John B. Sanfilippo & Son(JBSS) - 2019 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for the quarter and thirty-nine weeks ended March 28, 2019, detailing comprehensive income, balance sheets, equity, and cash flows Consolidated Statements of Comprehensive Income This statement details the company's financial performance for the quarter and thirty-nine weeks ended March 28, 2019, showing net sales, gross profit, and net income trends Q3 FY2019 vs Q3 FY2018 Performance (in thousands) | Metric | Q3 2019 | Q3 2018 | | :--- | :--- | :--- | | Net Sales | $201,834 | $202,786 | | Gross Profit | $38,815 | $33,107 | | Income from Operations | $15,408 | $14,024 | | Net Income | $10,331 | $8,552 | | Diluted EPS | $0.90 | $0.75 | Thirty-Nine Weeks FY2019 vs FY2018 Performance (in thousands) | Metric | 39 Weeks 2019 | 39 Weeks 2018 | | :--- | :--- | :--- | | Net Sales | $659,439 | $677,255 | | Gross Profit | $114,652 | $105,959 | | Income from Operations | $42,100 | $45,741 | | Net Income | $28,201 | $26,872 | | Diluted EPS | $2.45 | $2.35 | Consolidated Balance Sheets This statement presents the company's financial position as of March 28, 2019, detailing assets, liabilities, and stockholders' equity Key Balance Sheet Items (in thousands) | Account | March 28, 2019 | March 29, 2018 | | :--- | :--- | :--- | | Total Current Assets | $243,935 | $258,472 | | Inventories | $178,909 | $184,770 | | Total Assets | $409,749 | $426,256 | | Total Current Liabilities | $114,368 | $132,384 | | Revolving credit facility borrowings | $35,099 | $56,579 | | Total Liabilities | $165,331 | $190,170 | | Total Stockholders' Equity | $244,418 | $236,086 | Consolidated Statements of Stockholders' Equity This statement outlines the changes in stockholders' equity for the periods ended March 28, 2019, reflecting impacts from net income, dividends, and stock-based compensation - Total stockholders' equity increased from $243.0 million at the beginning of the period (June 28, 2018) to $244.4 million at March 28, 2019[17] Consolidated Statements of Cash Flows This statement summarizes the company's cash inflows and outflows from operating, investing, and financing activities for the thirty-nine weeks ended March 28, 2019 Cash Flow Summary (in thousands) | Activity | 39 Weeks Ended Mar 28, 2019 | 39 Weeks Ended Mar 29, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $42,817 | $33,065 | | Net cash used in investing activities | $(11,848) | $(30,853) | | Net cash used in financing activities | $(31,328) | $(3,154) | | Net Decrease in Cash | $(359) | $(942) | Notes to Consolidated Financial Statements These notes provide detailed information on the company's accounting policies, significant financial statement line items, and recent accounting pronouncements - The company adopted the new revenue recognition standard, ASU No. 2014-09 (Topic 606), on June 29, 2018, using the full retrospective method. The impact on prior period comparative information was not material[24][42] - Goodwill of $9.65 million relates entirely to the Squirrel Brand acquisition completed in the second quarter of fiscal 2018. Net intangible assets were $15.3 million as of March 28, 2019[45][46] - As of March 28, 2019, the company had $79.4 million of available credit under its revolving Credit Facility and was in compliance with all financial covenants[48][132] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial performance, including sales, gross profit, operating expenses, and liquidity, for the third quarter and first thirty-nine weeks of fiscal 2019 Overview This section provides an overview of the company's business as a leading nut processor and distributor, outlining its strategic focus and key market challenges - The company's strategic plan focuses on growing its Fisher, Orchard Valley Harvest, Squirrel Brand, and Southern Style Nuts brands[81] - Future challenges include deflation in commodity costs for most tree nuts (except almonds), intensified market competition, and changing industry trends like retail consolidation[82] Quarterly Highlights This section highlights key financial performance indicators for Q3 FY2019, including changes in net sales, sales volume, gross profit margin, and operating expenses Q3 FY2019 Key Performance Indicators vs. Q3 FY2018 | Metric | Change | | :--- | :--- | | Net Sales | ▼ 0.5% | | Sales Volume (pounds) | ▲ 3.0% | | Gross Profit Margin | ▲ to 19.2% from 16.3% | | Total Operating Expenses | ▲ 22.7% | Results of Operations This section details the financial results for Q3 FY19, analyzing net sales by channel, gross profit margin improvements, and the increase in operating expenses - The consumer distribution channel net sales increased by 5.2% in Q3 FY19, driven by an 8.2% increase in sales volume, particularly in private brand snack nuts and trail mixes[97] - Gross profit margin for Q3 FY19 increased to 19.2% from 16.3% year-over-year, mainly due to lower acquisition costs for walnuts, peanuts, cashews, and pecans[102] - Operating expenses in Q3 FY19 increased by $4.3 million (22.7%), driven by higher incentive compensation, advertising for the new Fisher snack line, and legal expenses[104][105][106] - The effective tax rate for Q3 FY19 was 25.2%, down from 29.9% in Q3 FY18[115] Liquidity and Capital Resources This section discusses the company's liquidity position, primary cash sources, capital expenditure plans, and compliance with credit facility covenants - Net cash provided by operating activities increased to $42.8 million for the first thirty-nine weeks of fiscal 2019, up from $33.1 million in the prior year, mainly due to a reduced use of working capital for inventory[121] - Total capital expenditures for fiscal 2019 are expected to be approximately $15.0 million[124] - As of March 28, 2019, the company had $79.4 million of available credit under its Credit Facility and was in compliance with all covenants[132] Quantitative and Qualitative Disclosures About Market Risk The company reports that there has been no material change in its assessment of sensitivity to market risk since the disclosures made in its Annual Report on Form 10-K for the fiscal year ended June 28, 2018 - There has been no material change in the company's assessment of its sensitivity to market risk since its last annual report[144] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded that they were effective as of the end of the period, March 28, 2019. There were no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of March 28, 2019, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[146] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[147] PART II. OTHER INFORMATION Legal Proceedings This section outlines the company's involvement in various legal proceedings, noting that their outcomes are not expected to materially affect financial position - The company is party to various legal proceedings in the ordinary course of business, which are not expected to have a material impact on its financial condition[61][149] - A $1.2 million settlement for an employment-related class-action complaint was paid in the first quarter of fiscal 2019[62] Risk Factors The company states that there were no significant changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended June 28, 2018, during the third quarter of fiscal 2019 - There were no significant changes to the risk factors identified in the Form 10-K for the fiscal year ended June 28, 2018[151] Exhibits This section provides an index of all exhibits filed with the Form 10-Q, including corporate governance documents, credit agreements, and required certifications - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[160][161] - XBRL (eXtensible Business Reporting Language) data files are included as exhibits, providing interactive data for financial reporting[161]