John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) Q4 2023 Earnings Conference Call August 24, 2023 10:00 AM ET Company Participants Jeffrey Sanfilippo - Chief Executive Officer Frank Pellegrino - Chief Financial Officer Conference Call Participants Daniel Ambrefe - UBS Operator Good day, and thank you for standing by. Welcome to the John B. Sanfilippo & Son, Inc. Fourth Quarter and Full Year 2023 Operating Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorde ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 29, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 0-19681 JOHN B. SANFILIPPO & SON, INC. (Exact name of Registrant as specified in its Charter) (State or other jurisdiction of incorporation o ...

John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) Q3 2023 Earnings Conference Call May 3, 2023 10:00 AM ET Company Participants Jeffrey Sanfilippo - Chief Executive Officer Frank Pellegrino - Chief Financial Officer Conference Call Participants Operator Good day and welcome to the John B. Sanfilippo & Son, Inc. Third Quarter Fiscal 2023 Operating Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Instru ...

WASHINGTON, DC 20549 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-19681 JOHN B. SANFILIPPO & SON, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 36-2419677 ( State or other jurisdiction of in ...

Table of Contents (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 29, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-19681 JOHN B. SANFILIPPO & SON, INC. (Exact Name of Registrant as Specified in Its Charter) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (State or Other Jurisdiction of Incorporation or Or ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements, including comprehensive income, balance sheets, stockholders' equity, cash flows, and detailed notes on accounting policies and financial instruments [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) | Metric | Q1 FY2023 (Sept 29, 2022) ($ thousands) | Q1 FY2022 (Sept 23, 2021) ($ thousands) | Change (YoY) | | :--------------------------- | :------------------------ | :------------------------ | :------------ | | Net sales | $252,601 | $226,329 | +11.6% | | Cost of sales | $201,958 | $174,526 | +15.7% | | Gross profit | $50,643 | $51,803 | -2.2% | | Total operating expenses | $28,229 | $24,465 | +15.4% | | Income from operations | $22,414 | $27,338 | -18.0% | | Interest expense | $661 | $371 | +78.2% | | Income before income taxes | $21,002 | $26,001 | -19.2% | | Income tax expense | $5,457 | $6,752 | -19.2% | | Net income | $15,545 | $19,249 | -19.3% | | Comprehensive income | $15,551 | $19,518 | -20.3% | | Net income per common share-basic | $1.35 | $1.67 | -19.2% | | Net income per common share-diluted | $1.34 | $1.66 | -19.3% | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) | Metric | Sept 29, 2022 ($ thousands) | June 30, 2022 ($ thousands) | Sept 23, 2021 ($ thousands) | Change (QoQ) | Change (YoY) | | :-------------------------- | :------------ | :------------ | :------------ | :----------- | :----------- | | Cash | $298 | $415 | $539 | -28.2% | -44.8% | | Accounts receivable, net | $76,401 | $69,611 | $71,890 | +9.7% | +6.3% | | Inventories | $192,098 | $204,855 | $152,603 | -6.2% | +25.9% | | TOTAL CURRENT ASSETS | $275,543 | $283,164 | $235,439 | -2.7% | +17.0% | | TOTAL ASSETS | $440,771 | $447,262 | $407,161 | -1.5% | +8.3% | | Revolving credit facility borrowings | $42,624 | $40,439 | $45,264 | +5.4% | -5.8% | | TOTAL CURRENT LIABILITIES | $126,170 | $122,762 | $123,834 | +2.8% | +1.9% | | TOTAL LIABILITIES | $171,608 | $168,441 | $178,996 | +1.9% | -4.1% | | TOTAL STOCKHOLDERS' EQUITY | $269,163 | $278,821 | $228,165 | -3.5% | +18.0% | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) | Metric | June 30, 2022 ($ thousands) | Sept 29, 2022 ($ thousands) | Change ($ thousands) | | :-------------------------------- | :------------ | :------------ | :------- | | Balance, Total Stockholders' Equity | $278,821 | $269,163 | -$9,658 | | Net income | - | $15,545 | +$15,545 | | Cash dividends ($2.25 per share) | - | $(25,981) | -$25,981 | | Pension liability amortization, net of income tax expense | - | $6 | +$6 | | Stock-based compensation expense | - | $772 | +$772 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) | Metric | Q1 FY2023 (Sept 29, 2022) ($ thousands) | Q1 FY2022 (Sept 23, 2021) ($ thousands) | Change (YoY) ($ thousands) | | :-------------------------------- | :------------------------ | :------------------------ | :------------ | | Net cash provided by operating activities | $30,646 | $903 | +$29,743 | | Net cash used in investing activities | $(5,974) | $(1,237) | -$4,737 | | Net cash (used in) provided by financing activities | $(24,789) | $201 | -$24,990 | | Net decrease in cash | $(117) | $(133) | +$16 | | Cash, end of period | $298 | $539 | -44.8% | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [Note 1 – Basis of Presentation and Description of Business](index=9&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation%20and%20Description%20of%20Business) - The company is a leading processor and distributor of peanuts, pecans, cashews, walnuts, almonds, and other nuts in the United States[25](index=25&type=chunk) - Products are sold under Fisher, Orchard Valley Harvest, Squirrel Brand, Southern Style Nuts, and a variety of private brands[25](index=25&type=chunk) - Distribution channels include food retailers (consumer), commercial ingredient users, and contract packaging customers[25](index=25&type=chunk) [Note 2 – Revenue Recognition](index=9&type=section&id=Note%202%20%E2%80%93%20Revenue%20Recognition) - Revenue is recognized at the point in time when product control is transferred to the customer, typically upon shipment or delivery[31](index=31&type=chunk) - Variable consideration, such as promotional allowances and rebates, is accounted for as a reduction in revenue and estimated quarterly[32](index=32&type=chunk)[33](index=33&type=chunk) Revenue by Distribution Channel | Distribution Channel | Q1 FY2023 (Sept 29, 2022) ($ thousands) | Q1 FY2022 (Sept 23, 2021) ($ thousands) | | :------------------- | :------------------------ | :------------------------ | | Consumer | $196,547 | $179,761 | | Commercial Ingredients | $31,507 | $28,156 | | Contract Packaging | $24,547 | $18,412 | | **Total** | **$252,601** | **$226,329** | [Note 3 - Leases](index=11&type=section&id=Note%203%20-%20Leases) - The company leases equipment and a small warehouse, with remaining lease terms up to **4.8 years**[37](index=37&type=chunk)[38](index=38&type=chunk) Lease Assets and Liabilities | Metric | Sept 29, 2022 ($ thousands) | June 30, 2022 ($ thousands) | Sept 23, 2021 ($ thousands) | | :-------------------------- | :------------ | :------------ | :------------ | | Operating lease right-of-use assets | $2,430 | $2,303 | $3,171 | | Total lease liabilities | $2,457 | $2,334 | $3,216 | Lease Costs | Metric | Q1 FY2023 (Sept 29, 2022) ($ thousands) | Q1 FY2022 (Sept 23, 2021) ($ thousands) | | :------------------ | :------------------------ | :------------------------ | | Operating lease costs | $474 | $444 | | Variable lease costs | $57 | $17 | | **Total lease cost** | **$531** | **$461** | - The company leases office space in its Elgin, Illinois building, with approximately **70% of the rentable area currently vacant**[43](index=43&type=chunk)[115](index=115&type=chunk) [Note 