-----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, WA7pqGsXjVkRiqa4TnEztQ9y08OJEtueC7EUp8Co5fCxyrqISmMbLiC9IXDa1iuj 13nEd6Jx6RuHFIV/Xjr2Aw== 0000880117-05-000003.txt : 20050131 0000880117-05-000003.hdr.sgml : 20050131 20050131160410 ACCESSION NUMBER: 0000880117-05-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20041223 FILED AS OF DATE: 20050131 DATE AS OF CHANGE: 20050131 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: 05561905 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 a20052ndq.txt 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 23, 2004 [ ] 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 [ X ] No [ ]. As of January 31, 2005, 7,970,074 shares of the Registrant's Common Stock, $0.01 par value per share, excluding 117,900 treasury shares, and 2,597,426 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 ------------------ PART I. FINANCIAL INFORMATION PAGE NO. - ------------------------------ -------- Item 1 -- Consolidated Financial Statements (Unaudited): Consolidated Statements of Operations for the quarters and twenty-six weeks ended December 23, 2004 and December 25, 2003 3 Consolidated Balance Sheets as of December 23, 2004 and June 24, 2004 4 Consolidated Statements of Cash Flows for the twenty-six weeks ended December 23, 2004 and December 25, 2003 5 Notes to Consolidated Financial Statements 6 Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3 -- Quantitative and Qualitative Disclosures About Market Risk 23 Item 4 -- Controls and Procedures 23 PART II. OTHER INFORMATION - --------------------------- Item 4 -- Submission of Matters to a Vote of Security Holders 24 Item 6 -- Exhibits and Reports on Form 8-K 24 SIGNATURE 25 - --------- EXHIBIT INDEX 26 - ------------- 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 23, 2004 December 25, 2003 December 23, 2004 December 25, 2003 ----------------- ----------------- ----------------- ----------------- Net sales $183,024 $171,392 $317,669 $296,154 Cost of sales 158,034 138,472 275,753 237,817 -------- -------- -------- -------- Gross profit 24,990 32,920 41,916 58,337 -------- -------- -------- -------- Operating expenses: Selling expenses 10,908 10,966 20,756 19,921 Administrative expenses 3,260 4,090 6,013 7,932 -------- -------- -------- -------- Total operating expenses 14,168 15,056 26,769 27,853 -------- -------- -------- -------- Income from operations 10,822 17,864 15,147 30,484 -------- -------- -------- -------- Other income (expense): Interest expense ($177, $196, $360 and $397 to related parties) (416) (855) (727) (1,850) Rental and miscellaneous income 120 120 296 237 -------- -------- -------- -------- Total other expense, net (296) (735) (431) (1,613) -------- -------- -------- -------- Income before income taxes 10,526 17,129 14,716 28,871 Income tax expense 4,105 6,681 5,739 11,260 -------- -------- -------- -------- Net income $ 6,421 $ 10,448 $ 8,977 $ 17,611 ======== ======== ======== ======== Basic earnings per common share $ 0.61 $ 1.12 $ 0.85 $ 1.88 ======== ======== ======== ======== Diluted earnings per common share $ 0.60 $ 1.09 $ 0.84 $ 1.85 ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 3 JOHN B. SANFILIPPO & SON, INC. ------------------------------ CONSOLIDATED BALANCE SHEETS --------------------------- (Dollars in thousands) (Unaudited) December 23, 2004 June 24, 2004 ------------------ ------------- ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 43,438 $ 2,085 Accounts receivable, less allowances of $3,125 and $1,977, respectively 46,655 33,735 Inventories 209,766 127,459 Income taxes receivable -- 943 Deferred income taxes 1,322 1,301 Prepaid expenses and other current assets 3,107 2,103 -------- -------- TOTAL CURRENT ASSETS 304,288 167,626 -------- -------- PROPERTY, PLANT AND EQUIPMENT: Land 1,863 1,863 Buildings 66,177 65,747 Machinery and equipment 100,935 97,137 Furniture and leasehold improvements 5,437 5,435 Vehicles 3,070 3,013 Construction in progress 2,591 209 -------- -------- 180,073 173,404 Less: Accumulated depreciation 108,377 104,250 -------- -------- TOTAL PROPERTY, PLANT AND EQUIPMENT 71,696 69,154 -------- -------- Other assets 9,249 4,396 Goodwill 1,242 1,242 Brand name 2,488 2,701 -------- -------- TOTAL ASSETS $388,963 $245,119 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Notes payable $ -- $ 5,269 Current maturities of long-term debt 1,053 1,277 Accounts payable ($662 and $502 to related parties) 89,887 16,388 Book overdraft 12,655 7,926 Accrued payroll and related benefits 5,068 9,474 Other accrued expenses 3,480 4,438 Income taxes payable 2,745 -- -------- -------- TOTAL CURRENT LIABILITIES 114,888 44,772 -------- -------- LONG-TERM LIABILITIES: Long-term debt, less current maturities 77,226 12,620 Deferred income taxes 6,380 6,367 -------- -------- TOTAL LONG-TERM LIABILITIES 83,606 18,987 -------- -------- STOCKHOLDERS' EQUITY: Class A Common Stock, convertible to Common Stock on a per share basis, cumulative voting rights of ten votes per share, $.01 par value; 10,000,000 shares authorized, 2,597,426 shares issued and outstanding 26 26 Common Stock, non-cumulative voting rights of one vote per share, $.01 par value; 17,000,000,and 10,000,000 shares authorized, 8,081,724 and 8,079,224 shares issued and outstanding 81 81 Capital in excess of par value 98,980 98,848 Retained