-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H+Snb3ulijv3g5u8TmBWhx0q5FaXpjBVT9uwUSqicTKI1mA+a46tjHIW1pKHMAws kGrvecDrz95QOWvujGS02w== 0000950134-04-000734.txt : 20040127 0000950134-04-000734.hdr.sgml : 20040127 20040127063812 ACCESSION NUMBER: 0000950134-04-000734 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20031225 FILED AS OF DATE: 20040127 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANFILIPPO JOHN B & SON INC CENTRAL INDEX KEY: 0000880117 STANDARD INDUSTRIAL CLASSIFICATION: SUGAR & CONFECTIONERY PRODUCTS [2060] IRS NUMBER: 362419677 STATE OF INCORPORATION: DE FISCAL YEAR END: 0624 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19681 FILM NUMBER: 04544662 BUSINESS ADDRESS: STREET 1: 2299 BUSSE RD CITY: ELK GROVE VILLAGE STATE: IL ZIP: 60007-6057 BUSINESS PHONE: 8475932300 MAIL ADDRESS: STREET 1: 2299 BUSSE RD CITY: ELK GROVE VILLAGE STATE: IL ZIP: 60007-6057 10-Q 1 c82327e10vq.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------------- FORM 10-Q (Mark One) [X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended December 25, 2003 [ ] 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) DELAWARE 36-2419677 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification Number) 2299 BUSSE ROAD ELK GROVE VILLAGE, ILLINOIS 60007 (Address of Principal Executive Offices) (Registrant's telephone number, including area code) (847) 593-2300 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [ ] No [X]. As of January 23, 2004, 5,716,774 shares of the Registrant's Common Stock, $0.01 par value per share, excluding 117,900 treasury shares, and 3,667,426 shares of the Registrant's Class A Common Stock, $0.01 par value per share, were outstanding. JOHN B. SANFILIPPO & SON, INC. INDEX TO FORM 10-Q
PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1 -- Consolidated Financial Statements (Unaudited): Consolidated Statements of Operations for the quarters and twenty-six weeks ended December 25, 2003 and December 26, 2002 3 Consolidated Balance Sheets as of December 25, 2003 and June 26, 2003 4 Consolidated Statements of Cash Flows for the twenty-six weeks ended December 25, 2003 and December 26, 2002 5 Notes to Consolidated Financial Statements 6 Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3 -- Quantitative and Qualitative Disclosures About Market Risk 18 Item 4 -- Controls and Procedures 18 PART II. OTHER INFORMATION Item 4 -- Submission of Matters to a Vote of Security Holders 19 Item 6 -- Exhibits and Reports on Form 8-K 19 SIGNATURE 20 EXHIBIT INDEX 21
FORWARD-LOOKING STATEMENTS This document contains certain forward-looking statements that represent the Company's present expectations or beliefs concerning future events. The Company cautions that such statements are qualified by important factors. See Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Forward Looking Statements and Factors That May Affect Future Results. 2 PART I. FINANCIAL INFORMATION ITEM 1 -- FINANCIAL STATEMENTS (UNAUDITED) JOHN B. SANFILIPPO & SON, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share)
For the Quarter Ended For the Twenty-six Weeks Ended --------------------- ------------------------------ December 25, December 26, December 25, December 26, 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Restated Restated Note 6 Note 6 Net sales $ 171,392 $ 138,107 $ 296,153 $ 233,434 Cost of sales 138,173 111,678 237,441 193,705 ---------- ---------- ---------- ---------- Gross profit 33,219 26,429 58,712 39,729 ---------- ---------- ---------- ---------- Selling expenses 11,265 9,702 20,296 16,811 Administrative expenses 4,090 2,244 7,933 4,617 ---------- ---------- ---------- ---------- 15,355 11,946 28,229 21,428 ---------- ---------- ---------- ---------- Income from operations 17,864 14,483 30,483 18,301 ---------- ---------- ---------- ---------- Other income (expense): Interest expense (855) (1,104) (1,850) (2,282) Rental income 119 133 237 244 Miscellaneous 1 1 1 1 ---------- ---------- ---------- ---------- (735) (970) (1,612) (2,037) ---------- ---------- ---------- ---------- Income before income taxes 17,129 13,513 28,871 16,264 Income tax expense 6,680 5,270 11,260 6,343 ---------- ---------- ---------- ---------- Net income and comprehensive income $ 10,449 $ 8,243 $ 17,611 $ 9,921 ========== ========== ========== ========== Basic earnings per common share $ 1.12 $ 0.90 $ 1.88 $ 1.08 ========== ========== ========== ========== Diluted earnings per common share $ 1.09 $ 0.89 $ 1.85 $ 1.07 ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements 3 JOHN B. SANFILIPPO & SON, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands)
(Unaudited) ----------- December 25, 2003 June 26, 2003 ----------------- ------------- ASSETS CURRENT ASSETS: Cash $ 1,764 $ 2,448 Accounts receivable, less allowances of $2,683 and $1,552, respectively 50,339 29,142 Inventories 139,885 112,016 Deferred income taxes 1,290 1,257 Income taxes receivable -- 469 Prepaid expenses and other current assets 2,091 2,192 ---------- ---------- TOTAL CURRENT ASSETS 195,369 147,524 ---------- ---------- PROPERTIES: Buildings 61,651 61,485 Machinery and equipment 92,780 89,980 Furniture and leasehold improvements 5,435 5,385 Vehicles 2,990 3,185 Construction in progress 4,088 1,057 ---------- ---------- 166,944 161,092 Less: Accumulated depreciation 99,912 95,838 ---------- ---------- 67,032 65,254 Land 1,863 1,863 ---------- ---------- TOTAL PROPERTIES 68,895 67,117 ---------- ---------- OTHER ASSETS: Goodwill and other intangibles 4,156 4,370 Miscellaneous 4,236 4,716 ---------- ---------- TOTAL OTHER ASSETS 8,392 9,086 ---------- ---------- TOTAL ASSETS $ 272,656 $ 223,727 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ 20,373 $ 29,702 Current maturities of long-term debt 10,817 10,776 Accounts payable 51,871 13,658 Drafts payable 13,007 5,507 Accrued expenses 12,306 12,699 Income taxes payable 2,854 -- ---------- ---------- TOTAL CURRENT LIABILITIES 111,228 72,342 ---------- ---------- LONG-TERM DEBT 21,139 29,640 ---------- ---------- LONG-TERM DEFERRED INCOME TAXES 2,958 2,964 ---------- ---------- STOCKHOLDERS' EQUITY Class A Common Stock, convertible to 37 37 Common Stock on a per share basis, cumulative voting rights of ten votes per share, $.01 par value; 10,000,000 shares authorized, 3,667,426 shares issued and outstanding Common Stock, non-cumulative voting 58 58 rights of one vote per share, $.01 par value; 10,000,000 shares authorized, 5,834,674 and 5,775,564 shares issued and outstanding, respectively Capital in excess of par value 59,850 58,911 Retained earnings 78,590 60,979 Treasury stock, at cost; 117,900 shares (1,204) (1,204) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 137,331 118,781 ---------- ---------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 272,656 $ 223,727 ========== ==========
The accompanying notes are an integral part of these financial statements. 4 JOHN B. SANFILIPPO & SON, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
For the Twenty-six Weeks Ended ------------------------------ December 25, 2003 December 26, 2002 ----------------- ----------------- Cash flows from operating activities: Net income $ 17,611 $ 9,921 Adjustments: Depreciation and amortization 5,435 5,230 Loss (gain) on disposition of properties 25 (3) Deferred income taxes (39) -- Tax benefit of option exercises 572 -- Change in current assets and current liabilities: Accounts receivable, net (21,197) (11,158) Inventories (27,869) (24,247) Prepaid expenses and other current assets 101 862 Accounts payable 38,213 28,370 Drafts payable 7,500 5,867 Accrued expenses (393) 684 Income taxes receivable/payable 3,323 3,729 Other (444) (453) ---------- ---------- Net cash provided by operating activities 22,838 18,802 ---------- ---------- Cash flows from investing activities: Acquisition of properties (6,100) (5,031) Proceeds from disposition of properties -- 7 ---------- ---------- Net cash used in investing activities (6,100) (5,024) ---------- ---------- Cash flows from financing activities: Net borrowings on notes payable (9,329) (9,303) Principal payments on long-term debt (8,460) (3,424) Issuance of Common Stock 367 -- ---------- ---------- Net cash used in financing activities (17,422) (12,727) ---------- ---------- Net (decrease) increase in cash (684) 1,051 Cash: Beginning of period 2,448 1,272 ---------- ---------- End of period $ 1,764 $ 2,323 ========== ========== Supplemental disclosures: Interest paid $ 2,017 $ 2,293 Income taxes paid 7,438 1,171
The accompanying notes are an integral part of these financial statements. 5 JOHN B. SANFILIPPO & SON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands) Note 1 -- Basis of Presentation The consolidated financial statements include the accounts of John B. Sanfilippo & Son, Inc. and its wholly-owned subsidiary, JBS International, Inc. (collectively, the "Company"). The Company's fiscal year ends on the last Thursday of June each year, and typically consists of fifty-two weeks (four thirteen week quarters). The unaudited financial statements included herein have been prepared by the Company. In the opinion of the Company's management, these statements present fairly the consolidated statements of operations, consolidated balance sheets and consolidated statements of cash flows, and reflect all adjustments, consisting only of normal recurring adjustments which, in the opinion of management, are necessary for the fair presentation of the results of the interim periods. The interim results of operations are not necessarily indicative of the results to be expected for a full year. The data presented on the balance sheet for the fiscal year ended June 26, 2003 were derived from audited financial statements. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's 2003 Annual Report filed on Form 10-K/A for the year ended June 26, 2003 and its unaudited first quarter financial statements filed on Form 10-Q/A which reflect a restatement to change the classification of freight costs, which had previously been reflected as a reduction in net sales rather than selling expenses, in accordance with Emerging Issues Task Force No. 00-10, "Accounting for Shipping and Handling Fees and Costs." See Note 6. Note 2 -- Inventories Inventories are stated at the lower of cost (first in, first out) or market. Inventories consist of the following:
December 25, June 26, 2003 2003 -------- -------- Raw material and supplies $ 72,878 $ 36,852 Work-in-process and finished goods 67,007 75,164 -------- -------- $139,885 $112,016 ======== ========
6 Note 3 -- Earnings Per Common 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 tables present the required disclosures:
For the Quarter Ended December 25, 2003 For the Quarter Ended December 26, 2002 --------------------------------------- --------------------------------------- Income Shares Per-Share Income Shares Per-Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ----------- ------------- --------- ----------- ------------- --------- Net Income $ 10,449 $ 8,243 Basic Earnings Per Common Share Income available to common stockholders $ 10,449 9,361,091 $ 1.12 $ 8,243 9,153,790 $ 0.90 ========= ========= Effect of Dilutive Securities Stock options 228,249 114,336 Diluted Earnings Per Common Share Income available to common stockholders $ 10,449 9,589,340 $ 1.09 $ 8,243 9,268,126 $ 0.89 =========== ============= ========= =========== ============= =========
For the Twenty-six Weeks Ended For the Twenty-six Weeks Ended December 25, 2003 December 26, 2002 --------------------------------------- --------------------------------------- Income Shares Per-Share Income Shares Per-Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ----------- ------------- --------- ----------- ------------- --------- Net Income $ 17,611 $ 9,921 Basic Earnings Per Common Share Income available to common stockholders $ 17,611 9,344,988 $ 1.88 $ 9,921 9,153,627 $ 1.08 ========= ========= Effect of Dilutive Securities Stock options 189,822 86,108 Diluted Earnings Per Common Share Income available to common stockholders $ 17,611 9,534,810 $ 1.85 $ 9,921 9,239,735 $ 1.07 =========== ============= ========= =========== ============= =========
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 shares for the period:
Weighted-Average Number of Options Exercise Price ----------------- ----------------- Quarter Ended December 25, 2003 -- $ -- Quarter Ended December 26, 2002 61,867 $ 11.21 Twenty-six Weeks Ended December 25, 2003 13,072 $ 16.48 Twenty-six Weeks Ended December 26, 2002 90,632 $ 9.91
Note 4 -- 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 SFAS 123, "Accounting for Stock-Based Compensation", the effect on the Company's net income for the quarters and twenty-six weeks ended December 25, 2003 and December 26, 2002 would not have been significant. Note 5 -- Recent Accounting Pronouncements In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based Compensation - Transition and Disclosure". SFAS 148 amends certain provisions of SFAS 123 and is effective for fiscal years beginning after December 15, 2002. The Company has adopted the disclosure requirements of SFAS 148, and is currently evaluating its accounting alternatives under SFAS 148. In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51". FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective immediately for all new variable interest 7 entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 will become effective during the third quarter of fiscal 2004. The Company enters into various transactions with certain related parties including the rental of buildings under capital leases and purchases from entities owned either directly or indirectly by certain directors, officers and stockholders of the Company. The Company's adoption of FIN 46 during the second quarter of 2004 did not have any impact on the financial statements. NOTE 6 -- NET SALES AND SELLING EXPENSES RESTATEMENT The Company has restated its financial statements to change the classification of freight costs, which had previously been reported as a reduction in net sales rather than selling expenses, in accordance with the guidance of Emerging Issues Task Force No. 00-10, "Accounting for Shipping and Handling Fees and Costs." The Company has made the appropriate modifications to the consolidated statements of operations to give effect to the change in classification of freight costs. The effect of this change in classification is to increase net sales and selling expenses by corresponding amounts for all periods presented, as indicated below. The change in classification has no effect on income from operations or net income, nor any effect on the Company's consolidated balance sheet, changes in stockholders' equity and cash flows. The table below summarizes the effect of the change in classification.