4 – Inventories](index=13&type=section&id=Note%204%20%E2%80%93%20Inventories) Inventory Breakdown | Inventory Type | Sept 29, 2022 ($ thousands) | June 30, 2022 ($ thousands) | Sept 23, 2021 ($ thousands) | | :----------------------- | :------------ | :------------ | :------------ | | Raw material and supplies | $60,657 | $77,558 | $55,159 | | Work-in-process and finished goods | $131,441 | $127,297 | $97,444 | | **Total** | **$192,098** | **$204,855** | **$152,603** | - Total inventories increased by **$39.5 million (25.9%) year-over-year**, driven by higher commodity acquisition costs for pecans and increased quantities of finished goods and work-in-process[84](index=84&type=chunk)[110](index=110&type=chunk) [Note 5 – Goodwill and Intangible Assets](index=13&type=section&id=Note%205%20%E2%80%93%20Goodwill%20and%20Intangible%20Assets) Net Intangible Assets | Metric | Sept 29, 2022 ($ thousands) | June 30, 2022 ($ thousands) | Sept 23, 2021 ($ thousands) | | :------------------- | :------------ | :------------ | :------------ | | Net intangible assets | $7,621 | $8,065 | $9,457 | - Total amortization expense related to intangible assets was **$444 thousand** for the quarter ended September 29, 2022[49](index=49&type=chunk) - Goodwill of **$9.65 million** relates entirely to the Squirrel Brand acquisition in fiscal 2018, with no change in carrying amount during the quarter[49](index=49&type=chunk) [Note 6 – Credit Facility](index=14&type=section&id=Note%206%20%E2%80%93%20Credit%20Facility) - The company has a **$117.5 million** senior secured revolving credit facility[51](index=51&type=chunk) - As of September 29, 2022, **$70.7 million** of available credit remained under the facility, and the company was in compliance with all financial covenants[52](index=52&type=chunk)[122](index=122&type=chunk) [Note 7 – Earnings Per Common Share](index=14&type=section&id=Note%207%20%E2%80%93%20Earnings%20Per%20Common%20Share) Weighted Average Shares Outstanding | Metric | Q1 FY2023 (Sept 29, 2022) | Q1 FY2022 (Sept 23, 2021) | | :-------------------------------- | :------------------------ | :------------------------ | | Weighted average number of shares outstanding – basic | 11,553,432 | 11,519,472 | | Weighted average number of shares outstanding – diluted | 11,617,113 | 11,588,484 | [Note 8 – Stock-Based Compensation Plans](index=14&type=section&id=Note%208%20%E2%80%93%20Stock-Based%20Compensation%20Plans) Stock-Based Compensation Expense | Metric | Q1 FY2023 (Sept 29, 2022) ($ thousands) | Q1 FY2022 (Sept 23, 2021) ($ thousands) | | :-------------------------- | :------------------------ | :------------------------ | | Stock-based compensation expense | $772 | $703 | - As of September 29, 2022, total unrecognized compensation expense for non-vested RSUs was **$3.359 million**, expected to be recognized over a weighted average period of **1.2 years**[54](index=54&type=chunk) [Note 9 – Retirement Plan](index=14&type=section&id=Note%209%20%E2%80%93%20Retirement%20Plan) Net Periodic Benefit Cost | Metric | Q1 FY2023 (Sept 29, 2022) ($ thousands) | Q1 FY2022 (Sept 23, 2021) ($ thousands) | | :-------------------- | :------------------------ | :------------------------ | | Service cost | $200 | $248 | | Interest cost | $342 | $254 | | Amortization of loss | $7 | $364 | | **Net periodic benefit cost** | **$549** | **$866** | [Note 10 – Accumulated Other Comprehensive Loss](index=15&type=section&id=Note%2010%20%E2%80%93%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated Other Comprehensive Loss | Metric | Q1 FY2023 (Sept 29, 2022) ($ thousands) | Q1 FY2022 (Sept 23, 2021) ($ thousands) | | :-------------------------------- | :------------------------ | :------------------------ | | Balance at beginning of period | $(2,480) | $(9,025) | | Net current-period other comprehensive income | $6 | $269 | | Balance at end of period | $(2,474) | $(8,756) | [Note 11 – Commitments and Contingent Liabilities](index=15&type=section&id=Note%2011%20%E2%80%93%20Commitments%20and%20Contingent%20Liabilities) - The company is a party to various legal proceedings in the ordinary course of business[60](index=60&type=chunk) - Management believes the ultimate outcomes will not materially affect financial position, results of operations, or cash flows, but acknowledges the possibility of unfavorable outcomes[60](index=60&type=chunk) [Note 12 – Fair Value of Financial Instruments](index=16&type=section&id=Note%2012%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) - Carrying values of cash, trade accounts receivable, accounts payable, and revolving credit facility borrowings approximate fair values due to short-term maturities and market rates[61](index=61&type=chunk)[62](index=62&type=chunk) Debt Carrying and Fair Values | Metric | Sept 29, 2022 ($ thousands) | June 30, 2022 ($ thousands) | Sept 23, 2021 ($ thousands) | | :-------------------------------- | :------------ | :------------ | :------------ | | Carrying value of current and long-term debt | $9,660 | $10,927 | $13,812 | | Fair value of current and long-term debt | $9,583 | $11,179 | $15,360 | [Note 13 – Garysburg, North Carolina Facility](index=16&type=section&id=Note%2013%20%E2%80%93%20Garysburg,%20North%20Carolina%20Facility) - In Q1 FY2022, the Garysburg, North Carolina facility was sold for **$4.0 million**, resulting in a **$2.349 million** gain[64](index=64&type=chunk) [Note 14 – Recent Accounting Pronouncements](index=16&type=section&id=Note%2014%20%E2%80%93%20Recent%20Accounting%20Pronouncements) - No recent accounting pronouncements were adopted in the current fiscal year, and none are expected to have a material impact on the consolidated financial statements[65](index=65&type=chunk) [Note 15 – Subsequent Event](index=16&type=section&id=Note%2015%20%E2%80%93%20Subsequent%20Event) - On November 3, 2022, the Board of Directors declared a special cash dividend of **$1.00 per share**, payable on December 21, 2022[66](index=66&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's Q1 FY2023 financial performance, condition, and strategic initiatives, addressing impacts of inflation and supply chain issues [OVERVIEW](index=17&type=section&id=OVERVIEW) - The company's Long-Range Plan focuses on growing non-branded business, transforming key brands (Fisher, Orchard Valley Harvest, Squirrel Brand), diversifying into high-growth snacking segments, and increasing sales through innovation and targeted acquisitions[70](index=70&type=chunk) - Key challenges include significant inflation, potential economic downturn, supply chain disruptions (pallets, packaging, imported ingredients, transportation), and increased labor costs due to a tightening labor market[72](index=72&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk) - Consumers are shifting preferences due to inflation, potentially moving to private brands or lower-priced nuts, and favoring value-focused retail channels. E-commerce growth has decelerated[73](index=73&type=chunk) - The conflict in Ukraine has exacerbated supply chain disruptions, especially related to sunflower oil and aluminum packaging[75](index=75&type=chunk) - While transportation capacity issues began to ease in Q3 FY2022 and continued into FY2023, intermodal capacity remains tight, and fuel prices are volatile[76](index=76&type=chunk) - The company anticipates potential ongoing challenges from the COVID-19 pandemic in fiscal 2023, though fiscal 2022 