earnings 92,586 83,609 Treasury stock, at cost; 117,900 shares (1,204) (1,204) -------- -------- TOTAL STOCKHOLDERS' EQUITY 190,469 181,360 -------- -------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $388,963 $245,119 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 4 JOHN B. SANFILIPPO & SON, INC. ------------------------------ CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (Unaudited) (Dollars in thousands) For the Twenty-six Weeks Ended ------------------------------------- December 23, 2004 December 25, 2003 ----------------- ----------------- Cash flows from operating activities: Net income $ 8,977 $ 17,611 Adjustments: Depreciation and amortization 5,488 5,435 (Gain) loss on disposition of properties (16) 25 Deferred income taxes (8) (39) Tax benefit of option exercises 46 572 Change in current assets and current liabilities: Accounts receivable, net (12,920) (21,197) Inventories (82,307) (27,869) Prepaid expenses and other current assets (1,004) 101 Accounts payable 73,499 38,213 Accrued expenses (5,364) (393) Income taxes receivable/payable 3,688 3,323 Other (1,407) (444) -------- -------- Net cash (used in) provided by operating activities (11,328) 15,338 -------- -------- Cash flows from investing activities: Purchases of plant, property and equipment (4,466) (3,116) Facility expansion costs (6,797) (2,984) Proceeds from disposition of properties 16 -- -------- -------- Net cash used in investing activities (11,247) (6,100) -------- -------- Cash flows from financing activities: Net borrowings on notes payable (5,269) (9,329) Issuance of long-term debt 65,000 -- Principal payments on long-term debt (618) (8,460) Book overdraft 4,729 7,500 Issuance of Common Stock under option plans 86 367 -------- -------- Net cash provided by (used in) financing activities 63,928 (9,922) -------- -------- Net increase (decrease) in cash and cash equivalents 41,353 (684) Cash and cash equivalents: Beginning of period 2,085 2,448 -------- -------- End of period $ 43,438 $ 1,764 ======== ======== The accompanying notes are an integral part of these consolidated 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 previously wholly-owned subsidiary, JBS International, Inc., which was dissolved in November, 2004 (collectively, the "Company"). Certain prior year's amounts have been reclassified to conform with the current year's presentation. 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), but the current fiscal year ending June 30, 2005 will consist of fifty-three weeks, with the fourth quarter containing fourteen weeks. 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 24, 2004 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 2004 Annual Report filed on Form 10-K for the year ended June 24, 2004. Note 2 -- Inventories - --------------------- Inventories are stated at the lower of cost (first in, first out) or market. Inventories consist of the following: December 23, June 24, 2004 2004 ------------ -------- Raw material and supplies $121,310 $ 62,256 Work-in-process and finished goods 88,456 65,203 -------- -------- $209,766 $127,459 ======== ======== 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 reconciliation of the weighted average shares outstanding used in computing earnings per share: Quarter Ended ------------------------------------- December 23, 2004 December 25, 2003 ----------------- ----------------- Weighted average shares outstanding - basic 10,562,470 9,361,091 Effect of dilutive securities: Stock options 147,754 228,249 ---------- --------- Weighted average shares outstanding - diluted 10,710,224 9,589,340 ========== ========= 6 Excluded from the computation of diluted earnings per share were options with exercise prices greater than the average market price of the Common Stock, totaling 3,000 for the quarter ended December 23, 2004. These options had a weighted average exercise price of $32.30. Twenty-six Weeks Ended ------------------------------------- December 23, 2004 December 25, 2003 ----------------- ----------------- Weighted average shares outstanding - basic 10,560,847 9,344,988 Effect of dilutive securities: Stock options 153,508 189,822 ---------- --------- Weighted average shares outstanding - diluted 10,714,355 9,534,810 ========== ========= Excluded from the computation of diluted earnings per share were options with exercise prices greater than the average market price of the Common Stock, totaling 3,000 and 13,072 for the twenty-six weeks ended December 23, 2004 and December 25, 2003, respectively. These options had weighted average exercise prices of $32.30 and $16.48, respectively. Note 4 -- Stock Option Plans - ---------------------------- The Company accounts for stock-based compensation in accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations using the intrinsic value method, which has resulted in no compensation cost for options granted. The Company has adopted the disclosure only provisions of Statement of Financial Accounting Standards No. 123 ("SFAS 123") with respect to options granted to employees. The Company's reported net income and earnings per share would have changed to the pro forma amounts shown below if compensation cost had been determined based on the fair value at the grant dates in accordance with SFAS Nos. 123 and 148, "Accounting for Stock-Based Compensation".