AS REPORTED AS RESTATED ----------- ----------- (unaudited) Net Sales for the - twenty-six weeks ended December 26, 2002 $ 227,305 $ 233,434 thirteen weeks ended December 26, 2002 134,236 138,107 Gross Profit for the - twenty-six weeks ended December 26, 2002 33,600 39,729 thirteen weeks ended December 26, 2002 22,558 26,429 Selling Expenses for the - twenty-six weeks ended December 26, 2002 10,682 16,811 thirteen weeks ended December 26, 2002 5,831 9,702 Total Selling and Administrative Expenses for the - twenty-six weeks ended December 26, 2002 15,299 21,428 thirteen weeks ended December 26, 2002 8,075 11,946
8 ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements. INTRODUCTION The Company is a processor, packager, marketer and distributor of shelled and inshell nuts. The Company also markets or distributes, and in most cases manufactures or processes, a diverse product line of food and snack items, including peanut butter, candy and confections, natural snacks and trail mixes, sunflower seeds, corn snacks and sesame products. The Company sells to the consumer market under a variety of private labels and under the Company's brand names, primarily Fisher. The Company also sells to the industrial, food service, contract packaging and export markets. Fiscal 2003 was a record-setting year for the Company, in terms of both sales and profitability, and this momentum has continued in fiscal 2004. Net sales increased to $171.4 million for the quarter ended December 25, 2003 compared to $138.1 million for the quarter ended December 26, 2002, representing a 24.1% increase. Net sales increased to $296.2 million for the twenty-six weeks ended December 25, 2003 compared to $233.4 million for the same period in fiscal 2003, representing a 26.9% increase. This growth was achieved primarily through unit volume increases throughout all of the Company's major distribution channels. Gross margin improved by 0.3 percentage points for the quarterly comparative period, and 2.8% for the twenty-six week comparative period. These improvements were due primarily to unit volume sales increases while certain costs of sales remain fixed, lower peanut costs in the first quarter of fiscal 2004 and certain other non- recurring benefits in 2004. Additionally, the first quarter of fiscal 2003 included certain non-recurring items that negatively impacted its gross margin. Net income for the quarter ended December 25, 2003 increased by 26.8% to $10.4 million from the quarter ended December 26, 2002. Net income for the twenty-six week period ended December 25, 2003 increased by 77.5% to $17.6 million from the twenty-six weeks ended December 26, 2002. The Company believes that a portion of the overall increase in net sales, for both the quarter and twenty-six weeks ended December 25, 2003, is attributable to the growing awareness of the health benefits of nuts and the current trend toward a low carbohydrate/high protein diet. The Company continually reviews nut consumption data prepared by various trade associations, marketing organizations and the United States Department of Agriculture to monitor trends in our business. Crop estimates are also reviewed to determine the available supply of various nuts, although due to the susceptibility of crops to wide year-over-year variations, this information is typically only useful for short periods of time. The Company then develops business strategies through analysis of this consumption and supply information. A significant factor in the improved margins has been the effect of the termination of the federal peanut quota program in the 2002 Farm Bill, as defined below, which reduced the Company's costs for peanuts beginning in the second quarter of fiscal 2003. The positive effect on margins was partially offset by a smaller decrease in peanut selling prices. The gross profit margin on peanuts is now similar to total gross profit margin. The Company believes that the 2002 Farm Bill will continue to have a favorable impact on the purchase prices of peanuts for the foreseeable future, though there is no assurance that the related favorable effects on margins will continue. The Company faces a number of challenges as it works to continue record growth. Due to the recent unit volume sales growth, the Chicago area processing facilities operate at full capacity at certain times of the year. If unit volume sales growth continues, the Company could exceed its capacity to meet the demand for its products, especially prior to the completion of the contemplated facility consolidation project. If the Company proceeds with the facility consolidation project, which would require approximately four to five years to complete, it nevertheless would face potential disruptive effects on the business, such as cost overruns for the construction of the new facility or business interruptions that may result from the transfer of production to 9 the new facility. In addition, the Company will continue to face the ongoing challenges of its business such as food safety and regulatory issues, the antitrust investigation of a portion of the peanut shelling industry and the maintenance and growth of its customer base. The Company's business is seasonal. Demand for peanut and other nut products is highest during the months of September, 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. This seasonality also impacts capacity utilization at the Company's Chicago area facilities, with these facilities routinely operating at full capacity during the last four months of the calendar year. 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. At December 25, 2003, the Company's inventories totaled approximately $139.9 million compared to approximately $112.0 million at June 26, 2003, and approximately $123.7 million at December 26, 2002. The increase in inventories at December 25, 2003 when compared to June 26, 2003 occurred primarily because the majority of nut purchases are made during the second and third quarters of the Company's fiscal year. The increase in inventories at December 25, 2003 when compared to December 26, 2002 is primarily due to (i) an increase in finished goods to support the increase in sales volume, and (ii) an increase in the quantity of inshell pecans on hand due to higher purchases during the first twenty-six weeks of fiscal 2003 than during the first twenty-six weeks of fiscal 2002. See "Factors That May Affect Future Results" - "Availability of Raw Materials and Market Price Fluctuations." At December 25, 2003, net accounts receivable were approximately $50.3 million compared to approximately $29.1 million at June 26, 2003 and approximately $35.3 million at December 26, 2002. The increase in net accounts receivable at December 25, 2003 when compared to June 26, 2003 is due primarily to the seasonality of the Company's business. The increase in net accounts receivable at December 25, 2003 when compared to December 26, 2002 is due primarily to the increase in net sales for the second quarter of fiscal 2004 compared to the first quarter of fiscal 2003. See "Results of Operations - Net Sales". 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). References herein to fiscal 2004 are to the fiscal year ending June 24, 2004. References herein to fiscal 2003 are to the fiscal year ended June 26, 2003. NET SALES AND SELLING EXPENSES RESTATEMENT In accordance with authoritative accounting literature, we have changed the classification of our freight costs. As a result, we have restated our Consolidated Statements of Operations included in our annual financial statements on Form 10-K/A for the fiscal years ended June 26, 2003, June 27, 2002, and June 28, 2001 and our quarterly filing for the thirteen weeks ended September 25, 2003 on Form 10-Q/A. We changed the classification of our freight costs, which had previously been reflected as a reduction in net sales rather than selling expenses, in accordance with the guidance of Emerging Issues Task Force No 00-10 ("EITF, 00-10"), "Accounting for Shipping and Handling Fees and Costs." As a result of this restatement, our net sales, gross profit, selling expenses and total selling, general and administrative expenses each increased by the corresponding amount of our freight costs. These changes had no effect on income, including net income and earnings per share, nor our consolidated balance sheet, stockholders' equity and cash flows. EITF 00-10 allows companies to classify shipping and handling costs in either or both of cost of goods sold or selling, general and administrative costs. We have elected to classify our shipping and handling costs (including freight costs) as selling expenses. We believe our presentation makes our financial statements comparable to similar companies in our industry. Some other comparable companies, however, include shipping and handling costs in their costs of goods sold and others include portions of shipping and handling costs in both their cost of goods sold and selling, general and administrative expenses. As a result of classifying our freight costs as selling expenses, we report a higher gross profit than if we were to classify these costs as cost of goods sold. Our income from operations, net income and earnings per share would be the same under either approach. RESULTS OF OPERATIONS Net Sales. Net sales increased from approximately $138.1 million for the second quarter of fiscal 2003 to approximately $171.4 million for the second quarter of fiscal 2004, an increase of approximately $33.3 million, or 24.1%. Net sales for the first twenty-six weeks of fiscal 2004 were approximately $296.2 million, an increase of approximately $62.7 million, or 26.9%, over the net sales of approximately $233.4 million for the first twenty-six weeks of fiscal 2003. The increases in net sales, for both the quarterly and twenty-six week periods, were due primarily to higher unit volume sales in the Company's consumer, industrial, export and food service distribution channels. Unit volume increased by 17.8% for the second quarter of fiscal 2004 over fiscal 2003, and increased by 18.8% for the twenty-six week period. The remainder of the increase in net sales, for both the quarterly and twenty-six week periods, was due to higher selling prices for pecans, as the Company was able to sell its pecan products at higher prices reflecting higher procurement costs. The Company experienced significant growth in most of its key distribution channels. Net sales in the consumer distribution channel for the second quarter of fiscal 2004 increased $19.0 million when compared to the second quarter for fiscal 2003 and $38.1 million for the twenty-six week period ended December 25, 2003, due primarily to an increase in Fisher brand and private label business through the expansion of business to existing customers. A significant portion of this expansion in the distribution of Fisher products came from short-term promotional activity which may not 10 result in a permanent increase in net sales. This increase was driven by increased nut consumption and efforts to increase Fisher brand marketing and promotions, especially in the Chicago area. The increase in net sales in the industrial distribution channel was due primarily to the increased usage of nuts as ingredients in food products such as cereals and nutrition bars. The increase in net sales in the export distribution channel was due primarily to higher almond and pecan sales to the Asian and European markets. The increase in net sales in the food service distribution channel was due primarily to the food service industry rebounding from a decline in business during fiscal 2003. Net sales in the contract packaging distribution channel increased slightly for both the quarterly and twenty-six week periods. The Company believes it is well-positioned for sales growth throughout its major distribution channels. The Company expects the increased demand for nuts to continue and to increase the selling opportunities available in the consumer distribution channel. The Company believes that industrial customers will continue to develop new nut-based products to capitalize on the health benefits of nuts. The Company also expects its food service business to improve as nuts are used more frequently in menu choices. The following tables show quarterly and twenty-six week comparisons of sales by distribution channel, and as a percentage of total net sales (dollars in thousands):
Second Quarter Ended -------------------- Distribution Channel December 25, 2003 December 26, 2002 - -------------------- ----------------- ----------------- Consumer $105,341 61.4% $ 86,355 62.5% Industrial 33,352 19.5 23,226 16.8 Food Service 11,342 6.6 9,141 6.6 Contract Packaging 7,901 4.6 7,293 5.3 Export 13,456 7.9 12,092 8.8 -------- ----- -------- ----- Total $171,392 100.0% $138,107 100.0% ======== ===== ======== =====
Twenty-six Weeks Ended ---------------------- Distribution Channel December 25, 2003 December 26, 2002 - -------------------- ----------------- ----------------- Consumer $178,701 60.3% $140,566 60.2% Industrial 58,082 19.6 43,000 18.4 Food Service 22,734 7.7 17,634 7.6 Contract Packaging 14,867 5.0 14,006 6.0 Export 21,769 7.4 18,228 7.8 -------- ----- -------- ----- Total $296,153 100.0% $233,434 100.0% ======== ===== ======== =====
The following table shows a quarterly and twenty-six week comparison of sales by product type, as a percentage of total gross sales. The table is based on gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product types.