saw significant sales volume improvement for foodservice and retail customers as restrictions eased[79](index=79&type=chunk) [QUARTERLY HIGHLIGHTS](index=19&type=section&id=QUARTERLY%20HIGHLIGHTS) Q1 FY2023 Financial Highlights | Metric | Q1 FY2023 (Sept 29, 2022) ($ millions) | Q1 FY2022 (Sept 23, 2021) ($ millions) | Change (YoY) | | :-------------------------- | :------------------------ | :------------------------ | :------------ | | Net sales | $252.6 | $226.3 | +11.6% | | Sales volume (pounds sold) | +1.8% | N/A | +1.8% | | Gross profit | $50.6 | $51.8 | -2.2% | | Gross profit margin | 20.0% | 22.9% | -2.9 pp | | Total operating expenses | $28.2 | $24.5 | +15.4% | | Total inventory value | $192.1 | $152.6 | +25.9% | - Acquisition costs for most major tree nuts are expected to be flat or decrease, while peanut acquisition costs are expected to increase modestly in the 2022 crop year[85](index=85&type=chunk) [RESULTS OF OPERATIONS](index=20&type=section&id=RESULTS%20OF%20OPERATIONS) Key Financial Results | Metric | Q1 FY2023 (Sept 29, 2022) ($ millions) | Q1 FY2022 (Sept 23, 2021) ($ millions) | Change (YoY) | | :--------------------------- | :------------------------ | :------------------------ | :------------ | | Net Sales | $252.6 | $226.3 | +11.6% | | Gross Profit | $50.6 | $51.8 | -2.2% | | Income from Operations | $22.4 | $27.3 | -18.0% | | Net Income | $15.5 | $19.2 | -19.3% | - Net sales increased **11.6%** due to a **9.6%** increase in weighted average sales price per pound and a **1.8%** increase in sales volume[88](index=88&type=chunk) Net Sales by Distribution Channel | Distribution Channel | Q1 FY2023 (Sept 29, 2022) ($ thousands) | Q1 FY2022 (Sept 23, 2021) ($ thousands) | $ Change ($ thousands) | % Change | | :------------------- | :------------------------ | :------------------------ | :------- | :------- | | Consumer | $196,547 | $179,761 | $16,786 | 9.3% | | Commercial Ingredients | $31,507 | $28,156 | $3,351 | 11.9% | | Contract Packaging | $24,547 | $18,412 | $6,135 | 33.3% | | **Total** | **$252,601** | **$226,329** | **$26,272** | **11.6%** | - Consumer channel sales volume decreased **0.6%** due to lost private brand distribution, partially offset by increased distribution at a mass merchandising retailer. Fisher recipe nuts volume increased **20.0%**[91](index=91&type=chunk) - Gross profit decreased by **$1.2 million (2.2%)** and gross profit margin declined to **20.0% from 22.9%**, primarily due to higher acquisition costs for nuts and other inflationary cost increases[95](index=95&type=chunk) - Total operating expenses increased by **$3.8 million (15.4%)** to **$28.2 million**, mainly due to a non-recurring gain on sale of a facility in the prior year and increases in compensation expenses[83](index=83&type=chunk)[96](index=96&type=chunk)[99](index=99&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=22&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) - The company's liquidity is primarily supported by operating cash flows and its **$117.5 million** revolving credit facility, which are expected to be sufficient for the next twelve months[107](index=107&type=chunk) Cash Flow Summary | Metric | Q1 FY2023 (Sept 29, 2022) ($ thousands) | Q1 FY2022 (Sept 23, 2021) ($ thousands) | $ Change ($ thousands) | | :-------------------------------- | :------------------------ | :------------------------ | :------- | | Operating activities | $30,646 | $903 | +$29,743 | | Investing activities | $(5,974) | $(1,237) | -$4,737 | | Financing activities | $(24,789) | $201 | -$24,990 | | Net decrease in cash | $(117) | $(133) | +$16 | - Net cash provided by operating activities increased significantly due to a decreased use of working capital, particularly a **$12.8 million** decrease in inventories[109](index=109&type=chunk) - Cash used in investing activities increased due to the non-recurrence of **$3.9 million** in proceeds from the Garysburg facility sale in the prior year, coupled with **$5.9 million** in capital expenditures[113](index=113&type=chunk) - Cash used in financing activities was **$24.8 million**, a significant shift from the prior year, primarily due to lower net short-term borrowings (**$2.2 million** vs. **$36.6 million**) and reduced dividends paid[114](index=114&type=chunk) - The company has a **$117.5 million** senior secured revolving credit facility (weighted average interest rate **5.4%** in Q1 FY2023) and a Mortgage Facility (fixed at **4.25%** per annum) maturing in March 2025 and March 2023, respectively[117](index=117&type=chunk)[119](index=119&type=chunk)[123](index=123&type=chunk) - A **$8.2 million** debt obligation is outstanding as of September 29, 2022, related to the sale-leaseback of Selma Properties, with the lease term extended to September 2026[124](index=124&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material change in the company's assessment of market risk sensitivity has occurred since the most recent Annual Report on Form 10-K - No material change in the company's assessment of market risk sensitivity since the presentation in its Annual Report on Form 10-K for the fiscal year ended June 30, 2022[131](index=131&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The company's disclosure controls and procedures were effective as of September 29, 2022[133](index=133&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended September 29, 2022[134](index=134&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 11 for details on legal proceedings, confirming the company's involvement in ordinary course legal matters - For a discussion of legal proceedings, refer to Note 11 – 'Commitments and Contingent Liabilities' in Part I, Item 1 of this Form 10-Q[136](index=136&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) No significant changes to the risk factors identified in the Annual Report on Form 10-K occurred during the first quarter of fiscal 2023 - No significant changes to the risk factors identified in the Annual Report on Form 10-K for the fiscal year ended June 30, 2022, occurred during the first quarter of fiscal 2023[138](index=138&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed with the Form 10-Q, including corporate governance, compensation, credit, and certification documents - The exhibit index lists various corporate documents (e.g., Restated Certificate of Incorporation, Amended and Restated Bylaws), incentive plans, credit agreements, and certifications (e.g., Sarbanes-Oxley Act certifications)[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) [SIGNATURE](index=30&type=section&id=SIGNATURE) This section formally concludes the report, signed by the Chief Financial Officer, Executive Vice President, Finance and Administration - The report was signed by Frank S. Pellegrino, Chief Financial Officer, Executive Vice President, Finance and Administration, on November 3, 2022[150](index=150&type=chunk)

John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) Q4 2022 Earnings Conference Call August 25, 2022 10:00 AM ET Company Representatives Jeffrey Sanfilippo - Chief Executive Officer Jasper B Sanfilippo Jr. - Chief Operating Officer Mike Valentine - Group President Frank Pellegrino - Chief Financial Officer Conference Call Participants Operator Good day, and thank you for standing by. Welcome to the John B. Sanfilippo & Son, Incorporated Fourth Quarter and Fiscal 2022 Year-End Operating Results Conference Call. At ...