Quarter Ended Twenty-six Weeks Ended ------------------------------------- ------------------------------------- December 23, 2004 December 25, 2003 December 23, 2004 December 25, 2003 ----------------- ----------------- ----------------- ----------------- Reported net income $6,421 $10,448 $8,977 $17,611 Less: Compensation cost determined under the fair value method 85 63 148 126 ------ ------- ------ ------- Pro forma net income $6,336 $10,385 $8,829 $17,485 ====== ======= ====== ======= Basic earnings per common share: As reported $0.61 $1.12 $0.85 $1.88 Pro forma $0.60 $1.11 $0.84 $1.87 Diluted earnings per common share: As reported $0.60 $1.09 $0.84 $1.85 Pro forma $0.59 $1.08 $0.82 $1.83
Note 5 -- Distribution Channel and Product Type Sales Mix - --------------------------------------------------------- The Company operates in a single reportable segment through which it sells various nut products through multiple distribution channels. The following summarizes net sales by distribution channel: 7
Quarter Ended Twenty-six Weeks Ended ------------------------------------- ------------------------------------- Distribution Channel December 23, 2004 December 25, 2003 December 23, 2004 December 25, 2003 - -------------------- ----------------- ----------------- ----------------- ----------------- Consumer $102,948 $105,341 $173,656 $178,701 Industrial 38,498 33,352 68,762 58,082 Food Service 15,011 11,342 29,094 22,734 Contract Packaging 11,092 7,901 21,615 14,868 Export 15,475 13,456 24,542 21,769 -------- -------- -------- -------- Total $183,024 $171,392 $317,669 $296,154 ======== ======== ======== ========
The following summarizes sales by product type as a percentage of total gross sales. The information is based on gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product type.
Quarter Ended Twenty-six Weeks Ended ------------------------------------- ------------------------------------- Product Type December 23, 2004 December 25, 2003 December 23, 2004 December 25, 2003 - ------------ ----------------- ----------------- ----------------- ----------------- Peanuts 18.2% 22.2% 20.9% 24.2% Pecans 27.9 24.8 25.5 22.2 Cashews & Mixed Nuts 22.9 22.0 23.2 22.6 Walnuts 11.6 12.0 10.3 11.1 Almonds 10.6 9.9 11.0 10.2 Other 8.8 9.1 9.1 9.7 ----- ----- ----- ----- Total 100.0% 100.0% 100.0% 100.0% ===== ===== ===== =====
Note 6 -- Comprehensive Income - ------------------------------ The Company accounts for comprehensive income in accordance with SFAS 130, "Reporting Comprehensive Income". The Company currently has no components of comprehensive income that are required to be disclosed separately. Consequently, comprehensive income equals net income for all periods presented. Note 7 -- Long-term Debt - ------------------------ On December 16, 2004, the Company entered into a note purchase agreement with various insurance companies (the "Purchasers"), whereby the Purchasers purchased $65 million of the Company's senior unsecured notes (the "Notes"). The Notes have a maturity of 10 years, bear interest at a fixed interest rate of 4.67% per annum and are required to be repaid in equal semi-annual principal payments of $3.6 million on each June 1 and December 1 commencing on June 1, 2006. The proceeds from this financing will be used to fund a portion of the Company's consolidation of its Chicago area facilities into a single facility in Elgin, Illinois and for other working capital and general corporate purposes. The anticipated closing date on the Elgin site acquisition is March 2005. The terms of the note purchase agreement include certain restrictive covenants that, among other things, require the Company to maintain specified financial ratios. These covenants coincide with those included in the Company's bank credit facility. 8 Note 8 -- Recent Accounting Pronouncements - ------------------------------------------ In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement No. 123R, "Share-Based Payment" ("SFAS 123R"), which requires compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of the compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be remeasured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS 123R replaces FASB Statement No. 123, "Accounting for Stock Based Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS 123R is effective for the Company's first quarter of fiscal 2006. The Company is currently evaluating the impact that the adoption of SFAS 123R will have on its consolidated financial position, results of operations and cash flows. In November, 2004, the FASB issued Statement No. 151, "Inventory Costs"("SFAS 151") an amendment of ARB No. 43, Chapter 4. SFAS 151 clarifies the accounting for abnormal amounts of the idle facility expense, freight, handling costs and wasted material (spoilage). SFAS 151 is effective for the Company's first quarter of fiscal 2006. The Company is currently evaluating the impact that the adoption of SFAS 151 will have on its consolidated financial position, results of operations and cash flows. 