356
------ --------- ------ ---------
Long-term:
Depreciation $ $4,982 $ $4,654
Capitalized leases 1,499 1,460
Other 591 456
------ --------- ------ ---------
Total long-term $2,090 $4,982 $1,916 $4,654
------ --------- ------ ---------
Total $3,237 $5,219 $2,791 $5,010
====== ========= ====== =========
NOTE 5 - INVENTORIES
--------------------
Inventories consist of the following:
June 29, June 24,
2000 1999
-------- --------
Raw material and supplies $ 56,755 $33,998
Work-in-process and finished goods 49,005 55,035
-------- --------
Total $105,760 $89,033
======== ========
NOTE 6 - NOTES PAYABLE
----------------------
Notes payable consist of the following:
June 29, June 24,
2000 1999
-------- --------
Revolving bank loan $41,874 $36,411
======== ========
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, as amended on May 31, 2000, 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 May 31, 2003, 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 7.60% at June 29, 2000) 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 that 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 ratios; (iii) limit annual
capital expenditures to the greater of $7,500 or an amount calculated using a
specified ratio; (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 29, June 24,
2000 1999
-------- --------
Industrial development bonds, secured by building,
machinery and equipment with a cost
aggregating $8,000 $ 7,445 $ 7,645
Capitalized lease obligations 7,040 7,361
Series A note payable, interest payable quarterly
at 8.72%, principal payable in semi-annual
installments of $200 1,800 2,200
Series B note payable, interest payable quarterly
at 9.07%, principal payable in semi-annual
installments of $300 2,700 3,300
Series C note payable, interest payable quarterly
at 9.07%, principal payable in semi-annual
installments of $200 1,800 2,200
Series D note payable, interest payable quarterly
at 9.18%, principal payable in semi-annual
installments of $150 1,350 1,650
Series E note payable, interest payable quarterly
at 7.34%, principal payable in semi-annual
installments of $400 3,600 4,400
Series F notes payable, interest payable quarterly
at 9.16%, principal payable in semi-annual
installments ranging from $500 to $475 5,800 6,825
Note payable, interest payable semi-annually at
8.30%, principal payable in annual installments
of approximately $1,429 8,571 10,000
Note payable, subordinated, interest payable
semi-annually at 9.38%, principal payable in 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 through October 1, 2015 2,232 2,298
Other 143 301
Current maturities (5,702) (5,672)
-------- --------
Total long-term debt $51,779 $57,508
======== ========
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 $215
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 ended
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
29, 2000, the Company was in compliance with all restrictive
covenants, as amended, 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 8.30%
and requires annual principal payments of approximately $1,429 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 29,
2000, the Company was in compliance with all restrictive covenants, as
amended, under the Additional Long-Term Financing.
Aggregate maturities of long-term debt, excluding capitalized lease
obligations, are as follows for the years ending:
June 28, 2001 $ 5,341
June 27, 2002 5,255
June 26, 2003 5,215
June 24, 2004 10,243
June 30, 2005 9,027
Subsequent years 15,360
-------
Total $50,441
=======
The accompanying financial statements include the following amounts
related to assets under capital leases:
June 29, June 24,
2000 1999
-------- --------
Buildings $9,520 $9,520
Less: Accumulated amortization 6,209 5,798
-------- --------
Total $3,311 $3,722
======== ========
Amortization expense aggregated $411 for the year ended June 29, 2000,
and $412 for the years ended June 24, 1999 and June 25, 1998.
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 28, 2001 $ 1,269
June 27, 2002 1,269
June 26, 2003 1,269
June 24, 2004 1,269
June 30, 2005 1,269
Subsequent years 6,303
-------
Total minimum lease payments 12,648
Less: Amount representing interest 5,608
-------
Present value of minimum lease payments $ 7,040
=======
JBSS also leases buildings and certain equipment pursuant to
agreements accounted for as operating leases. Rent expense under
these operating leases aggregated $596, $620 and $863 for the years
ended June 29, 2000, June 24, 1999 and June 25, 1998, respectively.
Aggregate noncancelable lease commitments under these operating leases
are as follows for the years ending:
June 28, 2001 $ 560
June 27, 2002 203
June 26, 2003 155
June 24, 2004 125
June 30, 2005 125
Subsequent years 80
------
$1,248
======
NOTE 8 - EMPLOYEE BENEFIT PLANS
-------------------------------
JBSS maintains a contributory 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. The Company contributes 50% of
the amount contributed by each employee up to certain maximums
specified in the plan. Total Company contributions to the 401(k) plan
were $260, $165 and $155 for the years ended June 29, 2000, June 24,
1999 and June 25, 1998, respectively.
JBSS contributed $101, $87 and $99 for the years ended June 29, 2000,
June 24, 1999 and June 25, 1998, respectively, to multi-employer
union-sponsored pension plans. JBSS is presently unable to determine
its respective share of either accumulated plan benefits or net assets
available for benefits under the union plans.