PART I [Item 1 — Business](index=3&type=section&id=Item%201%20%E2%80%94%20Business) John B. Sanfilippo & Son, Inc. is a leading U.S. nut processor and distributor, utilizing vertical integration and selling through consumer, commercial, and contract packaging channels with seasonal demand - The company is a major processor and distributor of various nuts, including peanuts, pecans, cashews, walnuts, and almonds, under brands like Fisher, Orchard Valley Harvest, Squirrel Brand, and Southern Style Nuts, as well as private labels[14](index=14&type=chunk) - A key strategy is vertical integration for pecans, peanuts, and walnuts, which involves controlling the process from grower procurement to final marketing, aiming to enhance quality and lower costs[18](index=18&type=chunk) - Products are distributed through three primary channels: consumer (food retailers), commercial ingredients (for other manufacturers), and contract packaging[14](index=14&type=chunk)[24](index=24&type=chunk) - The business experiences seasonality, with the highest demand for nut products occurring in the last four months of the calendar year, and raw material procurement concentrated between September and February[47](index=47&type=chunk) [Principal Products and Raw Materials](index=4&type=section&id=Item%201%20%E2%80%94%20Business_Principal%20Products%20and%20Raw%20Materials) Raw and processed nuts, including various types and mixes, constitute 94% of gross sales, with 32% of nut purchases sourced internationally - Raw and processed nuts, including trail and snack mixes, accounted for approximately **94% of gross sales** in fiscal 2022[21](index=21&type=chunk) - The company sources all its walnuts, almonds, and peanuts domestically, while pecans are sourced from the southern U.S. and Mexico, and cashews are imported from Vietnam and certain West African countries[33](index=33&type=chunk) - In fiscal 2022, approximately **32% of the total dollar value of nut purchases** was from foreign sources[33](index=33&type=chunk) [Customers and Channels](index=4&type=section&id=Item%201%20%E2%80%94%20Business_Customers%20and%20Channels) The company serves 265 customers across three channels, with Wal-Mart and Target collectively accounting for 49% of fiscal 2022 net sales Major Customer Concentration (as % of Net Sales) | Customer | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Wal-Mart Stores, Inc. | 35% | 34% | 33% | | Target Corporation | 14% | 14% | 12% | - No other single customer accounted for more than **10% of net sales** in the presented periods[25](index=25&type=chunk) [Competition](index=5&type=section&id=Item%201%20%E2%80%94%20Business_Competition) Operating in a highly competitive snack food industry, the company faces larger rivals like Hormel (Planters) and competes on price, quality, and brand - The company competes with major players like Hormel Foods Corp. (Planters brand) and the Diamond brand, as well as numerous regional snack food processors[32](index=32&type=chunk) - Key competitive factors are price, product quality, customer service, breadth of product line, brand name awareness, distribution method, sales promotion, and innovation[32](index=32&type=chunk) [Human Capital](index=6&type=section&id=Item%201%20%E2%80%94%20Business_Human%20Capital) As of June 30, 2022, the company employed 1,300 full-time staff, focusing on health, diversity, development, and rewards, including leadership programs and wage adjustments - The company employed approximately **1,300 full-time employees** as of June 30, 2022[40](index=40&type=chunk) - In fiscal 2022, a pilot Leadership Development program resulted in approximately **36% of its 41 participants** moving into higher-level jobs[43](index=43&type=chunk) - Over **38% of employees** received market-based wage adjustments in fiscal 2022, and approximately **16%** received promotions[43](index=43&type=chunk)[45](index=45&type=chunk) - The company offers annual cash bonus opportunities through its SVA (**20% of employees**) and TTP (**80% of employees**) incentive programs[45](index=45&type=chunk) [Item 1A — Risk Factors](index=8&type=section&id=Item%201A%20%E2%80%94%20Risk%20Factors) The company faces significant industry, business, regulatory, legal, and financial risks, including pandemic impacts, raw material volatility, customer dependence, and family voting control [Industry Risks](index=8&type=section&id=Item%201A%20%E2%80%94%20Risk%20Factors_Industry%20Risks) Industry risks include pandemic disruptions, volatile raw material costs, intense competition, changing consumer preferences, and food safety concerns - The COVID-19 pandemic and similar outbreaks pose risks of decreased demand, supply chain disruption, and economic downturns, which could affect product demand and margins[51](index=51&type=chunk)[53](index=53&type=chunk) - The availability and cost of raw materials (nuts, fruits, oils) are subject to uncontrollable factors like weather, plant diseases, and global demand, and the company cannot hedge against these commodity price fluctuations[58](index=58&type=chunk)[59](index=59&type=chunk) - The company operates in a highly competitive environment against larger companies with greater resources, such as Hormel Foods Corp. (Planters brand), and faces pressure from private label offerings[62](index=62&type=chunk) - Changing consumer preferences, concerns about health and sustainability, and the shift to e-commerce require continuous product innovation and investment, which may not be recovered if new products fail[65](index=65&type=chunk) - Food safety risks, particularly related to nut allergies and cross-contamination, could lead to product recalls, loss of consumer confidence, and significant liabilities[68](index=68&type=chunk) [Business Risks](index=13&type=section&id=Item%201A%20%E2%80%94%20Risk%20Factors_Business%20Risks) Business risks include high customer concentration, reliance on key management, limited production facilities, and the potential failure of the Long-Range Plan - The company is highly dependent on a few significant customers, with the five largest customers accounting for approximately **63% of net sales** in fiscal 2022[80](index=80&type=chunk) - Future success is largely dependent on the senior operating management team, who have not entered into employment or non-compete agreements[82](index=82&type=chunk) - Products are processed at a limited number of facilities, and a significant disruption at any one of them could materially impact the availability of products[83](index=83&type=chunk) - Failure to successfully implement the Long-Range Plan, which involves growing branded products and pursuing strategic acquisitions, could adversely affect financial results[84](index=84&type=chunk)[86](index=86&type=chunk) [Regulatory and Legal Risks](index=15&type=section&id=Item%201A%20%E2%80%94%20Risk%20Factors_Regulatory%20and%20Legal%20Risks) Regulatory and legal risks include extensive government oversight, costly food safety compliance, international operational hazards, and potential litigation - The business is subject to extensive regulation by the FDA, USDA, and EPA, with compliance, particularly under the Food Safety Modernization Act (FSMA), being costly and critical[87](index=87&type=chunk)[89](index=89&type=chunk) - Approximately **32% of the dollar value of total nut purchases** in fiscal 2022 were from foreign countries, exposing the company to international risks like tariffs, political instability, and supply chain disruptions[91](index=91&type=chunk) - The company faces potential litigation related to product liability, labeling, employment, and other business aspects, which can be expensive to defend[94](index=94&type=chunk) - Protecting intellectual property, especially trademarks like Fisher and Orchard Valley Harvest, is crucial, and failure to do so could diminish competitiveness[95](index=95&type=chunk) [Financial Risks](index=16&type=section&id=Item%201A%20%E2%80%94%20Risk%20Factors_Financial%20Risks) Financial risks include majority voting control by founding families, pledged stock collateral, potential impairment of goodwill, and inventory valuation uncertainties - The Sanfilippo