9 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 2004 was a record year for the Company in terms of both sales and earnings. Sales growth has continued during the first twenty-six weeks of fiscal 2005, when compared to the first twenty-six weeks of fiscal 2004, as net sales increased 7.3% to $317.7 million. The Company has experienced growth in all distribution channels, except for the consumer distribution channel. Sales declined in this channel in large part because the extensive promotional activity for Fisher peanut products at a major customer in the first twenty-six weeks of fiscal 2004 did not recur in the first twenty-six weeks of fiscal 2005. Consumer sales also declined because the Company elected to forego low margin business with two other customers that it sold to in the first twenty-six weeks of fiscal 2004 due to the customers' unwillingness to accept higher prices. The overall sales increase was due to higher average selling prices, as costs for most major nut types have increased. Total pounds shipped decreased by 3.0% in the second quarter of fiscal 2005 when compared to the second quarter of fiscal 2004, and 2.3% in the first twenty-six weeks of fiscal 2005 when compared to the first twenty-six weeks of fiscal 2004. While sales have increased during the first twenty-six weeks of fiscal 2005, earnings have decreased. Net income was $6.4 million for the second quarter of fiscal 2005 compared to $10.4 million for the second quarter of fiscal 2004, and net income was $9.0 million for the first twenty-six weeks of fiscal 2005 compared to $17.6 million for the first twenty-six weeks of fiscal 2004. These decreases were caused primarily by reductions in gross profit margin to 13.7% for the second quarter of fiscal 2005 compared to 19.2% for the second quarter of 2004, and 13.2% for the first twenty-six weeks of fiscal 2005 compared to 19.7% for the first twenty-six weeks of fiscal 2004. Almond sales had a substantially negative impact on the Company's profitability during the first twenty-six weeks of fiscal 2005, particularly during the first quarter of fiscal 2005. The Company was required to purchase almonds in the spot market during the first quarter of fiscal 2005 to fulfill its industrial sales contracts, as its supply of higher quality and lower cost almonds purchased from growers during the 2003 crop year was exhausted. Additionally, the final settlement cost to growers for the 2003 crop year, which was determined during the first quarter of fiscal 2005, was higher than anticipated. During the second quarter of fiscal 2005, the Company completed deliveries on the great majority of industrial sales contracts that were priced based on prior crop year costs. Current industrial almond sales contracts are being priced in line with expected 2004 crop year costs. Pecan sales also had a substantially negative impact on the Company's profitability during the second quarter of fiscal 2005 as the cost of pecans increased dramatically. The unit cost of inshell pecans for the current crop year has almost doubled from the unit cost for the prior crop year. The Company had to fulfill remaining industrial sales contracts during the second quarter of fiscal 2005. Since these contracts were priced based on costs from the prior crop year, the Company absorbed negative margins on these sales. The Company recorded a $0.8 million adjustment during the second quarter of fiscal 2005 to recognize losses on future shipments on any outstanding contract balances at December 23, 2004. These contracts will all expire during 10 the third quarter of fiscal 2005. All new contracts are being priced based on current crop costs. Also, pecan sales in the consumer distribution channel had a negative effect on the Company's profitability during the second quarter of fiscal 2005. The significant increases in pecan costs could not be passed on immediately to the customer, however, all price increases have been instituted in January 2005. The Company's business is seasonal. Demand for peanut and other nut products is highest during the months of October, November and December. Peanuts, pecans, walnuts, almonds and cashews, the Company's principal raw materials, are purchased primarily during the period from August to February and are processed throughout the year. As a result of this seasonality, the Company's personnel and working capital requirements peak during the last four months of the calendar year. This seasonality also impacts capacity utilization at the Company's Chicago area facilities, as these facilities are routinely operating at full capacity for the last four months of the calendar year. The possibility of continued growth at recent levels, and the seasonality of the Company's business that has caused full-capacity utilization rates at the Company's Chicago area facilities, led the Company to explore additional means of expanding its production capacity and enhancing its operations efficiency. As a result, the Company is planning to consolidate its five Chicago area facilities into a single location through the construction of a new production and distribution facility. This facility consolidation project is anticipated to achieve two primary objectives. First, the consolidation is intended to generate cost savings through the elimination of redundant costs and improvements in manufacturing efficiencies. Second, the new facility is expected to initially increase production capacity by 25% to 40% and would provide substantially more square footage than the aggregate space now available in the Company's existing Chicago area facilities to support future growth in the Company's business. The Company has already taken certain steps in furtherance of this facility consolidation project, including the Company and certain partnerships controlled by executive officers and directors of the Company entering into a Development Agreement (the "Development Agreement") with the City of Elgin, Illinois for the development and purchase of the land where a new facility could be constructed (the "Original Site"). The Development Agreement is subject to certain conditions, including but not limited to the completion of environmental and asbestos remediation procedures, the inclusion of the property in the Elgin enterprise zone and the establishment of a tax incremental financing district covering the property. The Company has paid $4.0 million in connection with the purchase of this land, $3.6 million of which was paid in the second quarter of fiscal 2005. Total expenditures at the Original Site were $4.9 million as of December 23, 2004. This amount is included as Other Assets on the Company's balance sheet as of December 23, 2004. Subsequent to entering into the Development