NOTE 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 $268, $436 and $504 for the
years ended June 29, 2000, June 24, 1999 and June 25, 1998,
respectively. In addition, JBSS leases office and warehouse space to
the entity. Rental income from the entity aggregated $154, $138 and
$118 for the years ended June 29, 2000, June 24, 1999 and June 25,
1998, respectively. Accounts receivable aggregated $15 and $34 at
June 29, 2000 and June 24, 1999, respectively. Accounts payable
aggregated $1 at June 29, 2000.
Material purchases
------------------
JBSS purchases materials from a company that is 10% owned by the
Company's Chairman of the Board and Chief Executive Officer, and is
90% owned by a trust, the beneficiaries of which are the sons and
daughter of the Company's Chairman of the Board and Chief Executive
Officer. Two of the beneficiaries of the trust are officers of the
Company, and one of the two is also on the Company's Board of
Directors. Material purchases aggregated $5,945, $4,670 and $6,245
for the years ended June 29, 2000, June 24, 1999 and June 25, 1998,
respectively. Accounts payable aggregated $387 and $436 at June 29,
2000 and June 24, 1999, respectively.
JBSS purchases materials from a company that is 33% owned by an
individual related to the Company's Chairman of the Board and Chief
Executive Officer. Material purchases aggregated $165, $84 and $108
for the years ended June 29, 2000, June 24, 1999 and June 25, 1998,
respectively. Accounts payable aggregated $15 and $2 at June 29, 2000
and June 24, 1999, respectively.
JBSS purchases materials from a company that is indirectly owned, in
part, by a member of the JBSS Board of Directors who is not an
employee of the Company. Material purchases aggregated $38 during the
year ended June 24, 1999 from this company.
Brokerage commissions
---------------------
JBSS 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.
Product purchases and sales
---------------------------
JBSS purchases materials from and sells products to a company that is
owned 33% by the Company's Chairman of the Board and Chief Executive
Officer. Material purchases aggregated $387, $559 and $2,619 for the
years ended June 29, 2000, June 24, 1999 and June 25, 1998,
respectively. The Company sold products to the same company
aggregating $1,527, $1,700 and $2,991 for the years ended June 29,
2000, June 24, 1999 and June 25, 1998, respectively. Accounts
receivable aggregated $122 and $219 at June 29, 2000 and June 24,
1999, respectively.
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.
NOTE 10 - STOCK OPTION PLANS
----------------------------
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 for
the years ended June 29, 2000, June 24, 1999 and June 25, 1998 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").
The termination of the 1991 Stock Option Plan, effective February 28,
1995, did not affect options granted under the 1991 Stock Option Plan
which remained outstanding as of the effective date of termination.
Accordingly, the unexercised options outstanding under the 1991 Stock
Option Plan at June 29, 2000 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 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
Canceled (33,650) $12.53
--------- ----------------
Outstanding at June 29, 2000 161,300 $12.12
========= ================
Options exercisable at June 29, 2000 161,300 $12.12
Options exercisable at June 24, 1999 194,950 $12.19
Options exercisable at June 25, 1998 202,762 $12.45
Exercise prices for options outstanding as of June 29, 2000 ranged
from $6.00 to $15.00. The weighted average remaining contractual life
of those options is 2.2 years. The options outstanding at June 29,
2000 may be segregated into two ranges, as is shown in the following:
Option Price Option Price Per
Per Share Share Range
$6.00 $12.25-$15.00
------------ ----------------
Number of options 18,250 143,050
Weighted-average exercise price $6.00 $12.90
Weighted-average remaining life (years) 4.5 1.9
Number of options exercisable 18,250 143,050
Weighted average exercise price for
exercisable options $6.00 $12.90
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 was at least the fair market
value of the Common Stock on the date of grant, with the exception of
nonqualified stock options which had 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.
The termination of the 1995 Equity Incentive Plan, effective August
27, 1998, did not affect options granted under the 1995 Equity
Incentive Plan which remained outstanding as of the effective date of
termination. Accordingly, the unexercised options outstanding under
the 1995 Equity Incentive Plan at June 29, 2000 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:
Number of Weighted Average
Shares Exercise Price
--------- ----------------
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
Canceled (25,300) $7.74
--------- ----------------
Outstanding at June 29, 2000 124,200 $7.75
========= ================
Options exercisable at June 29, 2000 107,900 $7.97
Options exercisable at June 24, 1999 93,700 $8.08
Options exercisable at June 25, 1998 60,250 $8.28
Exercise prices for options outstanding as of June 29, 2000 ranged
from $6.00 to $10.50. The weighted average remaining contractual life
of those options is 5.4 years. The options outstanding at June 29,
2000 may be segregated into two ranges, as is shown in the following:
Option Price Per Option Price Per
Share Range Share Range
$6.00-$6.88 $8.25-$10.50
----------- ------------
Number of options 68,700 55,500
Weighted-average exercise price $6.33 $9.51
Weighted-average remaining life (years) 6.2 4.6
Number of options exercisable 52,400 55,500
Weighted average exercise price for
exercisable options $6.34 $9.51
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 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
Granted 153,000 $4.48
Canceled (7,000) $4.04
---------------- ----------------
Outstanding at June 29, 2000 195,500 $4.38
================ ================
Options exercisable at June 29, 2000 6,250 $4.01
Exercise prices for options outstanding as of June 29, 2000 ranged
from $3.44 to $4.50. The weighted average remaining contractual life
of those options is 9.4 years.