Group and Valentine Group control approximately **50.7% and 23.8%** of the company's voting interest, respectively, giving them the ability to direct the election of the majority of the Board and influence corporate actions[97](index=97&type=chunk) - Several stockholders in the Sanfilippo Group have pledged shares of Class A Stock to secure loans, which could lead to a forced sale and a change of control if they default[99](index=99&type=chunk) - The company had goodwill of **$9.6M** and other intangible assets of **$8.1M** as of June 30, 2022, which are subject to impairment risk[101](index=101&type=chunk) - The valuation of bulk-stored nut inventories involves estimates that are subject to periodic adjustments, which directly affect earnings, with the precise amount not known until the entire quantity is depleted[102](index=102&type=chunk) [Item 1B — Unresolved Staff Comments](index=18&type=section&id=Item%201B%20%E2%80%94%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[104](index=104&type=chunk) [Item 2 — Properties](index=18&type=section&id=Item%202%20%E2%80%94%20Properties) The company operates four main production facilities, including Elgin (headquarters), Selma (pecans), Bainbridge (peanuts), and Gustine (walnuts), with varying utilization rates Principal Production Facilities and FY2022 Utilization | Location | Primary Use | Annual Capacity | FY2022 Processed/Shelled | | :--- | :--- | :--- | :--- | | Selma, TX | Pecan Shelling | >90M inshell lbs | ~38M inshell lbs | | Bainbridge, GA | Peanut Shelling | ~120M inshell lbs | ~100M inshell lbs | | Gustine, CA | Walnut Shelling | >60M inshell lbs | ~34M inshell lbs | - The primary processing and distribution facility in Elgin, IL, can accommodate a **15% to 20% increase** in production capacity, but certain production lines and finished goods storage are nearing full capacity[112](index=112&type=chunk) - The Garysburg, North Carolina facility, which ceased operations in fiscal 2021, was sold during the first quarter of fiscal 2022[110](index=110&type=chunk) [Item 3 — Legal Proceedings](index=19&type=section&id=Item%203%20%E2%80%94%20Legal%20Proceedings) Management anticipates that ongoing legal proceedings will not materially adversely affect the company's financial condition, results, or cash flows - Management does not expect current legal proceedings to have a material adverse effect on the company's financials[117](index=117&type=chunk) [Item 4 — Mine Safety Disclosures](index=19&type=section&id=Item%204%20%E2%80%94%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[119](index=119&type=chunk) PART II [Item 5 — Market for Registrant's Common Equity and Related Stockholder Matters](index=22&type=section&id=Item%205%20%E2%80%94%20Market%20for%20Registrant%27s%20Common%20Equity%20and%20Related%20Stockholder%20Matters) The company has dual-class stock (JBSS and Class A), pays annual cash dividends, and declared $3.00 per share in fiscal 2022 - The company has a dual-class stock structure: Common Stock (**1 vote/share**, traded as JBSS) and Class A Stock (**10 votes/share**, not publicly traded)[134](index=134&type=chunk) Recent Dividends Declared Per Share | Declaration Date | Type | Amount | Payment Date | | :--- | :--- | :--- | :--- | | July 8, 2021 | Annual & Special | $3.00 | Aug 25, 2021 | | Jan 27, 2021 | Special | $2.50 | Mar 16, 2021 | | July 9, 2020 | Annual & Special | $2.50 | Aug 21, 2020 | | Post FY2022 | Annual & Special | $2.25 | Aug 31, 2022 | - As of June 30, 2022, there were **593,034 securities** remaining available for future issuance under equity compensation plans approved by stockholders[146](index=146&type=chunk) [Item 6 — Selected Financial Data](index=24&type=section&id=Item%206%20%E2%80%94%20Selected%20Financial%20Data) This section summarizes five years of financial data, reporting fiscal 2022 net sales of $955.9 million, net income of $61.8 million, and total assets of $447.3 million Selected Financial Data (in thousands, except per share data) | Metric | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Net sales | $955,868 | $858,482 | $880,092 | | Gross profit | $199,627 | $184,987 | $175,775 | | Income from operations | $87,437 | $85,178 | $78,547 | | Net income | $61,787 | $59,741 | $54,110 | | Diluted EPS | $5.33 | $5.17 | $4.69 | | Total assets | $447,262 | $398,455 | $407,457 | | Total debt | $51,362 | $23,383 | $47,023 | [Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%207%20%E2%80%94%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses fiscal 2022 performance, noting an 11.3% net sales increase to $955.9 million, a gross margin decline, and a significant decrease in operating cash flow due to inventory investment [Results of Operations (FY2022 vs. FY2021)](index=27&type=section&id=Item%207%20%E2%80%94%20Management%27s%20Discussion%20and%20Analysis_Results%20of%20Operations%20(FY2022%20vs.%20FY2021)) Fiscal 2022 net sales increased 11.3% to $955.9 million, driven by volume and price, though gross margin declined due to higher commodity and input costs FY2022 vs. FY2021 Performance (in millions) | Metric | FY 2022 | FY 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $955.9M | $858.5M | 11.3% | | Gross Profit | $199.6M | $185.0M | 7.9% | | Gross Profit Margin | 20.9% | 21.5% | (0.6) p.p. | | Net Income | $61.8M | $59.7M | 3.5% | | Diluted EPS | $5.33 | $5.17 | 3.1% | - The increase in net sales was attributed to a **6.9% increase in sales volume** and a **4.2% increase in the weighted average selling price per pound**[168](index=168&type=chunk) Net Sales by Distribution Channel (FY2022 vs FY2021, in millions) | Distribution Channel | FY 2022 Sales | % Change from FY2021 | | :--- | :--- | :--- | | Consumer | $749.9M | +9.3% | | Commercial Ingredients | $120.6M | +29.8% | | Contract Packaging | $85.4M | +7.4% | [Liquidity and Capital Resources](index=29&type=section&id=Item%207%20%E2%80%94%20Management%27s%20Discussion%20and%20Analysis_Liquidity%20and%20Capital%20Resources) Fiscal 2022 operating cash flow significantly decreased to $19.6 million due to increased inventory investment, while the company utilized its credit facility for liquidity Cash Flow Summary (in thousands) | Activity | FY 2022 | FY 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $19,604 | $104,697 | | Net cash used in investing activities | ($11,376) | ($22,950) | | Net cash used in financing activities | ($8,485) | ($82,610) | - The decrease in operating cash flow was primarily due to an **$81.0M higher use of cash for inventory** in FY2022, compared to a **$24.1M decrease** in FY2021[190](index=190&type=chunk) - Total debt stood at **$51.4M** at the end of fiscal 2022, up from **$23.4M** at the end of fiscal 2021[149](index=149&type=chunk) - As of June 30, 2022, the company had **$71.9M of available credit** under its Revolving Credit Facility[203](index=203&type=chunk) [Critical Accounting Policies and Estimates](index=32&type=section&id=Item%207%20%E2%80%94%20Management%27s%20Discussion%20and%20Analysis_Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies involve significant judgment in revenue recognition, impairment assessments for assets and goodwill, and retirement plan accounting estimates - Critical policies involve significant management judgment and estimates[208](index=208&type=chunk) - Key areas of estimation include: customer deductions for revenue recognition, recoverability of long-lived assets and goodwill, quantity of bulk inventories, and assumptions for the retirement plan liability (e.g., discount rates)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[216](index=216&type=chunk) [Item 7A — Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%207A%20%E2%80%94%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces unhedged market risks from interest rates, commodity prices (especially nuts), and foreign exchange, with a 1% material cost increase impacting FY2022 gross profit by $5.9 million - The company does not hedge against commodity price risk, and a hypothetical **1% increase in material costs** would have reduced FY2022 gross profit by about **$5.9M**[223](index=223&type=chunk) - Approximately **32% of the dollar value of