News Column

John B. Sanfilippo & Son Reports Quarterly Results

February 4, 2014

John B. Sanfilippo & Son, Inc. announced operating results for its fiscal 2014 second quarter. In a release on January 29 , the Company reported that net income for the second quarter of fiscal 2014 was $9.2 million , or $0.83 per share diluted, compared to net income of $8.3 million , or $0.76 per share diluted, for the second quarter of fiscal 2013. Net income for the first two quarters of fiscal 2014 was $16.0 million , or $1.44 per share diluted, compared to net income of $15.8 million , or $1.45 per share diluted, for the first two quarters of fiscal 2013. Net sales for the second quarter of fiscal 2014 were $225.1 million compared to net sales of $215.6 million for the second quarter of fiscal 2013. The increase in net sales was attributable to a 12.0 percent increase in sales volume, which is measured as pounds sold to customers. The favorable impact upon net sales from the increase in sales volume was offset partially by lower selling prices for all major nut types except almonds. Sales volume increased in all four distribution channels led by a significant increase in sales volume in the consumer distribution channel. The increase in sales volume in the consumer distribution channel was attributable to increased sales of private brand snack nut and trail mix products with existing customers and a 28.5 percent increase in volume for Fisher recipe nuts from increased merchandising activity, which occurred as a result of significantly lower pecan prices compared to pecan prices that existed in the second quarter of fiscal 2013. Fisher snack nut volume declined in the quarterly comparison as a result of reduced distribution of inshell peanuts at a major Fisher snack nut customer. This reduced distribution is expected to be regained starting in the third quarter of fiscal 2014. The sales volume increases in the commercial ingredients and contract packaging channels were generated by increased volume with a major existing customer in each of those channels and higher pecan sales in the commercial ingredients channel as a result of significantly lower pecan prices compared to pecan prices that existed in the second quarter of fiscal 2013. The sales volume increase in the export channel is primarily due to the difference in the timing of inshell walnuts sales in fiscal 2014 compared to fiscal 2013. For the first two quarters of fiscal 2014, net sales increased to $401.8 million from $393.1 million for the first two quarters of fiscal 2013. The increase in net sales in the year to date comparison was primarily attributable to a 12.9 percent increase in sales volume. The increase in net sales from the increase in sales volume was offset in part by lower selling prices for all major nut types except almonds. Sales volume increased in the consumer, commercial ingredients and contract packaging distribution channels while sales volume was down 2.4 percent in the export channel in the year to date comparison. As was the case in the quarterly comparison, the increase in sales volume in the consumer channel came mainly from increased sales of private brand snack nuts and trail mixes and a 17.5 percent increase in sales volume for Fisher recipe nuts. Sales volume also increased significantly in the commercial ingredients and contract packaging channels primarily due to increased volume with a major existing customer in each of those channels and higher pecan sales in the commercial ingredients channel as a result of significantly lower pecan prices compared to pecan prices that existed in the second quarter of fiscal 2013. The gross profit margin, as a percentage of net sales, declined to 16.4 percent for the second quarter of fiscal 2014 from 17.0 percent for the second quarter of fiscal 2013. The gross profit margin, as a percentage of net sales, decreased to 16.5 percent for the first two quarters of fiscal 2014 from 17.1 percent for the first two quarters of fiscal 2013. The decrease in the gross profit margins in the quarterly and year to date comparisons was attributable mainly to decreased selling prices for private brand snack and trail mix products from competitive pricing pressure. The decline in gross profit margin in both the quarterly and year to date comparisons was offset in part by manufacturing efficiency improvements achieved during the first two quarters of fiscal 2014. Total operating expenses for the second quarter of fiscal 2014 decreased to 9.1 percent of net sales from 10.3 percent of net sales for the second quarter of fiscal 2013. Total operating expenses for the first two quarters of fiscal 2014 decreased to 9.4 percent of net sales from 9.9 percent of net sales for the first two quarters of fiscal 2013. The decrease in total operating expenses, as a percentage of net sales, in the quarterly and year to date comparisons was attributable to a $1.6 million gain on the sale of an Elgin, Illinois site that was originally purchased in 2006 for our facility consolidation project. Interest expense was $1.1 million for the second quarter of both fiscal 2014 and fiscal 2013. Interest expense for the first two quarters of fiscal 2014 was $2.1 million compared to $2.4 million for the first two quarters of fiscal 2013. The decrease in interest expense in the year to date comparison was attributable primarily to lower average borrowing levels. The total value of inventories on hand at the end of the second quarter of fiscal 2014 increased by $19.5 million , or 11.6 percent, as compared to the total value of inventories on hand at the end of the second quarter of fiscal 2013. The increase in the total value of inventories on hand was primarily driven by higher acquisition costs for pecans, walnuts and almonds. The quantity of raw nut input stocks on hand at the end of the second quarter of fiscal 2014 decreased by 7.7 percent when compared to the quantity of raw nut input stocks on hand at the end of the second quarter of fiscal 2013. The weighted average cost per pound of raw nut input stocks on hand at the end of the second quarter of fiscal 2014 increased by 16.2 percent as compared to the weighted average cost per pound of raw nut input stocks on hand at the end of the second quarter of fiscal 2013 mainly because of higher acquisition costs for walnuts, almonds and pecans. "I am pleased with our second quarter results, especially the continued growth of our Fisher recipe nuts," explained Jeffrey T. Sanfilippo , Chairman and Chief Executive Officer, "and I am proud of our sales, marketing and supply chain teams for driving volume increases across all four of our distribution channels in the second quarter. There is great potential for positive momentum in the nut industry as illustrated by a recent Harvard study published in the New England Journal of Medicine , which describes the health benefits associated with nut consumption," said Sanfilippo. "Going forward, commodity costs have recently increased for peanuts and most tree nuts, which will make the second half of fiscal 2014 challenging. While these cost increases may affect our sales volume for the remainder of fiscal 2014, I expect that higher selling prices should help mitigate the impact of the higher costs," Sanfilippo concluded. More information: www.jbssinc.com ((Comments on this story may be sent to newsdesk@closeupmedia.com ))


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