Second Quarter Ended Twenty-six Weeks Ended -------------------- ---------------------- Product Type December 25, 2003 December 26, 2002 December 25, 2003 December 26, 2002 ------------ ----------------- ----------------- ----------------- ----------------- Peanuts 22.2% 20.6% 24.2% 23.6% Pecans 24.8 22.7 22.2 20.2 Cashews & Mixed Nuts 22.0 23.4 22.6 23.2 Walnuts 12.0 13.6 11.1 13.0 Almonds 9.9 8.3 10.2 8.2 Other 9.1 11.4 9.7 11.8 ----- ----- ----- ----- Total 100.0% 100.0% 100.0% 100.0% ===== ===== ===== =====
11 Gross Profit. Gross profit for the second quarter of fiscal 2004 increased approximately 25.7% to approximately $33.2 million from approximately $26.4 million for the second quarter of fiscal 2003. Gross profit margin increased from approximately 19.1% for the second quarter of fiscal 2003 to approximately 19.4% for the second quarter of fiscal 2004. The increase in gross profit margin was due primarily to improved margins for pecan sales during the quarter as market sales prices were increasing. Gross profit for the first twenty-six weeks of fiscal 2004 increased approximately 47.8% to approximately $58.7 million from approximately $39.7 million for the first twenty-six weeks of fiscal 2003. Gross profit margin increased from approximately 17.0% for the first twenty-six weeks of fiscal 2003 to approximately 19.8% for the first twenty-six weeks of fiscal 2004. The increase in gross profit margin was due primarily to unit volume sales increases while certain costs of sales remained fixed, and we experienced lower peanut costs. Also, favorably impacting gross profit margin for the first quarter of fiscal 2004 were better than anticipated results in the Company's pecan shelling operation, which led to a positive adjustment to our pecan inventory. These favorable results became apparent as the remaining balance of the 2002 pecan crop was shelled during the first quarter of fiscal 2004. The effect of this pecan quantity increase was partially offset by an increase in the amount due to almond growers pursuant to the final settlement of the 2002 crop. The amounts paid to a majority of almond growers are dependent upon the final prices paid by certain of the Company's competitors. These final prices are generally not known until the first quarter of the fiscal year following harvest. Selling and Administrative Expenses. Selling and administrative expenses as a percentage of net sales increased from approximately 8.6% for the second quarter of fiscal 2003 to approximately 9.0% for the second quarter of fiscal 2004. For the first twenty-six weeks of fiscal 2004, selling and administrative expenses as a percentage of net sales increased to approximately 9.5% compared to approximately 9.2% for the first twenty-six weeks of fiscal 2003. Selling expenses as a percentage of net sales decreased from approximately 7.0% for the second quarter of fiscal 2003 to approximately 6.6% for the second quarter of fiscal 2003. Selling expenses as a percentage of net sales increased to approximately 7.2% for the first twenty-six weeks of fiscal 2004 from approximately 6.9% for the first twenty-six weeks of fiscal 2003. Administrative expenses as a percentage of net sales increased from approximately 1.6% for the second quarter of fiscal 2003 to approximately 2.4% for the second quarter of fiscal 2004. Administrative expenses as a percentage of net sales increased from approximately 2.0% for the first twenty-six weeks of fiscal 2003 to approximately 2.7% for the first twenty-six weeks of fiscal 2004. The dollar increases, for both the quarterly and twenty-six week periods, were due primarily to higher employee incentive compensation attributable to the Company's improved operating results in fiscal 2004. The second quarter of fiscal 2003 also includes the receipt of a contract settlement payment from a customer who previously chose not to honor a supply contract. Also contributing to the increases in administrative expenses was higher legal and professional fees related to (i) the United States Department of Justice's investigation of the peanut shelling industry and (ii) compliance with the Sarbanes-Oxley Act of 2002 and other corporate governance regulation. See "Factors That May Affect Future Results - Peanut Shelling Industry Antitrust Investigation." Income from Operations. Due to the factors discussed above, income from operations increased from approximately $14.5 million, or 10.5% of net sales, for the second quarter of fiscal 2003, to approximately $17.9 million, or 10.4% of net sales, for the second quarter of fiscal 2004. Income from operations increased from approximately $18.3 million, or 7.8% of net sales, for the first twenty-six weeks of fiscal 2003, to approximately $30.5 million, or 10.3% of net sales, for the first twenty-six weeks of fiscal 2004. Interest Expense. Interest expense decreased from approximately $1.1 million for the second quarter of fiscal 2003 to approximately $0.9 million for the second quarter of fiscal 2004. For the first twenty-six weeks of fiscal 2004, interest expense decreased to approximately $1.9 million from approximately $2.3 million for the first twenty-six weeks of fiscal 2003. The decreases in interest expense, for both the quarterly and twenty-six week periods, were due primarily to lower average rates of borrowings and lower balances resulting from scheduled debt payments. During the first quarter of fiscal 2004, the Company paid the first of three annual installments on its $15.0 million 12 subordinated debt, which bears a 9.38% interest rate. Income Taxes. Income tax expense was approximately $6.7 million, or 39.0% of income before income taxes for the second quarter of fiscal 2004 compared to approximately $5.3 million, or 39.0% of income before income taxes, for the second quarter of fiscal 2003. Income tax expense was approximately $11.3 million, or 39.0% of income before income taxes for the first twenty-six weeks of fiscal 2004 compared to approximately $6.3 million, or 39.0% of income before income taxes, for the first twenty-six weeks of fiscal 2003. Net Income. Net income was approximately $10.4 million, or $1.12 basic per common share ($1.09 diluted), for the second quarter of fiscal 2004, compared to approximately $8.2 million, or $0.90 basic per common share ($0.89 diluted), for the second quarter of fiscal 2003. Net income was approximately $17.6 million, or $1.88 basic per common share ($1.85 diluted), for the first twenty-six weeks of fiscal 2004, compared to approximately $9.9 million, or $1.08 basic per common share ($1.07 diluted), for the first twenty-six weeks of fiscal 2003, due to the factors discussed above. LIQUIDITY AND CAPITAL RESOURCES GENERAL The primary uses of cash are to fund the Company's current operations, fulfill contractual obligations and repay indebtedness. Also, various uncertainties could result in additional uses of cash, such as those pertaining to the antitrust investigation of a portion of the peanut shelling industry or other litigation. Net cash provided by operating activities was approximately $22.8 million for the first twenty-six weeks of fiscal 2004 compared to approximately $18.8 million for the first twenty-six weeks of fiscal 2003. The increase in cash provided by operating activities for the first twenty-six weeks of fiscal 2004 when compared to the first twenty-six weeks of fiscal 2003 was due primarily to improved operating results. Nut purchases were approximately 18.2% greater in the first twenty-six weeks of fiscal 2004 than in the first twenty-six weeks of fiscal 2003. During the first twenty-six weeks of fiscal 2004, the Company spent approximately $6.1 million on capital expenditures, compared to approximately $5.0 million for the first twenty-six weeks of fiscal 2003. The most significant project for fiscal 2004 is the expansion of the storage capacity of inshell pecans at the Selma, Texas facility. This project should be completed during the third quarter of fiscal 2004. The Company is currently exploring the possible consolidation of its Chicago area production facilities into a single location through the construction of a new production facility. If the consolidation proceeds, it is unlikely that such a facility could be financed using solely the Company's existing credit facilities. In that event, the Company would evaluate other financing alternatives, including but not limited to debt financing, proceeds from the sale of existing Chicago area facilities and/or cash flow from operations. During the first twenty-six weeks of fiscal 2004, the Company repaid approximately $8.5 million of long-term debt compared to approximately $3.4 million during the first twenty-six weeks of fiscal 2003, as the first scheduled annual $5.0 million payment of subordinated debt under the Additional Long-Term Financing discussed below became due. FINANCING ARRANGEMENTS The Company's Bank Credit Facility is comprised of (i) a working capital revolving loan, which provides for working capital financing of up to approximately $73.1 million, in the aggregate, and matures, as amended, on May 31, 2006, and (ii) a letter of credit of approximately $6.9 million (the "IDB Letter of Credit") to secure industrial development bonds, which matures on June 1, 2006. Borrowings under the working capital revolving loan accrue interest at a rate determined pursuant to a formula based on the agent bank's quoted rate and the Eurodollar Interbank rate, the weighted average of which was 2.54% at December 25, 2003. As 13 of December 25, 2003, the Company had approximately $49.5 million of available credit under the Bank Credit Facility. As of December 25, 2003, the total principal amount outstanding under the $35.0 million long-term credit facility entered into in 1992 (the "Long-Term Financing Facility") was approximately $4.9 million. Of the 4.9 million, $2.5 million bears interest at rates ranging from 7.34% to 9.18% per annum payable quarterly, and requires equal semi-annual principal installments of approximately $1.3 million, with the final installment due on August 16, 2004. The remaining approximately $2.4 million of this indebtedness bears interest at a rate of 9.16% per annum payable quarterly, and requires equal semi-annual principal installments of approximately $0.5 million, with the final installment due on May 15, 2006. As of December 25, 2003, the total principal amount outstanding under the $25.0 million long-term credit facility entered into in 1995 (the "Additional Long-Term Financing") was approximately $12.9 million. Of the $12.9 million, approximately $2.9 million bears interest at a rate of 8.3% per annum payable semiannually, and requires equal annual principal installments of approximately $1.4 million, with the final installment due on September 1, 2005. The remaining $10.0 million of this indebtedness (which is subordinated to the Company's other financing facilities) bears interest at a rate of 9.38% per annum payable semiannually, and requires equal annual principal installments of $5.0 million, with the final installment due on September 1, 2005. As of December 25, 2003, the Company had $6.75 million in aggregate principal amount of industrial development bonds outstanding, which was used to finance the acquisition, construction and equipping of the Bainbridge, Georgia facility. The bonds bear interest payable semiannually at 4.00% (which was reset on June 1, 2002) through May 2006. On June 1, 2006, 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 $0.3 million in fiscal 2004 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. 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 to the date the dividend is declared, (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 14 Company from redeeming shares of capital stock. As of December 25, 2003, the Company was in compliance with all restrictive covenants under its financing facilities. The Company believes that cash flow from operating activities and funds available under the Bank Credit Facility will be sufficient to meet working capital requirements and anticipated capital expenditures for the foreseeable future. However, if the Company elects to pursue the facility consolidation project, additional financing sources may be required to fund the capital expenditures that would be necessary for the project. RECENT ACCOUNTING PRONOUNCEMENTS In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based Compensation - Transition and Disclosure". SFAS 148 amends certain provisions of SFAS 123 and is effective for fiscal years beginning after December 15, 2002. The Company has adopted the disclosure requirements of SFAS 148, and is currently its accounting alternatives under SFAS 148. In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51". FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 will become effective during the third quarter of fiscal 2004. The Company enters into various transactions with certain related parties including the rental of buildings under capital leases and purchases from entities owned either directly or indirectly by certain directors, officers and stockholders of the Company. The adoption of FIN 46 during the second quarter did not have any impact on the financial statements FORWARD LOOKING STATEMENTS The statements contained in this filing that 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 "intends", "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, including the factors described below under "Factors That May Affect Future Results", that could cause actual results to differ materially from those in the forward looking statements, as well as the timing and occurrence (or nonoccurrence) 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 (a) 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, plant diseases and changes in government programs. Additionally, the supply of edible nuts and other raw materials used in the Company's products could be reduced upon any determination by the United States Department of Agriculture ("USDA") or other government agencies 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. 