Agreement, the Company became aware of an existing property for sale (the "Current Site") that is preferable to the site in the Development Agreement. The Current Site is preferable for a number of reasons, including the presence of an existing structure. Although this structure will need to be expanded and upgraded to meet the Company's needs, the Current Site allows for an earlier project completion date, provides more certainty as to the project's total cost and provides more acreage than the site in the Development Agreement. On December 2, 2004, the Company entered into a definitive agreement to purchase the Current Site. The Company deposited $2.0 million into an escrow account under the terms of the agreement. An additional $46.0 million is scheduled to be paid on the closing date in March 2005. The Company expects to lease the unused portion of the Current Site back to the seller and third parties. The Company intends to continue to develop the Original Site in conjunction with the Current Site. The Company's total required investment in the Original Site is estimated to be approximately $12 million, including $4.9 million which has already been paid. The Company intends to recover its investment in the Original Site from either a termination of the Development Agreement, or the subsequent sale or development of the land. 11 In order to finance a portion of the Company's facility consolidation project, the Company received $65 million from a note purchase agreement (the "Note Agreement") entered into on December 16, 2004 with various lenders. Under the terms of the Note Agreement, the notes have a maturity of ten years, bear interest at a fixed 4.67% annual rate and are required to be repaid in equal semi-annual principal payments of $3.6 million beginning on June 1, 2006. The Company currently plans to begin the facility consolidation project at the Current Site in March 2005. It is anticipated that the project will take three years from the time that the property is acquired to the time it is fully placed in service. Assuming the project continues to move forward, the Company estimates the total cost to be between $90 and $100 million, excluding the cost of developing the Original Site, which would be financed through a combination of the proceeds received through the Note Agreement, proceeds from the sale of existing facilities, rental income from lease arrangements with the seller and third parties, available cash flow from operations and, if necessary, additional borrowings under the Company's Bank Credit Facility, as defined below. Although the Company believes the new facility would be accretive within two years after completing construction, there can be no assurances as to the timing or the impact on the Company's net income. See "Factors That May Affect Future Results -- Risks and Uncertainties Regarding Facility Consolidation Project." The Company faces a number of challenges as it works to continue its recent growth. The Company's Chicago area processing facilities operate at full capacity at certain times during the year. If the Company experiences growth in unit volume sales, it could exceed its capacity to meet the demand for its products, especially prior to the completion of the planned facility consolidation project. Assuming the Company proceeds with the facility consolidation project, the Company nevertheless faces potential disruptive effects on its business, such as cost overruns for the construction of the new facility or business interruptions that may result from the transfer of production to the new facility. In addition, the Company will continue to face the ongoing challenges of its business such as food safety and regulatory issues, pricing pressures, the antitrust investigation of a portion of the peanut shelling industry and the maintenance and growth of its customer base. See "Factors That May Affect Future Results." Total inventories were $209.8 million at December 23, 2004, an increase of approximately $82.3 million, or 64.6%, over the balance at June 24, 2004, and an increase of $69.9 million, or 50.0%, over the balance at December 25, 2003. The increase over June 24, 2004 is due primarily to the normal procurement of nuts in the first and second quarters of the Company's fiscal year. The increase over December 25, 2003 is due primarily to greater purchases of almonds in the current crop year compared to the previous crop year and generally higher costs for all tree nuts, particularly pecans and almonds. Net accounts receivable were $46.7 million at December 23, 2004, an increase of approximately $12.9 million, or 38.3%, over the balance at June 24, 2004, and a decrease of $3.7 million, or 7.3%, under the balance at December 25, 2003. The increase over June 24, 2004 is due primarily to higher monthly sales in December 2004 than in June 2004 due to the seasonality of the Company's business. 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). Fiscal 2005, however, will contain fifty-three weeks, with the fourth quarter containing fourteen weeks. References herein to fiscal 2005 are to the fiscal year ending June 30, 2005. References herein to fiscal 2004 are to the fiscal year ended June 24, 2004. As used herein, unless the context otherwise indicates, the terms "Company" and "JBSS" refer collectively to John B. Sanfilippo & Son, Inc. and its previously wholly-owned subsidiary, JBS International, Inc., which was dissolved in November 2004. 