total nut purchases** for fiscal 2022 were from foreign countries, creating exposure to foreign currency fluctuations, although purchases are made in U.S. dollars[224](index=224&type=chunk) - A hypothetical **10% adverse change** in weighted-average interest rates on its variable rate debt would have had less than a **$0.1M impact** on net income for fiscal 2022[225](index=225&type=chunk) [Item 8 — Financial Statements and Supplementary Data](index=35&type=section&id=Item%208%20%E2%80%94%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the independent auditor's unqualified opinion and the company's consolidated financial statements, including balance sheets, income statements, and cash flows, with detailed notes - PricewaterhouseCoopers LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of June 30, 2022[228](index=228&type=chunk) - The auditor identified the valuation of the projected benefit obligation for the Supplemental Employee Retirement Plan (SERP) as a critical audit matter, due to the significant management judgment involved in determining the discount rate[235](index=235&type=chunk)[236](index=236&type=chunk) [Consolidated Financial Statements](index=37&type=section&id=Item%208%20%E2%80%94%20Financial%20Statements%20and%20Supplementary%20Data_Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of $447.3 million and stockholders' equity of $278.8 million as of June 30, 2022, with fiscal 2022 net sales of $955.9 million Key Balance Sheet Figures (in thousands) | Account | June 30, 2022 | June 24, 2021 | | :--- | :--- | :--- | | Total Current Assets | $283,164 | $225,167 | | Total Assets | $447,262 | $398,455 | | Total Current Liabilities | $122,762 | $100,204 | | Total Liabilities | $168,441 | $155,961 | | Total Stockholders' Equity | $278,821 | $242,494 | Key Income Statement Figures (in thousands) | Account | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Net Sales | $955,868 | $858,482 | $880,092 | | Gross Profit | $199,627 | $184,987 | $175,775 | | Income from Operations | $87,437 | $85,178 | $78,547 | | Net Income | $61,787 | $59,741 | $54,110 | [Notes to Consolidated Financial Statements](index=42&type=section&id=Item%208%20%E2%80%94%20Financial%20Statements%20and%20Supplementary%20Data_Notes%20to%20Consolidated%20Financial%20Statements) Notes to the financial statements provide detailed disclosures on accounting policies, including revenue recognition, inventories, goodwill, debt, and the retirement plan - Note 2 (Revenue Recognition): Revenue is disaggregated by channel, with the Consumer channel representing **$749.9M** of the **$955.9M total net sales** in FY2022[310](index=310&type=chunk) - Note 5 (Goodwill and Intangible Assets): As of June 30, 2022, the company had net goodwill of **$9.65M** and net intangible assets of **$8.07M**[325](index=325&type=chunk)[326](index=326&type=chunk) - Note 14 (Retirement Plan): The projected benefit obligation for the SERP was **$29.5M** at June 30, 2022, a decrease from **$35.5M** at the prior year-end, primarily due to a significant actuarial gain from a higher discount rate (**4.68% vs 2.89%**)[351](index=351&type=chunk)[354](index=354&type=chunk) [Item 9A — Controls and Procedures](index=64&type=section&id=Item%209A%20%E2%80%94%20Controls%20and%20Procedures) Management and the independent auditor concluded that disclosure controls and internal control over financial reporting were effective as of June 30, 2022 - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2022[370](index=370&type=chunk) - Management concluded that internal control over financial reporting was effective as of June 30, 2022, a conclusion audited and affirmed by PricewaterhouseCoopers LLP[371](index=371&type=chunk)[372](index=372&type=chunk) PART III [Item 10 — Directors, Executive Officers and Corporate Governance](index=65&type=section&id=Item%2010%20%E2%80%94%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement - This section incorporates information by reference from the definitive Proxy Statement for the Annual Meeting of Stockholders to be held November 3, 2022[376](index=376&type=chunk) [Item 11 — Executive Compensation](index=65&type=section&id=Item%2011%20%E2%80%94%20Executive%20Compensation) Information on executive and director compensation is incorporated by reference from the 2022 Proxy Statement - This section incorporates information by reference from the definitive Proxy Statement for the 2022 Annual Meeting[378](index=378&type=chunk) [Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=65&type=section&id=Item%2012%20%E2%80%94%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership of beneficial owners and management is incorporated by reference from the 2022 Proxy Statement - This section incorporates information by reference from the definitive Proxy Statement for the 2022 Annual Meeting[379](index=379&type=chunk) [Item 13 — Certain Relationships and Related Transactions, and Director Independence](index=65&type=section&id=Item%2013%20%E2%80%94%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related party transactions, and director independence is incorporated by reference from the 2022 Proxy Statement - This section incorporates information by reference from the definitive Proxy Statement for the 2022 Annual Meeting[380](index=380&type=chunk) [Item 14 — Principal Accounting Fees and Services](index=65&type=section&id=Item%2014%20%E2%80%94%20Principal%20Accounting%20Fees%20and%20Services) Information on principal accounting fees and services is incorporated by reference from the 2022 Proxy Statement - This section incorporates information by reference from the definitive Proxy Statement for the 2022 Annual Meeting[381](index=381&type=chunk) PART IV [Item 15 — Exhibits, Financial Statement Schedules](index=66&type=section&id=Item%2015%20%E2%80%94%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements included in Item 8, notes the omission of schedules, and refers to the Exhibit Index - The financial statements are included in Part II, Item 8, and all financial statement schedules are omitted[382](index=382&type=chunk)[383](index=383&type=chunk) - A list of exhibits filed with the report is provided in the Exhibit Index[384](index=384&type=chunk) [Item 16 — Form 10-K Summary](index=66&type=section&id=Item%2016%20%E2%80%94%20Form%2010-K%20Summary) The company reports that there is no Form 10-K summary - None[387](index=387&type=chunk)

John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) Q3 2022 Earnings Conference Call April 28, 2022 11:00 AM ET Company Participants Frank Pellegrino - Chief Financial Officer Jeffrey Sanfilippo - Chief Executive Officer Jasper Sanfilippo - Chief Operating Officer Conference Call Participants Chris McGinnis - Sidoti & Company Operator Welcome to the John B. Sanfilippo & Son Incorporated Third Quarter Fiscal 2022 Operating Results Conference Call. My name is James and I will be your operator for today's call. At th ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial statements, including comprehensive income, balance sheets, stockholders' equity, and cash flows, with accompanying notes [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section provides the unaudited consolidated financial statements and detailed notes for the quarter and thirty-nine weeks ended March 24, 2022 [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This statement details the company's revenues, costs, and net income for the quarter and thirty-nine weeks ended March 24, 2022, and comparative periods Consolidated Statements of Comprehensive Income (in thousands) | Metric | Q3 Fiscal 2022 (Ended Mar 24, 2022) | Q3 Fiscal 2021 (Ended Mar 25, 2021) | 39 Weeks Fiscal 2022 (Ended Mar 24, 2022) | 39 Weeks Fiscal 2021 (Ended Mar 25, 2021) | | :-------------------------------- | :---------------------------------- | :---------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net sales | $218,584 | $207,892 | $698,120 | $651,740 | | Cost of sales | $179,175 | $161,846 | $554,678 | $513,567 | | Gross profit | $39,409 | $46,046 | $143,442 | $138,173 | | Income from operations | $17,424 | $21,097 | $63,024 | $67,766 | | Net income | $11,877 | $14,701 | $44,373 | $47,398 | | Net income per common share-basic | $1.03 | $1.28 | $3.85 | $4.12 | | Net income per common share-diluted | $1.02 | $1.27 | $3.83 | $4.10 | - Net sales increased by **5.1%** for the quarter and **7.1%** for the thirty-nine weeks ended March 24, 2022, compared to the prior year periods[11](index=11&type=chunk) - Gross profit decreased by **14.4%** for the quarter but increased by **3.8%** for the thirty-nine weeks ended March 24, 2022[11](index=11&type=chunk) - Net income decreased by **19.3%** for the quarter and **6.4%** for the thirty-nine weeks ended March 24, 2022[11](index=11&type=chunk) [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) This statement presents the company's financial position, including assets, liabilities, and stockholders' equity, as of March 24, 2022, and comparative dates Consolidated Balance Sheets (in thousands) | Asset/Liability | March 24, 2022 | June 24, 2021 | March 25, 2021 | | :------------------------------------------ | :------------- | :------------ | :------------- | | **ASSETS:** | | | | | Cash | $667 | $672 | $1,043 | | Accounts receivable, net | $68,704 | $66,334 | $64,502 | | Inventories | $211,127 | $147,998 | $151,757 | | Total Current Assets | $288,151 | $225,167 | $223,783 | | Total Property, Plant and Equipment, net | $133,123 | $133,374 | $129,875 | | Total Assets | $453,579 | $398,455 | $392,228 | | **LIABILITIES & STOCKHOLDERS' EQUITY:** | | | | | Revolving credit facility borrowings | $65,863 | $8,653 | $26,005 | | Total Current Liabilities | $145,815 | $100,204 | $106,672 | | Total Long-Term Liabilities | $52,985 | $55,757 | $54,653 | | Total Liabilities | $198,800 | $155,961 | $161,325 | | Total Stockholders' Equity | $254,779 | $242,494 | $230,903 | | Total Liabilities & Stockholders' Equity | $453,579 | $398,455 | $392,228 | - Total assets increased to **$453.6 million** as of March 24, 2022, from **$398.5 million** at June 24, 2021, primarily driven by a significant increase in inventories[14](index=14&type=chunk) - Current liabilities saw a substantial increase, mainly due to higher revolving credit facility borrowings, rising from **$8.7 million** at June 24, 2021, to **$65.9 million** at March 24, 2022[17](index=17&type=chunk) [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement outlines changes in stockholders' equity, reflecting net income, dividends, and stock-based compensation, for the period ended March 24, 2022 Consolidated Statements of Stockholders' Equity (in thousands) | Item | Balance, June 24, 2021 | Net Income | Cash Dividends | Stock-based Compensation Expense | Balance, March 24, 2022 | | :------------------------------------ | :--------------------- | :--------- | :------------- | :------------------------------- | :---------------------- | | Total Stockholders' Equity (in thousands) | $242,494 | $44,373 (cumulative for 39 weeks) | $(34,534) | $2,649 (cumulative for 39 weeks) | $254,779 | - Total stockholders' equity increased from **$242.5 million** at June 24, 2021, to **$254.8 million** at March 24, 2022, primarily due to net income partially offset by cash dividends[20](index=20&type=chunk) - Cash dividends of **$3.00 per share** were paid, totaling **$34.5 million** for the period from June 24, 2021, to March 24, 2022[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement reports cash inflows and outflows from operating, investing, and financing activities for the thirty-nine weeks ended March 24, 2022 Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 39 Weeks Ended March 24, 2022 | 39 Weeks Ended March 25, 2021 | | :-------------------------------- | :---------------------------- | :---------------------------- | | Net cash (used in) provided by operating activities | $(12,555) | $77,026 | | Net cash used in investing activities | $(6,488) | $(13,620) | | Net cash provided by (used in) financing activities | $19,038 | $(63,898) | | Net decrease in cash | $(5) | $(492) | | Cash, end of period | $667 | $1,043 | - Operating activities shifted from providing **$77.0 million** in cash in fiscal 2021 to using **$12.6 million** in fiscal 2022, primarily due to increased working capital for inventory[22](index=22&type=chunk)[122](index=122&type=chunk) - Cash used in investing activities decreased from **$13.6 million** in fiscal 2021 to **$6.5 million** in fiscal 2022, partly due to proceeds from the sale of the Garysburg facility and life insurance policies[22](index=22&type=chunk)[125](index=125&type=chunk) - Financing activities provided **$19.0 million** in cash in fiscal 2022, a significant change from using **$63.9 million** in fiscal 2021, driven by net short-term borrowings[22](index=22&type=chunk)[127](index=127&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures regarding the company's accounting policies and financial statement line items - The company is a leading processor and distributor of various nuts and snack products under multiple brand names and private labels, sold through consumer, commercial ingredients, and contract packaging channels[24](index=24&type=chunk) - Revenue recognition is generally at a point in time when product control transfers to the customer upon shipment or delivery, with variable consideration for promotional allowances and rebates accounted for as a reduction in revenue[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) Revenue Disaggregated by Sales Channel (in thousands) | Distribution Channel | Q3 Fiscal 2022 | Q3 Fiscal 2021 | 39 Weeks Fiscal 2022 | 39 Weeks Fiscal 2021 | | :------------------- | :------------- | :------------- | :------------------- | :------------------- | | Consumer | $173,648 | $169,415 | $556,888 | $528,201 | | Commercial Ingredients | $25,514 | $21,052 | $81,426 | $64,399 | | Contract Packaging | $19,422 | $17,425 | $59,806 | $59,140 | | Total | $218,584 | $207,892 | $698,120 | $651,740 | - Inventories increased significantly to **$211.1 million** at March 24, 2022, from **$151.8 million** at March 25, 2021, primarily due to higher commodity acquisition costs and increased quantities of certain nuts and finished goods[46](index=46&type=chunk)[123](index=123&type=chunk) - Goodwill of **$9.65 million** relates entirely to the Squirrel Brand acquisition in fiscal 2018, with no change in its carrying amount during the thirty-nine weeks ended March 24, 2022[48](index=48&type=chunk) - The company sold its Garysburg, North Carolina facility in the first quarter of fiscal 2022 for **$4.0 million**, resulting in a **$2.349 million** gain[68](index=68&type=chunk)[111](index=111&type=chunk) - Recent accounting pronouncements (ASU No. 2019-12 and ASU No. 2020-10) adopted in fiscal 2022 did not have a material impact on the consolidated financial statements[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, liquidity, and capital resources, highlighting key challenges and strategic initiatives [OVERVIEW](index=18&type=section&id=OVERVIEW) This section provides a general introduction to the company's business, strategic focus, and the significant challenges it faces - John B. Sanfilippo & Son, Inc. is a leading processor and distributor of nuts and snack products under various brands and private labels, serving consumer, commercial ingredients, and contract packaging channels[73](index=73&type=chunk) - The company's strategic plan focuses on growing its branded business through innovation, expanded distribution, diversified offerings, and increased e-commerce sales[74](index=74&type=chunk) - Significant challenges include competitive pricing pressures, evolving consumer preferences (e.g., shift to value channels due to inflation), and supply chain issues causing shortages and increased costs for inputs, transportation, and labor[75](index=75&type=chunk) [QUARTERLY HIGHLIGHTS](index=20&type=section&id=QUARTERLY%20HIGHLIGHTS) This section summarizes key financial performance metrics and trends for the quarter and thirty-nine weeks ended March 24, 2022 Key Financial Highlights (in millions) | Metric | Q3 Fiscal 2022 | Q3 Fiscal 2021 | 39 Weeks Fiscal 2022 | 39 Weeks Fiscal 2021 | | :-------------------- | :------------- | :------------- | :------------------- | :------------------- | | Net