15 If worldwide demand for nuts continues at recent rates, and supply does not expand to meet demand, a reduction in availability and an increase in the cost of raw materials will occur. We do not hedge against changes in commodity prices, and thus, shortages in the supply of and 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 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 "General". (b) 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 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, which 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. (c) FIXED PRICE COMMITMENTS From time to time, the Company enters into fixed price commitments with its customers. Such commitments represented approximately 15% to 20% of the Company's annual net sales in fiscal 2003, and in many cases are entered into after the Company's cost to acquire the nut products necessary to satisfy the fixed price commitment is substantially fixed. 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, however, these fixed price commitments may result in losses that have a material adverse effect on the Company's results of operations. (d) INVENTORY MEASUREMENT The Company purchases its inshell nut inventories in large quantities at harvest times, which are primarily during the second and third quarters of the Company's fiscal year, and receives inshell nut shipments in bulk truckloads. The weights of the inshell nuts are measured using truck scales at the time of receipt, and inventories are recorded on the basis of those measurements. The inshell nuts are than stored in bulk in large warehouses to be shelled throughout the year. The inshell inventories are relieved on the basis of continuous high-speed bulk weighing systems as the nuts are shelled or on the basis of calculations derived from the weight of the shelled nuts that are produced. While the Company performs various procedures to confirm the accuracy of its inshell nut inventories, these inventories are estimates that must be periodically adjusted to account for positive or negative variations and such adjustments directly affect earnings. The precise amount of the Company's inshell inventories is not known until the entire quantity of the particular nut is depleted, which may not necessarily occur every year. Prior crop year inventories may still be on hand as the new crop year inventories are purchased. There can be no assurance that such inventory quantity adjustments will not have a material adverse effect on the Company's results of operations in the future. (e) 2002 FARM BILL The Farm Security and Rural Investment Act of 2002 (the "2002 Farm Bill") terminated the federal peanut quota program beginning with the 2002 crop year. The 2002 Farm Bill replaced the federal peanut quota program with a fixed payment system through the 2007 crop year that can be either coupled or decoupled. A coupled system is tied to the actual amount of production, while a decoupled system is not. The series of loans and subsidies established by the 2002 Farm Bill is similar to the systems used for other crops such as grains and cotton. To compensate farmers for the elimination of the peanut quota, the 2002 Farm Bill 16 provides a buy-out at a specified rate for each pound of peanuts that had been in that farmer's quota under the prior program. Additionally, among other provisions, the Secretary of Agriculture may make certain counter-cyclical payments whenever the Secretary believes that the effective price for peanuts is less than the target price. The termination of the federal peanut quota program has reduced the Company's costs for peanuts and resulted in a higher gross margin than the Company has historically achieved. Therefore, the gross margin on peanuts is higher than the Company has historically achieved. Although this margin is now similar to the Company's total gross profit margin, we may be unable to maintain these higher gross profit margins on the sale of peanuts, and the Company's business, financial position and results of operations will be materially adversely affected. (f) PUBLIC HEALTH SECURITY AND BIOTERRORISM PREPAREDNESS AND RESPONSE ACT OF 2002 The events of September 11, 2001 reinforced the need to enhance the security of the United States. Congress responded in part by passing the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (the "Bioterrorism Act"). The Bioterrorism Act includes a number of provisions to help guard against the threat of bioterrorism, including new authority for the Secretary of Health and Human Services ("HHS") to take action to protect the nation's food supply against the threat of international contamination. The Food and Drug Administration ("FDA"), as the food regulatory arm of HHS, is responsible for developing and implementing these food safety measures, which fall into four broad categories: (i) registration of food facilities, (ii) establishment and maintenance of records regarding the sources and recipients of foods, (iii) prior notice to FDA of imported food shipments and (iv) administrative detention of potentially affected foods. FDA is the process of issuing rules in each of these categories, which rules generally took effect on December 12, 2003. There can be no assurances that effects of the Bioterrorism Act and the related rules, including any potential disruption in the Company's supply of imported nuts, which represent approximately 37% of the Company's total nut purchases, will not have a material adverse effect on the Company's business, financial position or results of operations in the future. (g) PEANUT SHELLING INDUSTRY ANTITRUST INVESTIGATION On June 17, 2003, the Company received a subpoena for the production of documents and records from a grand jury in connection with an investigation of a portion of the peanut shelling industry by the Antitrust Division of the United States Department of Justice. The Company believes the investigation relates to procurement pricing practices but, given the early stage of the investigation, it could concern other or additional business practices. The investigation, of which the Company is a subject, is on-going. The Company has responded to the subpoena and produced documents to the Department of Justice. The investigation may have a material adverse effect on the Company's business, financial condition and results of operations, and on the peanut shelling industry. 17 ITEM 3 -- 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. ITEM 4 -- CONTROLS AND PROCEDURES As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chairman and Chief Executive Officer along with the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, the Company's Chairman and Chief Executive Officer along with the Company's Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company's periodic SEC filings. There has been no change in the Company's internal control over financial reporting during the Company's second fiscal quarter ended December 25, 2003 that has materially affected, or is reasonably likely to materially affect the Company's internal control over financial reporting. 18 PART II. OTHER INFORMATION Item 4 -- Submission of Matters to a Vote of Security Holders The Company's 2003 Annual Meeting of Stockholders was held on October 29, 2003 for the purpose of (i) electing those directors entitled to be elected by the holders of the Company's Class A Common Stock, (ii) electing those directors entitled to be elected by the holders of the Company's Common Stock, (iii) ratifying the action of the Company's Audit Committee of the Board of Directors in appointing PricewaterhouseCoopers LLP as independent accountants for fiscal 2004, and (iv) transacting such other business properly brought before the meeting. The meeting proceeded and (i) the holders of Class A Common Stock elected Jasper B. Sanfilippo, Mathias A. Valentine, Michael J. Valentine, Jeffrey T. Sanfilippo and Timothy R. Donovan to serve on the Company's Board of Directors by a unanimous vote of 3,667,426 votes cast for, representing 100% of the then outstanding shares of Class A Common Stock, (ii) the holders of Common Stock elected Governor Jim R. Edgar by a vote of 5,061,345 votes cast for and 234,723 votes withheld, (iii) the holders of Common Stock elected John W. A. Buyers by a vote of 5,062,725 votes cast for and 233,343 votes withheld, and (iv) the holders of Class A Common Stock and Common Stock ratified the appointment of PricewaterhouseCoopers LLP as the Company's independent accountants for fiscal 2004 by a total of 41,926,468 votes cast for ratification, 40,780 votes against ratification and 3,080 abstentions. Item 6 -- Exhibits and Reports on Form 8-K (a) The exhibits filed herewith are listed in the exhibit index that follows the certifications page and immediately precedes the exhibits filed. (b) Reports on Form 8-K: On October 24, 2003, the Company filed a Current Report on Form 8-K, dated October 22, 2003, announcing quarterly financial results. 19 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JOHN B. SANFILIPPO & SON, INC. Date: January 27, 2004 By: /s/ Michael J. Valentine ------------------------------------- Michael J. Valentine Executive Vice President Finance, Chief Financial Officer and Secretary 20 EXHIBIT INDEX
Exhibit Number Description - ------------------------------------------------------------------------------------------------------------------------------------ 2 None 3.1 Restated Certificate of Incorporation of Registrant(2) 3.2 Certificate of Correction to Restated Certificate(2) 3.3 Bylaws of Registrant(1) 4.1 Specimen Common Stock Certificate(3) 4.2 Specimen Class A Common Stock Certificate(3) 4.3 Second Amended and Restated Note Agreement by and between the Registrant and The Prudential Insurance Company of America ("Prudential") dated January 24, 1997 (the "Long-Term Financing Facility")(16) 4.4 7.87% Series A Senior Note dated September 29, 1992 in the original principal amount of $4.0 million due August 15, 2004 executed by the Registrant in favor of Prudential(5) 4.5 8.22% Series B Senior Note dated September 29, 1992 in the original principal amount of $6.0 million due August 15, 2004 executed by the Registrant in favor of Prudential(5) 4.6 8.22% Series C Senior Note dated September 29, 1992 in the original principal amount of $4.0 million due August 15, 2004 executed by the Registrant in favor of Prudential(5) 4.7 8.33% Series D Senior Note dated January 15, 1993 in the original principal amount of $3.0 million due August 15, 2004 executed by the Registrant in favor of Prudential(6) 4.8 6.49% Series E Senior Note dated September 15, 1993 in the original principal amount of $8.0 million due August 15, 2004 executed by the Registrant in favor of Prudential(8) 4.9 8.31% Series F Senior Note dated June 23, 1994 in the original principal amount of $8.0 million due May 15, 2006 executed by the Registrant in favor of Prudential(9) 4.10 8.31% Series F Senior Note dated June 23, 1994 in the original principal amount of $2.0 million due May 15, 2006 executed by the Registrant in favor of Prudential(9) 4.11 Amended and Restated Guaranty Agreement dated as of October 19, 1993 by Sunshine in favor of Prudential(7) 4.12 Amendment to the Second Amended and Restated Note Agreement dated May 21, 1997 by and among Prudential, Sunshine and the Registrant(17) 4.13 Amendment to the Second Amended and Restated Note Agreement dated March 31, 1998 by and among Prudential, the Registrant, Sunshine and Quantz Acquisition Co., Inc. ("Quantz")(18) 4.14 Guaranty Agreement dated as of March 31, 1998 by JBS International, Inc. ("JBSI") in favor of Prudential(18) 4.15 Amendment and Waiver to the Second Amended and Restated Note Agreement dated February 5, 1999 by and among Prudential, the Registrant, Sunshine, JBSI and Quantz(21) 4.16 Amendment to the Second Amended and Restated Note Agreement dated May 30, 2003 by and among Prudential, the Registrant and JBSI(26)
21