12 RESULTS OF OPERATIONS - --------------------- Net Sales. Net sales increased to $183.0 million for the second quarter of fiscal 2005 from approximately $171.4 million for the second quarter of fiscal 2004, an increase of $11.6 million, or 6.8%. Net sales increased to $317.7 million for the first twenty-six weeks of fiscal 2005 from approximately $296.2 million for the first twenty-six weeks of fiscal 2004, an increase of $21.5 million, or 7.3%. The overall increase in net sales, for both the quarterly and year-to-date periods, was due primarily to higher prices due to higher commodity costs, especially for almonds and pecans. The total pounds shipped decreased by 3.0% in the second quarter of fiscal 2005 when compared to the second quarter of fiscal 2004, and 2.3% in the first twenty-six weeks of fiscal 2005 when compared to the first twenty-six weeks of fiscal 2004. Unit volume sales, for both the quarterly and year-to-date periods, did however increase in the Company's contract packaging and food service distribution channels. The increase in the contract packaging distribution channel was due primarily to the introduction of new products and expansion of business with a major customer. The increase in the food service distribution channel was due primarily to expansion of business at existing customers and the addition of new customers. Unit volume sales, for both the quarterly and year-to-date periods, decreased in the Company's consumer channel due primarily to lower promotional activity for Fisher peanut products at a major customer and lost business with customers that would not accept price increases. Unit volume sales, for both the quarterly and year-to-date periods, decreased slightly in the Company's industrial distribution channel, due to the second quarter of fiscal 2004 containing non-recurring significant sales of peanuts to other peanut processors. Unit volume sales in the Company's export distribution channel, for both the quarterly and year- to-date periods, increased due primarily to higher walnut sales. The following table shows a comparison of sales by distribution channel, and as a percentage of total net sales (dollars in thousands):
Quarter Ended Twenty-six Weeks Ended ------------------------------------- ------------------------------------- Distribution Channel December 23, 2004 December 25, 2003 December 23, 2004 December 25, 2003 - -------------------- ----------------- ----------------- ----------------- ----------------- Consumer $102,948 $105,341 $173,656 $178,701 Industrial 38,498 33,352 68,762 58,082 Food Service 15,011 11,342 29,094 22,734 Contract Packaging 11,092 7,901 21,615 14,868 Export 15,475 13,456 24,542 21,769 -------- -------- -------- -------- Total $183,024 $171,392 $317,669 $296,154 ======== ======== ======== ========
The following summarizes sales by product type as a percentage of total gross sales. The information is based on gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product type.
Quarter Ended Twenty-six Weeks Ended ------------------------------------- ------------------------------------- Product Type December 23, 2004 December 25, 2003 December 23, 2004 December 25, 2003 - ------------ ----------------- ----------------- ----------------- ----------------- Peanuts 18.2% 22.2% 20.9% 24.2% Pecans 27.9 24.8 25.5 22.2 Cashews & Mixed Nuts 22.9 22.0 23.2 22.6 Walnuts 11.6 12.0 10.3 11.1 Almonds 10.6 9.9 11.0 10.2 Other 8.8 9.1 9.1 9.7 ----- ----- ----- ----- Total 100.0% 100.0% 100.0% 100.0% ===== ===== ===== =====
13 Gross Profit. Gross profit for the second quarter of fiscal 2005 decreased 24.1% to $25.0 million from $32.9 million for the second quarter of fiscal 2004. Gross profit margin decreased to 13.7% for the second quarter of fiscal 2005 from 19.2% for the second quarter of fiscal 2004. Gross profit for the first twenty-six weeks of fiscal 2005 decreased 28.1% to $41.9 million from $58.3 million for the first twenty-six weeks of fiscal 2004. Gross profit margin decreased to 13.2% for the first twenty-six weeks of fiscal 2005 from 19.7% for the first twenty-six weeks of fiscal 2004. The decrease in gross margin for the quarterly period was due primarily to: (i) significantly higher costs for pecans that were used to fulfill remaining industrial contracts that were priced based on the crop costs for the prior year; (ii) higher tree nut costs that were not passed on to customers in the consumer distribution channel until January 2005; (iii) a reserve of $0.8 million to reduce the carrying value of pecan inventories based upon sales contracts that expire in the third quarter of fiscal 2005; and (iv) low margins on industrial almond contracts. The decrease in gross margin for the twenty-six week period was also due to (i) a significant increase in the cost of almonds purchased in the spot market during the first quarter of fiscal 2005; (ii) unfavorable almond processing variances generated from the use of low quality almonds that were required to be purchased during the first quarter of fiscal 2005 to fulfill customer contracts; and (iii) a higher than expected final settlement with almond growers for the 2003 crop. Gross margins were further negatively impacted to a lesser extent by a lower than expected yield on walnuts shelled during the first quarter of fiscal 2005. Also, the gross margin in the first quarter of fiscal 2004 benefited from a sizeable gain in pecan shelling that did not occur in the first quarter of fiscal 2005. Selling and Administrative Expenses. Selling and administrative expenses decreased to $14.2 million, or 7.7% of net sales, for the second quarter of fiscal 2005 from $15.1 million, or 8.8% of net sales, for the second quarter of fiscal 2004. Selling and administrative expenses decreased to $26.8 million, or 8.4% of net sales, for the first twenty-six weeks of fiscal 2005 from $27.9 million, or 9.4% of net sales, for the first twenty-six weeks of fiscal 2004. Selling expenses decreased slightly to $10.9 million, or 6.0% of net sales, for the second quarter of fiscal 2005 from $11.0 million, or 6.4% of net sales, for the second quarter of fiscal 2004. Selling expenses increased to $20.8 million, or 6.5% of net sales, for the first twenty-six weeks of fiscal 2005 from $19.9 million, or 6.7% of net sales, for the first twenty-six weeks of fiscal 