sales | $218.6 | $207.9 | $698.1 | $651.7 | | Sales volume (pounds) | -2.8% YoY | N/A | +5.6% YoY | N/A | | Gross profit | $39.4 | $46.0 | $143.4 | $138.2 | | Gross profit margin | 18.0% | 22.1% | 20.5% | 21.2% | | Total operating expenses | $22.0 | $24.9 | $80.4 | $70.4 | | Inventories (period end) | $211.1 | $151.8 | N/A | N/A | - Net sales increased by **5.1%** in Q3 fiscal 2022, but sales volume decreased by **2.8%** for the quarter. For the first thirty-nine weeks, net sales increased by **7.1%** and sales volume by **5.6%**[83](index=83&type=chunk)[84](index=84&type=chunk) - Gross profit margin declined to **18.0%** in Q3 fiscal 2022 from **22.1%** in Q3 fiscal 2021, primarily due to higher commodity acquisition costs and other inflationary pressures[85](index=85&type=chunk) - Inventories increased by **39.1%** year-over-year at the end of Q3 fiscal 2022, driven by rising commodity acquisition costs[87](index=87&type=chunk)[88](index=88&type=chunk) [RESULTS OF OPERATIONS](index=21&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of net sales, gross profit, operating expenses, and net income for the reporting periods - Net sales increased **5.1%** in Q3 fiscal 2022 due to an **8.1%** increase in weighted average sales price per pound, offsetting a **2.8%** decrease in sales volume. For the first 39 weeks, net sales rose **7.1%** from a **5.6%** volume increase and **1.5%** price increase[91](index=91&type=chunk)[92](index=92&type=chunk) Net Sales by Distribution Channel (Q3 Fiscal 2022 vs Q3 Fiscal 2021, in thousands) | Distribution Channel | March 24, 2022 | March 25, 2021 | $ Change | % Change | | :------------------- | :------------- | :------------- | :------- | :------- | | Consumer | $173,648 | $169,415 | $4,233 | 2.5% | | Commercial Ingredients | $25,514 | $21,052 | $4,462 | 21.2% | | Contract Packaging | $19,422 | $17,425 | $1,997 | 11.5% | | Total | $218,584 | $207,892 | $10,692 | 5.1% | - Consumer channel sales volume decreased **5.8%** in Q3 fiscal 2022, mainly due to a **57.1%** drop in peanut butter sales (due to planned downtime for line upgrade) and discontinuance of inshell peanut products. Commercial ingredients sales volume increased **11.2%** due to improved restaurant industry conditions[97](index=97&type=chunk)[99](index=99&type=chunk) - Gross profit decreased **14.4%** in Q3 fiscal 2022, with margin falling to **18.0%**, primarily due to higher commodity acquisition costs for pecans, almonds, and walnuts, and other inflationary cost increases (labor, freight, manufacturing supplies)[103](index=103&type=chunk) - Total operating expenses decreased **11.9%** in Q3 fiscal 2022, largely due to a **$3.1 million** decrease in compensation expense and a **$0.7 million** increase in miscellaneous income from the sale of life insurance policies[105](index=105&type=chunk)[107](index=107&type=chunk) - Net income for Q3 fiscal 2022 was **$11.9 million** (**$1.02** diluted EPS), down from **$14.7 million** (**$1.27** diluted EPS) in Q3 fiscal 2021[117](index=117&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=25&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's cash flow, financing arrangements, and ability to meet its financial obligations and fund operations - Primary cash uses include funding operations, contractual obligations, strategic plan initiatives (branded/private label growth), and debt repayment. Sources are operations and the Credit Facility[120](index=120&type=chunk) - Net cash used in operating activities was **$12.6 million** for the first 39 weeks of fiscal 2022, a significant decrease from **$77.0 million** provided in the prior year, mainly due to increased working capital for inventory driven by rising commodity costs[122](index=122&type=chunk) - Cash provided by financing activities was **$19.0 million** for the first 39 weeks of fiscal 2022, compared to **$63.9 million** used in the prior year, primarily due to **$57.2 million** in net short-term borrowings under the Credit Facility to cover increased commodity acquisition costs[127](index=127&type=chunk) - The company's Credit Facility provides a **$117.5 million** senior secured revolving credit facility, with **$47.4 million** available credit as of March 24, 2022. The weighted average interest rate for the Credit Facility was **2.2%**[130](index=130&type=chunk)[133](index=133&type=chunk) - The Mortgage Facility matures on **March 1, 2023**, with a fixed interest rate of **4.25%** per annum, and **$3.4 million** principal outstanding as of March 24, 2022[135](index=135&type=chunk)[136](index=136&type=chunk) - The Selma Properties leaseback arrangement is recorded as a debt obligation, with **$8.5 million** outstanding as of March 24, 2022[137](index=137&type=chunk) - The company aims to drive profitable growth by expanding its Fisher, Orchard Valley Harvest, Squirrel Brand, and Southern Style Nuts brands, and growing non-branded business through product innovation, distribution expansion, and increased e-commerce sales[74](index=74&type=chunk) - Challenges include intensified competition, changing consumer preferences (e.g., shift to private brands or lower-priced nuts due to inflation), and supply chain disruptions leading to shortages and cost increases for pallets, packaging, ingredients, transportation, and labor[75](index=75&type=chunk) - The COVID-19 pandemic continued to impact operations, with improved sales volume in foodservice and non-essential retail, but offset by the Omicron variant surge and ongoing transportation capacity shortages[79](index=79&type=chunk)[80](index=80&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section confirms no material changes in the company's market risk assessment since the prior fiscal year's annual report - No material change in market risk assessment since the prior fiscal year's 10-K filing[144](index=144&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of disclosure controls and procedures, concluding they were effective with no material changes to internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of March 24, 2022[146](index=146&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended March 24, 2022[147](index=147&type=chunk) [PART II. OTHER INFORMATION](index=29&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section contains additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to disclosures on legal proceedings, noting management's belief that outcomes will not materially affect financial results - The company is involved in various legal proceedings in the ordinary course of business[62](index=62&type=chunk)[149](index=149&type=chunk) - Management believes current legal proceedings will not materially affect the company's financial position, results of operations, or cash flows, but acknowledges the possibility of unfavorable outcomes[62](index=62&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section states that no significant changes to previously disclosed risk factors occurred during the reporting period - No significant changes to the risk factors identified in the Form 10-K for the fiscal year ended June 24, 2021, occurred during the third quarter of fiscal 2022[151](index=151&type=chunk) [Item 6. Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed with the Form 10-Q, including corporate documents and certifications - The exhibit index lists various corporate documents, such as the Restated Certificate of Incorporation and Amended and Restated Bylaws[156](index=156&type=chunk) - Key agreements like the Amended and Restated Credit Agreement and various Split-Dollar Insurance Agreements are included[156](index=156&type=chunk)[158](index=158&type=chunk) - Certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act are also part of the exhibits[159](index=159&type=chunk) [SIGNATURE](index=33&type=section&id=SIGNATURE) This section contains the official signature and date of filing for the report - The report was signed on behalf of John B. Sanfilippo & Son, Inc. by Frank S. Pellegrino, Chief Financial Officer, Executive Vice President, Finance and Administration, on April 27, 2022[162](index=162&type=chunk)[164](index=164&type=chunk)