Exhibit Number Description - ------------------------------------------------------------------------------------------------------------------------------------ 4.17 Guaranty Agreement dated as of May 30, 2003 by JBSI in favor of Prudential(26) 4.18 Note Purchase Agreement dated as of August 30, 1995 between the Registrant and Teachers Insurance and Annuity Association of America ("Teachers")(13) 4.19 8.30% Senior Note due 2005 in the original principal amount of $10.0 million, dated September 12, 1995 and executed by the Registrant in favor of Teachers(13) 4.20 9.38% Senior Subordinated Note due 2005 in the original principal amount of $15.0 million, dated September 12, 1995 and executed by the Registrant in favor of Teachers(13) 4.21 Guaranty Agreement dated as of August 30, 1995 by Sunshine in favor of Teachers (Senior Notes)(13) 4.22 Guaranty Agreement dated as of August 30, 1995 by Sunshine in favor of Teachers (Senior Subordinated Notes)(13) 4.23 Amendment, Consent and Waiver, dated as of March 27, 1996, by and among Teachers, Sunshine and the Registrant(15) 4.24 Amendment No. 2 to Note Purchase Agreement dated as of January 24, 1997 by and among Teachers, Sunshine and the Registrant(16) 4.25 Amendment to Note Purchase Agreement dated May 19, 1997 by and among Teachers, Sunshine and the Registrant(18) 4.26 Amendment No. 3 to Note Purchase Agreement dated as of March 31, 1998 by and among Teachers, Sunshine, Quantz and the Registrant(18) 4.27 Guaranty Agreement dated as of March 31, 1998 by JBSI in favor of Teachers (Senior Notes)(18) 4.28 Guaranty Agreement dated as of March 31, 1998 by JBSI in favor of Teachers (Senior Subordinated Notes)(18) 4.29 Amendment and Waiver to Note Purchase Agreement dated February 5, 1999 by and among Teachers, Sunshine, Quantz, JBSI and the Registrant(21) 4.30 Amendment and waiver to Note Purchase Agreement dated October 26, 1999 between Teachers and the Registrant(22) 10.1 Certain documents relating to $8.0 million Decatur County-Bainbridge Industrial Development Authority Industrial Development Revenue Bonds (John B. Sanfilippo & Son, Inc. Project) Series 1987 dated as of June 1, 1987(1) 10.2 Industrial Building Lease (the "Touhy Avenue Lease") dated November 1, 1985 between the Registrant and LNB, as Trustee under Trust Agreement dated September 20, 1966 and known as Trust No. 34837(10) 10.3 First Amendment to the Touhy Avenue Lease dated June 1, 1987(10) 10.4 Second Amendment to the Touhy Avenue Lease dated December 14, 1990(10) 10.5 Third Amendment to the Touhy Avenue Lease dated September 1, 1991(14)
22
Exhibit Number Description - ------------------------------------------------------------------------------------------------------------------------------------ 10.6 Mortgage, Assignment of Rents and Security Agreement made on September 29, 1992 by LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628 in favor of the Registrant relating to the properties commonly known as 2299 Busse Road and 1717 Arthur Avenue, Elk Grove Village, Illinois(5) 10.7 Industrial Building Lease dated June 1, 1985 between Registrant and LNB, as Trustee under Trust Agreement dated February 7, 1979 and known as Trust No. 100628(1) 10.8 First Amendment to Industrial Building Lease dated September 29, 1992 by and between the Registrant and LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628(5) 10.9 Second Amendment to Industrial Building Lease dated March 3, 1995 by and between the Registrant and LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628(11) 10.10 Third Amendment to Industrial Building Lease dated August 15, 1998 by and between the Registrant and LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628(19) 10.11 Ground Lease dated January 1, 1995 between the Registrant and LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628(11) 10.12 Party Wall Agreement, dated March 3, 1995 between the Registrant, LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628, and the Arthur/Busse Limited Partnership(11) 10.13 Tax Indemnification Agreement between Registrant and certain Stockholders of Registrant prior to its initial public offering(2) 10.14 Indemnification Agreement between Registrant and certain Stockholders of Registrant prior to its initial public offering(2) 10.15 The Registrant's 1991 Stock Option Plan(1) 10.16 First Amendment to the Registrant's 1991 Stock Option Plan(4) 10.17 Outsource Agreement between the Registrant and Preferred Products, Inc. dated January 19, 1995 [CONFIDENTIAL TREATMENT REQUESTED](11) 10.18 Letter Agreement between the Registrant and Preferred Products, Inc. dated February 24, 1995, amending the Outsource Agreement dated January 19, 1994 [CONFIDENTIAL TREATMENT REQUESTED](11) 10.19 The Registrant's 1995 Equity Incentive Plan(12) 10.20 Promissory Note (the "ILIC Promissory Note") in the original principal amount of $2.5 million, dated September 27, 1995 and executed by the Registrant in favor of Indianapolis Life Insurance Company ("ILIC")(14) 10.21 First Mortgage and Security Agreement (the "ILIC Mortgage") by and between the Registrant, as mortgagor, and ILIC, as mortgagee, dated September 27, 1995, and securing the ILIC Promissory Note and relating to the property commonly known as 3001 Malmo Drive, Arlington Heights, Illinois(14)
23
Exhibit Number Description - ------------------------------------------------------------------------------------------------------------------------------------ 10.22 Assignment of Rents, Leases, Income and Profits dated September 27, 1995, executed by the Registrant in favor of ILIC and relating to the ILIC Promissory Note, the ILIC Mortgage and the Arlington Heights facility(14) 10.23 Environmental Risk Agreement dated September 27, 1995, executed by the Registrant in favor of ILIC and relating to the ILIC Promissory Note, the ILIC Mortgage and the Arlington Heights facility(14) 10.24 Credit Agreement dated as of March 31, 1998 among the Registrant, Sunshine, Quantz, JBSI, U.S. Bancorp Ag Credit, Inc. ("USB") as Agent, Keybank National Association ("KNA"), and LNB(18) 10.25 The Registrant's 1998 Equity Incentive Plan(21) 10.26 First Amendment to the Registrant's 1998 Equity Incentive Plan(24) 10.27 Second Amendment to Credit Agreement dated May 10, 2000 by and among the Registrant, JBSI, USB as Agent, LNB and SunTrust Bank, N.A.("STB") (replacing KNA)(23) 10.28 Third Amendment to Credit Agreement dated May 20, 2002 by and among the Registrant, JBSI, USB as Agent, LNB and STB(25) 10.29 Fourth Amendment to Credit Agreement dated May 30, 2003 by and among the Registrant, JBSI, USB as Agent, LNB and STB(26) 10.30 Revolving Credit Note in the principal amount of $40.0 million executed by the Registrant and JBSI in favor of USB, dated as of May 30, 2003(26) 10.31 Revolving Credit Note in the principal amount of approximately $22.9 million executed by the Registrant and JBSI in favor of STB, dated as of May 30, 2003(26) 10.32 Revolving Credit Note in the principal amount of approximately $17.1 million executed by the Registrant and JBSI in favor of LSB, dated as of May 30, 2003(26) 10.33 Industrial Building Lease between the Registrant and Cabot Acquisition, LLC dated April 18, 2003(26) 10.34 Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number One among John E. Sanfilippo, as trustee of the Jasper and Marian Sanfilippo Irrevocable Trust, dated September 23, 1990, Jasper B. Sanfilippo, Marian R. Sanfilippo and Registrant, dated December 31, 2003, filed herewith 10.35 Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number Two among Michael J. Valentine, as trustee of the Valentine Life Insurance Trust, Mathias Valentine, Mary Valentine and Registrant, dated December 31, 2003, filed herewith 31.1 Certification of Jasper B. Sanfilippo pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended, filed herewith 31.2 Certification of Michael J. Valentine pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended, filed herewith 32.1 Certification of Jasper B. Sanfilippo pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith 32.2 Certification of Michael J. Valentine pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith
24 (1) Incorporated by reference to the Registrant's Registration Statement on Form S-1, Registration No. 33-43353, as filed with the Commission on October 15, 1991 (Commission File No. 0-19681). (2) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (Commission File No. 0-19681). (3) Incorporated by reference to the Registrant's Registration Statement on Form S-1 (Amendment No. 3), Registration No. 33-43353, as filed with the Commission on November 25, 1991 (Commission File No. 0-19681). (4) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the second quarter ended June 25, 1992 (Commission File No. 0-19681). (5) Incorporated by reference to the Registrant's Current Report on Form 8-K dated September 29, 1992 (Commission File No. 0-19681). (6) Incorporated by reference to the Registrant's Current Report on Form 8-K dated January 15, 1993 (Commission File No. 0-19681). (7) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the third quarter ended September 30, 1993 (Commission File No. 0-19681). (8) Incorporated by reference to the Registrant's Current Report on Form 8-K dated September 15, 1993 (Commission File No. 0-19681). (9) Incorporated by reference to the Registrant's Current Report and Form 8-K dated June 23, 1994 (Commission File No. 0-19681). (10) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (Commission File No. 0-19681). (11) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (Commission File No. 0-19681). (12) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the first quarter ended March 30, 1995 (Commission File No. 0-19681). (13) Incorporated by reference to the Registrant's Current Report on Form 8-K dated September 12, 1995 (Commission File No. 0-19681). (14) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the third quarter ended September 28, 1995 (Commission File No. 0-19681). (15) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 (Commission File No. 0-19681). (16) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (Commission File No. 0-19681). 25 (17) Incorporated by reference to the Registrant's Current Report on Form 8-K dated May 21, 1997 (Commission File No. 0-19681). (18) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the third quarter ended March 26, 1998 (Commission File No. 0-19681). (19) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 25, 1998 (Commission File No. 0-19681). (20) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the first quarter ended September 24, 1998 (Commission File No. 0-19681). (21) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the second quarter ended December 24, 1998 (Commission File No. 0-19681). (22) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the first quarter ended September 23, 1999 (Commission File No. 0-19681). (23) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 29, 2000 (Commission File No. 0-19681). (24) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the second quarter ended December 28, 2000 (Commission File No. 0-19681). (25) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 27, 2002 (Commission File No. 0-19681). (26) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 26, 2003 (Commission File No. 0-19681). 26 EX-10.34 3 c82327exv10w34.txt AMENDED & RESTATED SPLIT-DOLLAR INSURANCE AGMT-#1 EXHIBIT 10.34 AMENDED AND RESTATED JOHN B. SANFILIPPO & SON, INC. SPLIT-DOLLAR INSURANCE AGREEMENT NUMBER ONE THIS AMENDED AND RESTATED AGREEMENT (the "Agreement") is made and entered into as of the 31st day of December, 2003, by and between John B. Sanfilippo & Son, Inc., an Illinois corporation (the "Company"), Jasper B. Sanfilippo, individually, Marian R. Sanfilippo, individually (collectively the "Insureds" and individually an "Insured"), and John E. Sanfilippo (the "Trustee"), not individually, but as Trustee of the Jasper and Marian Sanfilippo Irrevocable Trust, dated September 23, 1990 (the "Trust"). RECITALS WHEREAS, the Company, Jasper B. Sanfilippo, Marian R. Sanfilippo, and the Trustee executed an agreement in 1992 known as the John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number One (the "Original Agreement"); and WHEREAS, pursuant to Paragraph 10 of the Original Agreement, the parties thereto have the right to amend or modify the Original Agreement in whole or in part by the written agreement of all of the parties; and WHEREAS, the parties now wish to amend and restate the Original Agreement in its entirety so that the equity collateral assignment split-dollar arrangement created by the Original Agreement is changed to a non-equity endorsement split-dollar arrangement. NOW, THEREFORE, in consideration of the mutual promises made by the parties herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby amend and restate the Original Agreement in its entirety and agree as follows: AGREEMENT 1. ASSIGNMENT OF POLICIES TO COMPANY; CONSIDERATION. (a) ASSIGNMENT. Upon the execution of this Agreement, the Trustee shall take all necessary action to cause the life insurance policies listed on Exhibit A, which is attached hereto and incorporated by reference herein (collectively the "Policies" and individually a "Policy"), and all incidents of ownership therein, including all rights to the Policies' cash values, to be assigned to the Company. (b) CONSIDERATION. In consideration of the assignment of the Policies by the Trustee to the Company, the Company hereby agrees to: -1- (i) Release and discharge the Trust from its obligations under the Original Agreement to pay to the Company an amount equal to the cumulative premiums paid by the Company on the Policies up to the date of this Agreement; (ii) Release and discharge the security interest issued by the Trust in the limited rights in the Policies as set forth in Paragraph 4(b) of the Original Agreement ; and (iii) Repay any and all outstanding loans on the Policies that the Trust was obligated to repay as of the date of this Agreement. 