2004. The dollar increase for the year-to- date period was due primarily to higher distribution expenses which were partially offset by lower incentive compensation costs. Administrative expenses decreased to $3.3 million, or 1.8% of net sales, for the second quarter of fiscal 2005 from $4.1 million, or 2.4% of net sales, for the second quarter of fiscal 2004. Administrative expenses decreased to $6.0 million, or 1.9% of net sales, for the first twenty-six weeks of fiscal 2005 from $7.9 million, or 2.7% of net sales, for the first twenty-six weeks of fiscal 2004. This decrease, for both the quarterly and year-to- date period, was due primarily to lower employee incentive compensation expense attributable to lower operating results Income from Operations. Due to the factors discussed above, income from operations decreased to $10.8 million, or 5.9% of net sales, for the second quarter of fiscal 2005, from approximately $17.9 million, or 10.4% of net sales, for the second quarter of fiscal 2004. Income from operations decreased to $15.1 million, or 4.8% of net sales, for the first twenty-six weeks of fiscal 2005, from approximately $30.5 million, or 10.3% of net sales, for the first twenty-six weeks of fiscal 2004. Interest Expense. Interest expense decreased to $0.4 million for the second quarter of fiscal 2005 from $0.9 million for the second quarter of fiscal 2004. Interest expense decreased to $0.7 million for the first twenty-six weeks of fiscal 2005 from $1.9 million for the first twenty- six weeks of fiscal 2004. The decrease in interest expense, for both the quarterly and year-to-date periods, was due primarily to lower average debt levels attributable to debt prepaid with proceeds from the Company's stock offering which was completed in the fourth quarter of fiscal 2004. On December 16, 2004, the Company issued $65.0 million of ten year notes bearing interest at a fixed rate of 4.67% under the Note Agreement to fund a portion of the Company's facility consolidation project. 14 Income Taxes. Income tax expense was $4.1 million, or 39.0% of income before income taxes for the first quarter of fiscal 2005 compared to $6.7 million, or 39.0% of income before income taxes, for the first quarter of fiscal 2004. Income tax expense was $5.7 million, or 39.0% of income before income taxes for the first twenty-six weeks of fiscal 2005 compared to $11.3 million, or 39.0% of income before income taxes, for the first twenty-six weeks of fiscal 2004. Net Income. Net income was $6.4 million, or $0.61 basic per common share ($0.60 diluted), for the second quarter of fiscal 2005, compared to $10.4 million, or $1.12 basic per common share ($1.09 diluted), for the second quarter of fiscal 2004. Net income was $9.0 million, or $0.85 basic per common share ($0.84 diluted), for the first twenty-six weeks of fiscal 2005, compared to $17.6 million, or $1.88 basic per common share ($1.85 diluted), for the first twenty-six weeks of fiscal 2004 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. Cash flows from operating activities have historically been driven by income from operations but are also influenced by inventory balances, which can change based upon fluctuations in both quantities and market prices of the various nuts the Company sells. Current market trends in nut prices and crop estimates also impact nut procurement. Net cash used in operating activities was $11.3 million for the first twenty-six weeks of fiscal 2005 compared to $15.3 million provided by operating activities for the first twenty-six weeks of fiscal 2004. The decrease in cash provided by operating activities was due primarily to increased inventory levels attributable to purchasing roughly double the quantity of almonds in the first twenty-six weeks of fiscal 2005 compared to the first twenty-six weeks of fiscal 2004, significantly higher costs for almonds and pecans and, to a lesser extent, lower net income. The Company received $65.0 of proceeds from the Note Agreement during the second quarter of fiscal 2005, accounting for a significant increase in cash provided by financing activities and the cash on hand at the end of the second quarter of fiscal 2005. The Company repaid $0.6 million of long-term debt during the first twenty-six weeks of fiscal 2005 compared to $8.5 million in fiscal 2004. The significant decrease is due to the Company prepaying outstanding balances on its two major long-term credit facilities in the fourth quarter of fiscal 2004 with proceeds from an underwritten public stock offering. Financing Arrangements - ---------------------- The Company's bank credit facility (the "Bank Credit Facility") is comprised of (i) a working capital revolving loan which provides working capital financing of up to $73.1 million, in the aggregate, and matures, as amended, on May 31, 2006, and (ii) a $6.9 million letter of credit (the "IDB Letter of Credit") to secure the industrial development bonds described below which matures on June 1, 2006. Borrowings under the working capital revolving loan accrue interest at a rate (the weighted average of which was 3.89% at December 23, 2004) determined pursuant to a formula based on the agent bank's quoted rate and the Eurodollar Interbank rate. As of December 23, 2004 the Company had $69.9 million of available credit under the Bank Credit Facility. 