NOTE 12 - LEGAL MATTERS
-----------------------
The Company is party to various lawsuits, proceedings and other matters
arising out of the conduct of its business. It is management's opinion
that the ultimate resolution of these matters will not have a material
adverse effect upon the business, financial condition or results of
operations of the Company.
SUPPLEMENTARY QUARTERLY DATA
The following unaudited quarterly consolidated financial data are
presented for fiscal 2000 and fiscal 1999. Quarterly financial results
necessarily rely on estimates and caution is required in drawing
specific conclusions from quarterly consolidated results.
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- -------- ------- -------
Year Ended June 29, 2000:
Net sales $79,524 $124,030 $51,777 $77,987
Gross profit 12,549 23,525 10,152 15,067
Income from operations 2,778 9,254 2,065 4,500
Net income 641 4,575 111 1,430
Basic and diluted earnings per
common share $ 0.07 $ 0.50 $ 0.01 $ 0.16
Common Stock prices:
High $ 4.06 $ 3.88 $ 4.94 $ 4.25
Low 3.50 2.88 3.50 3.03
Year Ended June 24, 1999:
Net sales $73,829 $113,332 $57,762 $74,316
Gross profit 11,416 18,199 9,277 12,014
Income from operations 2,650 5,404 972 2,902
Net income (loss) 287 1,887 (845) 467
Basic and diluted earnings
(loss) per common share $ 0.03 $ 0.21 $ (0.09) $ 0.05
Common Stock prices:
High $ 6.50 $ 4.94 $ 4.25 $ 4.06
Low 4.50 3.38 3.44 3.00
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 ten 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".
As of August 22, 2000, there were approximately 1,260 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 2000. The declaration
and payment of future dividends will be at the sole discretion of the
Board of Directors and will depend on the Company's profitability,
financial condition, cash requirements, future prospects and other
factors deemed relevant by the Board of Directors. The Company's
current loan agreements restrict the payment of annual dividends to
amounts specified in the loan agreements. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources."
OFFICERS
Chairman of the Board and Chief Executive Officer
Jasper B. Sanfilippo
President
Mathias A. Valentine
Executive 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 and Assistant Secretary
Jasper B. Sanfilippo, Jr.
Senior Vice President Sales and Marketing
Jeffrey T. Sanfilippo
Senior Vice President Information Technology
James A. Valentine
Controller
William R. Pokrajac
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
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.
Governor James R. Edgar (b)
Former governor of Illinois. Presently, Distinguished Fellow at
the University of Illinois Institute of Government and Public Affairs
Timothy R. Donovan (a)(b)
Senior Vice President and General Counsel of Tenneco Automotive
Inc., one of the world's largest producers of emission controls and ride
control systems and products for the automotive industry. Formerly,
partner in the law firm of Jenner & Block.
(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 Thursday, October 26, 2000 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, located at
2299 Busse Road, Elk Grove Village, Illinois 60007.
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 & Addis LLC
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, Chef's Naturals, Snack 'N Serve Nut
Bowl, Evon's, Flavor Tree, Sunshine Country, Texas Pride and Tom
Scott. Any other product or brand names are trademarks or registered
trademarks of their respective companies.
Corporate Office, Production and Distribution Facility
John B. Sanfilippo & Son, Inc.
2299 Busse Road
Elk Grove Village, Illinois 60007
(847)593-2300
Production and Distribution Facilities
1851 Arthur Avenue
Elk Grove Village, Illinois 60007
3001 Malmo Drive
Arlington Heights, Illinois 60005
Highway 27 North
1251 Colquitt Highway
Bainbridge, Georgia 31717
16435 IH 35 North
Selma, Texas 78154
515 South Lemon Avenue
Walnut, California 91789
29241 West Cottonwood Road
Gustine, California 95322
Rt. 1, Box 13
Highway 46 West
Garysburg, North Carolina 27831
Web Addresses
www.jbssinc.com
www.fishernuts.com
www.evonsnuts.com
Printed in U.S.A.