2. POLICY OWNERSHIP. (a) OWNERSHIP. Upon the execution of this Agreement and the assignment of the Policies as set forth in Paragraph 1(a) above, the Company shall be the sole and absolute owner of the Policies and may exercise all ownership rights granted to the owner thereof by the terms of the Policies, except as may otherwise be provided herein. The Company shall have the full and exclusive right and access to the Policies' cash values, and neither the Insureds nor the Trustee shall have a current or future right in, or direct or indirect access to, the Policies' cash values. The parties hereto agree that the Policies shall be subject to the terms and conditions of this Agreement and of the endorsements to the Policies that are to be filed with the Phoenix Life Insurance Company and the Transamerica Occidental Life Insurance Company (collectively the "Insurers" and individually an "Insurer") pursuant to Paragraph 2(b) below. The parties hereto further agree that they will take all action necessary to cause the Policies to conform to the provisions of this Agreement. (b) ENDORSEMENTS. Contemporaneously with the execution of this Agreement, the Company shall complete and file endorsements with the Insurers, using the appropriate forms provided by the Insurers for such purposes, conferring upon the Trustee the right to name the beneficiaries of the Policies' death benefits in excess of the amounts to which the Company is entitled under Paragraph 5(a) hereunder. 3. PREMIUM PAYMENTS. On or before the due date of each Policy premium, or within the applicable grace period provided therein, the Company shall pay the full amount of each Policy premium to the appropriate Insurer. 4. BENEFICIARY DESIGNATIONS. (a) THE COMPANY. Contemporaneously with the execution of this Agreement, the Company shall execute and deliver to the appropriate Insurer corporate beneficiary designations for the Policies, using the appropriate forms provided by said Insurer for such beneficiary designations, to secure the Company's recovery of the amounts described in Paragraph 5(a) hereunder. The parties hereto agree to take all action necessary to cause such corporate beneficiary designations to conform to the provisions of this Agreement. -2- (b) THE TRUST. Also contemporaneously with the execution of this Agreement, the Trustee shall execute and deliver beneficiary designations for the Policies to the appropriate Insurer, using the appropriate forms provided by the Insurers for such designations, to designate the requested person(s) or entity(ies) as the beneficiary(ies) to receive the death benefits of the Policies in excess of the amounts to which the Company is entitled under Paragraph 5(a) hereunder (such designated beneficiary(ies) referred to herein as the "Trust Designee"). The parties hereto agree to take all action necessary to cause such beneficiary designations to conform to the provisions of this Agreement. The Company shall not terminate, alter, or amend the Trustee's beneficiary designations without the express written consent of the Trustee. 5. RIGHT TO POLICY PROCEEDS. (a) THE COMPANY'S RIGHTS. For so long as this Agreement remains in effect, upon the death of the Insured (or, in the case of a joint-and-survivor policy that is subject to the terms of this Agreement, upon the death of the last Insured to die), the Company shall have the unqualified right to receive from the proceeds of each Policy an amount equal to the cumulative premiums paid by the Company on each Policy from the date of the Original Agreement until the date of the Insured's death (or, in the case of a joint-and-survivor policy, the date of the death of the last Insured to die), provided that such amounts shall be reduced by any indebtedness against each Policy existing at the death of the Insured (or, in the case of a joint-and-survivor policy that is subject to the terms of this Agreement, upon the death of the last Insured to die). (b) THE TRUST DESIGNEE'S RIGHTS. For so long as this Agreement remains in effect, upon the death of the Insured (or, in the case of a joint-and-survivor policy that is subject to the terms of this Agreement, upon the death of the last Insured to die), the Trust Designee shall have the unqualified right to receive from the proceeds of each Policy an amount equal to the death benefit of each Policy in excess of the amount to which the Company is entitled to receive from each Policy under Paragraph 5(a) above. (c) LIMITATIONS. No amounts shall be paid from the Policies' death benefits to the Trust Designee until the full amounts due to the Company from each Policy pursuant to Paragraph 5(a) above have been paid. The parties hereto agree that the beneficiary designation provisions of each Policy shall conform to the provisions of this paragraph. 6. POLICY DIVIDENDS. The dividends on each Policy shall be applied as elected by the Company. 7. SETTLEMENT OPTION. The Company and the Trust Designee may select a settlement option as provided in the Policies at the time of distribution. 8. NOTICE TO INSUREDS OF TAXABLE COST. For each year that this Agreement is in effect, the Company shall secure from each Insurer and shall furnish to each Insured an annual -3- report that includes a statement of the amounts of taxable income reportable by the Insureds for federal and state income tax purposes as a result of the Company's payment of the Policies' premiums. The Company shall use the information contained in these annual reports to determine proper withholdings and tax treatments. 9. COLLECTION OF DEATH BENEFITS. Upon the death of the Insured (or, in the case of a joint-and-survivor policy that is subject to the terms of this Agreement, upon the death of the last Insured to die), the Company and the Trustee shall cooperate to take whatever action is necessary to collect the death benefits provided under the Policies. Upon the collection and payment of the Policies' death benefits as provided in this Agreement, this Agreement shall terminate. 10. TERMINATION OF THE AGREEMENT DURING THE LIFETIME(S) OF THE INSURED(S). (a) WITHOUT NOTICE. This Agreement shall terminate without notice during the Insured's lifetime (or, in the case of a joint-and-survivor policy that is subject to the terms of this Agreement, during the life of the surviving Insured) upon the first to occur of the following: (i) Surrender of the Policies by the Company, which has the sole and exclusive right of surrender; (ii) Failure of the Company to make a premium payment as required pursuant to Paragraph 3 hereunder; (iii) Total cessation of the Company's business; or (iv) Bankruptcy, receivership, or dissolution of the Company. (b) WITH NOTICE. In addition, either the Company or the Trustee may terminate this Agreement unilaterally and without cause, so long as no premium under a Policy is overdue, by written notice to the other party of such intent to terminate the Agreement. Such termination shall be effective as of the date specified in such notice. 11. DISPOSITION OF THE POLICIES UPON TERMINATION OF THE AGREEMENT DURING THE LIFETIME(S) OF THE INSURED(S). (a) OPTION TO PURCHASE. For thirty (30) days after the date of the termination of this Agreement pursuant to Paragraph 10 above, the Trustee shall have the option to purchase any of the Policies from the Corporation. The purchase price for each Policy shall be equal to the cash surrender value of such Policy, including dividend accumulations and the cash value of dividend additions existing in such Policy at the end of the period for which premiums have been paid. If the Policy shall then be encumbered by assignment, policy loan, or otherwise, the Company shall either remove such encumbrance, or reduce the sales price to the Trustee by the total amount of indebtedness outstanding against the Policy. Upon receipt of such amount, the Company shall transfer all of its rights, title, and interest in and to the Policy to the Trustee, by the execution and delivery of an appropriate instrument of transfer. -4- (b) FAILURE TO EXERCISE OPTION. If the Trustee fails to exercise such option within such thirty (30) day period, then the Company may surrender or cancel the Policies for their cash surrender values, or it may change the beneficiary designation provisions of the Policies naming itself or any other person or entity as the revocable beneficiary thereof, or exercise any other ownership rights in and to the Policies, without regard to the provisions thereof. Thereafter, neither the Trustee, nor his successor in interest nor any of the Trust's beneficiaries shall have any further interest in and to the Policies, either under the terms thereof or under this Agreement. 12. LOANS. The Company may pledge or assign any of the Policies, subject to the terms and conditions of this Agreement, for the sole purpose of securing a loan from either of the Insurers or from a third party. The amount of such loan, including the accumulated interest thereon, shall not exceed the lesser of (i) the amount of the premiums on the respective Policy to which the loan relates paid by the Company hereunder, or (ii) the cash surrender value of the respective Policy to which the loan relates (as determined by the appropriate Insurer) as of the date to which premiums have been paid. Interest charges on any such loans shall be paid by the Company. If the Company so encumbers any of the Policies, other than by policy loans from the Insurers, then, upon the death of the Insured (or, in the case of a joint-and-survivor policy that is subject to the provisions of this Agreement, upon the death of the last Insured to die), or upon the election of an Insured to purchase a Policy from the Company, the Company shall promptly take all action necessary to secure the release or discharge of such encumbrance. 13. TRUSTEE'S RIGHT TO ASSIGN INTEREST. Assignment of any or all of the rights or benefits provided under this Agreement has significant tax consequences. Therefore, unless otherwise agreed to in writing by the Company, the Trustee shall not assign any right or benefit provided under this Agreement and any attempt to do so shall be void. Upon written consent of the Company, an assignment shall be exercisable by the execution and delivery to the Company of a written assignment, which shall be attached to the Agreement and by this reference is made a part hereof. Upon receipt of such written assignment executed by the Trustee, and duly accepted by the assignee thereof, the Company shall consent thereto in writing, and shall thereafter treat the Trustee's assignee as the sole owner of all the Trustee's right, title, and interest in and to this Agreement and the Policy(ies). Thereafter, the Trustee shall have no right, title, or interest in and to this Agreement or the Policy(ies), all such rights being vested in and exercisable only by such assignee. 14. THE INSURERS. Each Insurer shall be bound only by the provisions of and endorsements on the Policy issued by it, and any payments made or actions taken by it in accordance therewith shall fully discharge it from all claims, suits, and demands of all persons whatsoever. Each Insurer shall in no way be bound by or be deemed to have notice of the provisions of this Agreement. 15. NAMED FIDUCIARY, DETERMINATION OF BENEFITS, CLAIMS PROCEDURE, AND ADMINISTRATION. -5- (a) NAMED FIDUCIARY. The Company is designated as the named fiduciary under this Agreement. (b) FUNDING POLICY. The funding policy under this Agreement is that all premiums on the Policies be remitted to the Insurers when due. (c) DETERMINATION OF BENEFITS. Direct payment by the Insurer is the basis of payment of benefits under the Agreement, with those benefits in turn being based on the payment of premiums as provided in this Agreement. (d) CLAIMS PROCEDURES. (i) For claims procedure purposes, the "Claims Manager" shall be Bill Pokrajac or his designee. At any time, the Company may remove the Claims Manager with or without cause. Within ten (10) days of the removal of the Claims Manager, the Company shall appoint a successor Claims Manager. The Company shall provide written notice of such appointment to all of the parties hereto within ten (10) days of the appointment of a successor Claims Manager. (ii) If for any reason a claim for benefits under this Agreement is denied by the Company, the Claims Manager shall deliver to the claimant a written explanation setting forth the specific reasons for the denial, pertinent references to the section of the Agreement on which the denial is based, a description of any additional material or information necessary to perfect the claim, and an explanation of why such material or information is necessary, such other data as may be pertinent, and information on the procedures to be followed by the claimant in obtaining a review of his or her claim, all written in a manner calculated to be understood by the claimant. For this purpose, the claimant's claim shall be deemed filed when presented orally or in writing to the Claims Manager. The Claims Manager's explanation shall be in writing and shall be delivered to the claimant within thirty (30) days of the date on which the claim is filed. (iii) The claimant (or his or her duly authorized representative) shall have thirty (30) days following the claimant's receipt of the denial of the claim to file with the Claims Manager a written request for review of the denial. For such review, the claimant (or his or her duly authorized representative) may submit pertinent documents and written issues and comments. (iv) The Claims Manager shall decide the issue on review and furnish the claimant with a copy of his or her decision within thirty (30) days of the receipt of the claimant's request for review of his or her claim. The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, as well as specific references to the pertinent provisions of the Agreement on which the decision is based. If a copy of the decision is not so furnished to the claimant within thirty (30) days, the claim shall be deemed denied on review. -6- 16. BINDING EFFECT. Each and all of the covenants, terms, provisions, and agreements contained herein shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement, their respective heirs, legal representatives, successors and assigns, and to any beneficiaries of the Policies. 17. GOVERNING LAW. This Agreement and its interpretation shall be governed exclusively by its terms and by the laws of the State of Illinois. 18. AMENDMENT. This Agreement may be amended or modified in whole or in part by the written agreement of all the parties hereto. 19. NOTICE. Any notice or other communication made hereunder or pursuant hereto shall be deemed to be given if delivered personally, mailed by registered or certified mail, postage prepaid, or sent by facsimile transmission, and addressed (a) in the case of the Company, to its President at the Company's principal office, and (b) in the case of any other party, to the address appearing below the party's signature hereto, and the same shall be effective upon receipt if delivered personally or sent by facsimile transmission, or if mailed, five (5) business days after it is deposited in the mail. Any party may change the address at which the party is to receive communications made hereunder or pursuant hereto by giving written notice of the new address to the other parties in the manner provided in this paragraph. 20. SEVERABILITY. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid, illegal, or unenforceable to any extent, the remainder of this Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law. 21. ENTIRE AGREEMENT. This Agreement supersedes all agreements previously made between the parties relating to its subject matter. There are no other understandings or agreements between them. It contains the entire agreement of the parties. It may not be changed orally but only by an agreement in writing pursuant to Paragraph 18 above. 22. WAIVER. No party hereto shall be deemed to have waived any right hereunder unless such waiver is in writing and signed by the party claimed to have waived such right. No delay or omission in exercising any right hereunder shall operate as a waiver of such right or any other right. A waiver upon any one occasion shall not be considered as a waiver of any right or remedy on any further occasion. 23. HEADINGS. The headings in this Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provision hereof. 24. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. -7- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. JOHN B. SANFILIPPO & SON, INC. By: /s/ William R. Pokrajac ---------------------------------------- Its: Vice President of Finance /s/ Jasper B. Sanfilippo -------------------------------------------- Jasper B. Sanfilippo /s/ Marian R. Sanfilippo -------------------------------------------- Marian R. Sanfilippo JASPER AND MARIAN SANFILIPPO IRREVOCABLE TRUST, DATED SEPTEMBER 23, 1990 By: /s/ John E. Sanfilippo ---------------------------------------- John E. Sanfilippo, Trustee -8- EXHIBIT A LIFE INSURANCE POLICIES
Insurer Policy Number Insured Face Amount ------- ------------- ------- ----------- Transamerica Occidental Jasper and Marian Life Insurance Company 92338274 Sanfilippo $ 5,000,000 Phoenix Mutual Life Jasper and Marian Insurance Company 2535010 Sanfilippo $ 5,000,000
-9- EX-10.35 4 c82327exv10w35.txt AMENDED & RESTATED SPLIT-DOLLAR INSURANCE AGMT-#2 EXHIBIT 10.35 AMENDED AND RESTATED JOHN B. SANFILIPPO & SON, INC. SPLIT-DOLLAR INSURANCE AGREEMENT NUMBER TWO THIS AMENDED AND RESTATED AGREEMENT (the "Agreement") is made and entered into as of the 31st day of December, 2003, by and between John B. Sanfilippo & Son, Inc., an Illinois corporation (the "Company"), Mathias Valentine, individually, Mary Valentine, individually (collectively the "Insureds" and individually an "Insured"), and Michael J. Valentine (the "Trustee"), not individually, but as Trustee of the Valentine Life Insurance Trust, dated May 15, 1991 (the "Trust"). RECITALS WHEREAS, the Company, Mathias Valentine, Mary Valentine, and the Trustee executed an agreement in 1992 known as the John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number Two (the "Original Agreement"); and WHEREAS, pursuant to Paragraph 10 of the Original Agreement, the parties thereto have the right to amend or modify the Original Agreement in whole or in part by the written agreement of all of the parties; and WHEREAS, the parties now wish to amend and restate the Original Agreement in its entirety so that the equity collateral assignment split-dollar arrangement created by the Original Agreement is changed to a non-equity endorsement split-dollar arrangement. NOW, THEREFORE, in consideration of the mutual promises made by the parties herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby amend and restate the Original Agreement in its entirety and agree as follows: AGREEMENT 1. ASSIGNMENT OF POLICIES TO COMPANY; CONSIDERATION. (a) ASSIGNMENT. Upon the execution of this Agreement, the Trustee shall take all necessary action to cause the life insurance policies listed on Exhibit A, which is attached hereto and incorporated by reference herein (collectively the "Policies" and individually a "Policy"), and all incidents of ownership therein, including all rights to the Policies' cash values, to be assigned to the Company. (b) CONSIDERATION. In consideration of the assignment of the Policies by the Trustee to the Company, the Company hereby agrees to: -1- (i) Release and discharge the Trust from its obligations under the Original Agreement to pay to the Company an amount equal to the cumulative premiums paid by the Company on the Policies up to the date of this Agreement; (ii) Release and discharge the security interest issued by the Trust in the limited rights in the Policies as set forth in Paragraph 4(b) of the Original Agreement; and (iii) Repay any and all outstanding loans on the Policies that the Trust was obligated to repay as of the date of this Agreement. 2. POLICY OWNERSHIP. (a) OWNERSHIP. Upon the execution of this Agreement and the assignment of the Policies as set forth in Paragraph 1(a) above, the Company shall be the sole and absolute owner of the Policies and may exercise all ownership rights granted to the owner thereof by the terms of the Policies, except as may otherwise be provided herein. The Company shall have the full and exclusive right and access to the Policies' cash values, and neither the Insureds nor the Trustee shall have a current or future right in, or direct or indirect access to, the Policies' cash values. The parties hereto agree that the Policies shall be subject to the terms and conditions of this Agreement and of the endorsements to the Policies that are to be filed with the AmerUs Life Insurance Company, the Sun Life Assurance Company of Canada, and the Transamerica Occidental Life Insurance Company (collectively the "Insurers" and individually an "Insurer") pursuant to Paragraph 2(b) below. The parties hereto further agree that they will take all action necessary to cause the Policies to conform to the provisions of this Agreement. (b) ENDORSEMENTS. Contemporaneously with the execution of this Agreement, the Company shall complete and file endorsements with the Insurers, using the appropriate forms provided by the Insurers for such purposes, conferring upon the Trustee the right to name the beneficiaries of the Policies' death benefits in excess of the amounts to which the Company is entitled under Paragraph 5(a) hereunder. 3. PREMIUM PAYMENTS. On or before the due date of each Policy premium, or within the applicable grace period provided therein, the Company shall pay the full amount of each Policy premium to the appropriate Insurer. 4. BENEFICIARY DESIGNATIONS. (a) THE COMPANY. Contemporaneously with the execution of this Agreement, the Company shall execute and deliver to the appropriate Insurer corporate beneficiary designations for the Policies, using the appropriate forms provided by said Insurer for such beneficiary designations, to secure the Company's recovery of the amounts described in Paragraph 5(a) hereunder. The parties hereto agree to take all action necessary to cause such corporate beneficiary designations to conform to the provisions of this Agreement. -2- (b) THE TRUST. Also contemporaneously with the execution of this Agreement, the Trustee shall execute and deliver beneficiary designations for the Policies to the appropriate Insurer, using the appropriate forms provided by the Insurers for such designations, to designate the requested person(s) or entity(ies) as the beneficiary(ies) to receive the death benefits of the Policies in excess of the amounts to which the Company is entitled under Paragraph 5(a) hereunder (such designated beneficiary(ies) referred to herein as the "Trust Designee"). The parties hereto agree to take all action necessary to cause such beneficiary designations to conform to the provisions of this Agreement. The Company shall not terminate, alter, or amend the Trustee's beneficiary designations without the express written consent of the Trustee. 5. RIGHT TO POLICY PROCEEDS. (a) THE COMPANY'S RIGHTS. For so long as this Agreement remains in effect, upon the death of the Insured (or, in the case of a joint-and-survivor policy that is subject to the terms of this Agreement, upon the death of the last Insured to die), the Company shall have the unqualified right to receive from the proceeds of each Policy an amount equal to the cumulative premiums paid by the Company on each Policy from the date of the Original Agreement until the date of the Insured's death (or, in the case of a joint-and-survivor policy, the date of the death of the last Insured to die), provided that such amounts shall be reduced by any indebtedness against each Policy existing at the death of the Insured (or, in the case of a joint-and-survivor policy that is subject to the terms of this Agreement, upon the death of the last Insured to die). (b) THE TRUST DESIGNEE'S RIGHTS. For so long as this Agreement remains in effect, upon the death of the Insured (or, in the case of a joint-and-survivor policy that is subject to the terms of this Agreement, upon the death of the last Insured to die), the Trust Designee shall have the unqualified right to receive from the proceeds of each Policy an amount equal to the death benefit of each Policy in excess of the amount to which the Company is entitled to receive from each Policy under Paragraph 5(a) above. (c) LIMITATIONS. No amounts shall be paid from the Policies' death benefits to the Trust Designee until the full amounts due to the Company from each Policy pursuant to Paragraph 5(a) above have been paid. The parties hereto agree that the beneficiary designation provisions of each Policy shall conform to the provisions of this paragraph. 6. POLICY DIVIDENDS. The dividends on each Policy shall be applied as elected by the Company. 7. SETTLEMENT OPTION. The Company and the Trust Designee may select a settlement option as provided in the Policies at the time of distribution. 8. NOTICE TO INSUREDS OF TAXABLE COST. For each year that this Agreement is in effect, the Company shall secure from each Insurer and shall furnish to each Insured an annual -3- report that includes a statement of the amounts of taxable income reportable by the Insureds for federal and state income tax purposes as a result of the Company's payment of the Policies' premiums. The Company shall use the information contained in these annual reports to determine proper withholdings and tax treatments. 9. COLLECTION OF DEATH BENEFITS. Upon the death of the Insured (or, in the case of a joint-and-survivor policy that is subject to the terms of this Agreement, upon the death of the last Insured to die), the Company and the Trustee shall cooperate to take whatever action is necessary to collect the death benefits provided under the Policies. Upon the collection and payment of the Policies' death benefits as provided in this Agreement, this Agreement shall terminate. 10. TERMINATION OF THE AGREEMENT DURING THE LIFETIME(S) OF THE INSURED(S). (a) WITHOUT NOTICE. This Agreement shall terminate without notice during the Insured's lifetime (or, in the case of a joint-and-survivor policy that is subject to the terms of this Agreement, during the life of the surviving Insured) upon the first to occur of the following: (i) Surrender of the Policies by the Company, which has the sole and exclusive right of surrender; (ii) Failure of the Company to make a premium payment as required pursuant to Paragraph 3 hereunder; (iii) Total cessation of the Company's business; or (iv) Bankruptcy, receivership, or dissolution of the Company. (b) WITH NOTICE. In addition, either the Company or the Trustee may terminate this Agreement unilaterally and without cause, so long as no premium under a Policy is overdue, by written notice to the other party of such intent to terminate the Agreement. Such termination shall be effective as of the date specified in such notice. 11. DISPOSITION OF THE POLICIES UPON TERMINATION OF THE AGREEMENT DURING THE LIFETIME(S) OF THE INSURED(S). (a) OPTION TO PURCHASE. For thirty (30) days after the date of the termination of this Agreement pursuant to Paragraph 10 above, the Trustee shall have the option to purchase any of the Policies from the Corporation. The purchase price for each Policy shall be equal to the cash surrender value of such Policy, including dividend accumulations and the cash value of dividend additions existing in such Policy at the end of the period for which premiums have been paid. If the Policy shall then be encumbered by assignment, policy loan, or otherwise, the Company shall either remove such encumbrance, or reduce the sales price to the Trustee by the total amount of indebtedness outstanding against the Policy. Upon receipt of such amount, the Company shall transfer all of its rights, title, and interest in and to the Policy to the Trustee, by the execution and delivery of an appropriate instrument of transfer. -4- (b) FAILURE TO EXERCISE OPTION. If the Trustee fails to exercise such option within such thirty (30) day period, then the Company may surrender or cancel the Policies for their cash surrender values, or it may change the beneficiary designation provisions of the Policies naming itself or any other person or entity as the revocable beneficiary thereof, or exercise any other ownership rights in and to the Policies, without regard to the provisions thereof. Thereafter, neither the Trustee, nor his successor in interest nor any of the Trust's beneficiaries shall have any further interest in and to the Policies, either under the terms thereof or under this Agreement. 12. LOANS. The Company may pledge or assign any of the Policies, subject to the terms and conditions of this Agreement, for the sole purpose of securing a loan from any of the Insurers or from a third party. The amount of such loan, including the accumulated interest thereon, shall not exceed the lesser of (i) the amount of the premiums on the respective Policy to which the loan relates paid by the Company hereunder, or (ii) the cash surrender value of the respective Policy to which the loan relates (as determined by the appropriate Insurer) as of the date to which premiums have been paid. Interest charges on any such loans shall be paid by the Company. If the Company so encumbers any of the Policies, other than by policy loans from the Insurers, then, upon the death of the Insured (or, in the case of a joint-and-survivor policy that is subject to the provisions of this Agreement, upon the death of the last Insured to die), or upon the election of an Insured to purchase a Policy from the Company, the Company shall promptly take all action necessary to secure the release or discharge of such encumbrance. 13. TRUSTEE'S RIGHT TO ASSIGN INTEREST. Assignment of any or all of the rights or benefits provided under this Agreement has significant tax consequences. Therefore, unless otherwise agreed to in writing by the Company, the Trustee shall not assign any right or benefit provided under this Agreement and any attempt to do so shall be void. Upon written consent of the Company, an assignment shall be exercisable by the execution and delivery to the Company of a written assignment, which shall be attached to the Agreement and by this reference is made a part hereof. Upon receipt of such written assignment executed by the Trustee, and duly accepted by the assignee thereof, the Company shall consent thereto in writing, and shall thereafter treat the Trustee's assignee as the sole owner of all the Trustee's right, title, and interest in and to this Agreement and the Policy(ies). Thereafter, the Trustee shall have no right, title, or interest in and to this Agreement or the Policy(ies), all such rights being vested in and exercisable only by such assignee. 14. THE INSURERS. Each Insurer shall be bound only by the provisions of and endorsements on the Policy issued by it, and any payments made or actions taken by it in accordance therewith shall fully discharge it from all claims, suits, and demands of all persons whatsoever. Each Insurer shall in no way be bound by or be deemed to have notice of the provisions of this Agreement. 15. NAMED FIDUCIARY, DETERMINATION OF BENEFITS, CLAIMS PROCEDURE, AND ADMINISTRATION. -5- (a) NAMED FIDUCIARY. The Company is designated as the named fiduciary under this Agreement. (b) FUNDING POLICY. The funding policy under this Agreement is that all premiums on the Policies be remitted to the Insurers when due. (c) DETERMINATION OF BENEFITS. Direct payment by the Insurer is the basis of payment of benefits under the Agreement, with those benefits in turn being based on the payment of premiums as provided in this Agreement. (d) CLAIMS PROCEDURES. (i) For claims procedure purposes, the "Claims Manager" shall be Bill Pokrajac or his designee. At any time, the Company may remove the Claims Manager with or without cause. Within ten (10) days of the removal of the Claims Manager, the Company shall appoint a successor Claims Manager. The Company shall provide written notice of such appointment to all of the parties hereto within ten (10) days of the appointment of a successor Claims Manager. (ii) If for any reason a claim for benefits under this Agreement is denied by the Company, the Claims Manager shall deliver to the claimant a written explanation setting forth the specific reasons for the denial, pertinent references to the section of the Agreement on which the denial is based, a description of any additional material or information necessary to perfect the claim, and an explanation of why such material or information is necessary, such other data as may be pertinent, and information on the procedures to be followed by the claimant in obtaining a review of his or her claim, all written in a manner calculated to be understood by the claimant. For this purpose, the claimant's claim shall be deemed filed when presented orally or in writing to the Claims Manager. The Claims Manager's explanation shall be in writing and shall be delivered to the claimant within thirty (30) days of the date on which the claim is filed. (iii) The claimant (or his or her duly authorized representative) shall have thirty (30) days following the claimant's receipt of the denial of the claim to file with the Claims Manager a written request for review of the denial. For such review, the claimant (or his or her duly authorized representative) may submit pertinent documents and written issues and comments. (iv) The Claims Manager shall decide the issue on review and furnish the claimant with a copy of his or her decision within thirty (30) days of the receipt of the claimant's request for review of his or her claim. The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, as well as specific references to the pertinent provisions of the Agreement on which the decision is based. If a copy of the decision is not so furnished to the claimant within thirty (30) days, the claim shall be deemed denied on review. -6- 16. BINDING EFFECT. Each and all of the covenants, terms, provisions, and agreements contained herein shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement, their respective heirs, legal representatives, successors and assigns, and to any beneficiaries of the Policies. 17. GOVERNING LAW. This Agreement and its interpretation shall be governed exclusively by its terms and by the laws of the State of Illinois. 18. AMENDMENT. This Agreement may be amended or modified in whole or in part by the written agreement of all the parties hereto. 19. NOTICE. Any notice or other communication made hereunder or pursuant hereto shall be deemed to be given if delivered personally, mailed by registered or certified mail, postage prepaid, or sent by facsimile transmission, and addressed (a) in the case of the Company, to its President at the Company's principal office, and (b) in the case of any other party, to the address appearing below the party's signature hereto, and the same shall be effective upon receipt if delivered personally or sent by facsimile transmission, or if mailed, five (5) business days after it is deposited in the mail. Any party may change the address at which the party is to receive communications made hereunder or pursuant hereto by giving written notice of the new address to the other parties in the manner provided in this paragraph. 20. SEVERABILITY. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid, illegal, or unenforceable to any extent, the remainder of this Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law. 21. ENTIRE AGREEMENT. This Agreement supersedes all agreements previously made between the parties relating to its subject matter. There are no other understandings or agreements between them. It contains the entire agreement of the parties. It may not be changed orally but only by an agreement in writing pursuant to Paragraph 18 above. 22. WAIVER. No party hereto shall be deemed to have waived any right hereunder unless such waiver is in writing and signed by the party claimed to have waived such right. No delay or omission in exercising any right hereunder shall operate as a waiver of such right or any other right. A waiver upon any one occasion shall not be considered as a waiver of any right or remedy on any further occasion. 23. HEADINGS. The headings in this Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provision hereof. 24. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. -7- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. JOHN B. SANFILIPPO & SON, INC. By: /s/ William R. Pokrajac ---------------------------------------- Its: Vice President of Finance /s/ Mathias Valentine -------------------------------------------- Mathias Valentine /s/ Mary Valentine -------------------------------------------- Mary Valentine VALENTINE LIFE INSURANCE TRUST, DATED MAY 15, 1991 By: /s/ Michael J. Valentine ---------------------------------------- Michael J. Valentine, Trustee -8- EXHIBIT A LIFE INSURANCE POLICIES
Insurer Policy Number Insured Face Amount ------- ------------ ------- ----------- AmerUs Life Insurance Company 2692684 Mathias Valentine $ 400,000 AmerUs Life Insurance Company 2249880 Mary Valentine $ 500,000 Transamerica Occidental Mathias and Mary Life Insurance Company 92371857 Valentine $ 2,000,000 Sun Life Assurance Company Mathias and Mary of Canada 9235749 Valentine $ 1,500,000
-9- EX-31.1 5 c82327exv31w1.txt 302 CERTIFICATION OF JASPER B. SANFILIPPO Exhibit 31.1 CERTIFICATION I, Jasper B. Sanfilippo, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of John B. Sanfilippo & Son, Inc. for the quarter ended December 25, 2003; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. January 27, 2004 /s/ Jasper B. Sanfilippo ------------------------ Jasper B. Sanfilippo Chairman of the Board and Chief Executive Officer EX-31.2 6 c82327exv31w2.txt 302 CERTIFICATION OF MICHAEL J. VALENTINE Exhibit 31.2 CERTIFICATION I, Michael J. Valentine, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of John B. Sanfilippo & Son, Inc. for the quarter ended December 25, 2003; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. January 27, 2004 /s/ Michael J. Valentine --------------------------------------- Michael J. Valentine Executive Vice President Finance, Chief Financial Officer and Secretary EX-32.1 7 c82327exv32w1.txt 906 CERTIFICATION OF JASPER B. SANFILIPPO Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of John B. Sanfilippo & Son, Inc. (the "Company") on Form 10-Q for the quarter ended December 25, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jasper B. Sanfilippo, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. January 27, 2004 /s/ Jasper B. Sanfilippo --------------------------------------- Jasper B. Sanfilippo Chairman of the Board and Chief Executive Officer EX-32.2 8 c82327exv32w2.txt 906 CERTIFICATION OF MICHAEL J. VALENTINE Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of John B. Sanfilippo & Son, Inc. (the "Company") on Form 10-Q for the quarter ended December 25, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael J. Valentine, Executive Vice President Finance, Chief Financial Officer, Secretary and Director, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. January 27, 2004 /s/ Michael J. Valentine --------------------------------------- Michael J. Valentine Executive Vice President Finance Chief Financial Officer and Secretary -----END PRIVACY-ENHANCED MESSAGE-----