15 The terms of the Bank Credit Facility, 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, the Bank Credit Facility limits dividends to the lesser of (a) 25% of net income for the previous fiscal year, or (b) $5.0 million, and prohibits the Company from redeeming shares of capital stock. As of December 23, 2004, the Company was in compliance with all restrictive covenants, as amended, under the Bank Credit Facility. On December 16, 2004, the Company received $65.0 million from the Note Agreement to fund a portion of the facility consolidation project. Under the terms of the Note Agreement, the notes have a maturity of ten years, bear interest at a 4.67% annual rate and are required to be repaid in equal semi-annual principal payments of $3.6 million beginning on June 1, 2006. As of December 23, 2004, the outstanding balance on the Note Agreement was $65.0 million. The terms of the Note Agreement include certain restrictive covenants that, among other things, require the Company to maintain specified financial ratios. These covenants coincide with those included in the Bank Credit Facility. As of December 23, 2004, the Company was in compliance with all restrictive covenants under the Note Agreement. The Company may be required to fund a portion of the facility consolidation project through the Bank Credit Facility or other financing. As of December 23, 2004, the Company had approximately $6.5 million in aggregate principal amount of industrial development bonds outstanding, which was used to finance the acquisition, construction and equipping of the Company's Bainbridge, Georgia facility. The 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 2005 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. Capital Expenditures - -------------------- The Company spent $4.5 million on capital expenditures not related to facility expansion costs in the first twenty-six weeks of fiscal 2005 compared to $3.1 million in the first twenty-six weeks of fiscal 2004. Facility expansion costs totaled $6.8 million during the first twenty- six weeks of fiscal 2005, of which $4.5 million relate to the Original Site and $2.3 million to the Current Site. Total capital expenditures for fiscal 2005 are expected to be between $10 million and $12 million, excluding any amounts for the planned facility consolidation project. 16 The Company currently plans to begin the facility consolidation project at the Current Site in fiscal 2005. The Company is required to pay $46.0 million in March 2005, the anticipated closing date for the Company's acquisition of the Current Site. It is anticipated that the project will take three years from the time that the property is acquired to the time it is fully placed in service. The Company estimates the total cost of the project to be between $90 and $100 million, including the cost of moving existing operations and investment in new equipment. In addition, the Company also expects to spend an additional $7 million to develop the Original Site, bringing the total investment in the Original Site to approximately $12 million. The Company intends to recover its investment in the Original Site from either a termination of the Development Agreement, or the subsequent sale or development of the land. 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, almonds, walnuts 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. 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 would occur. This type of increase was experienced during the last half of fiscal 2004 and during the first half of fiscal 2005 for most of the Company's major nut types. The Company does 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 "Introduction". (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 17 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) Dependence Upon Customers - ------------------------------ The Company is dependent on a few significant customers for a large portion of its total sales, particularly in the consumer channel. Sales to the Company's five largest customers represented approximately 39% of gross sales in fiscal 2004. Wal-Mart alone accounted for approximately 19% of the Company's net sales for fiscal 2004. The loss of one of the Company's largest customers, or a material decrease in purchases by one or more of its largest customers, would result in decreased sales and adversely impact the Company's income and cash flow. Gross sales to Wal-Mart decreased by 12% in the first twenty-six weeks of fiscal 2005 when compared to the first twenty-six weeks of fiscal 2004, (d) Pricing Pressures - ---------------------- As the retail grocery trade continues to consolidate and the Company's retail customers grow larger and become more sophisticated, the Company's retail customers are demanding lower pricing and increased promotional programs. Further, these customers may begin to place a greater emphasis on the lowest-cost supplier in making purchasing decisions, particularly if buying techniques such as reverse internet auctions increase in popularity. An increased focus on the lowest-cost supplier could reduce the benefits of some of the Company's competitive advantages. The Company's sales volume growth could slow, and it may become necessary to lower the Company's prices and increase promotional support of the Company's products, any of which would adversely affect its gross profit margins. (e) Production Limitations - --------------------------- The Company has experienced significant sales growth as its customer demand has increased. If the Company continues to experience comparable increases in customer demand, particularly prior to the completion of the Company's facility consolidation project, it may be unable to fully satisfy its customers' supply needs. If the Company becomes unable to supply sufficient quantities of products, it may lose sales and market share to its competitors. (f) Food Safety and Product Contamination - ------------------------------------------ The Company could be adversely affected if consumers in the Company's principal markets lose confidence in the safety of nut products, particularly with respect to peanut and tree nut allergies. Individuals with peanut allergies may be at risk of serious illness or death resulting from the consumption of the Company's nut products. Notwithstanding existing food safety controls, the Company processes peanuts and tree nuts on the same equipment, and there is no guarantee that the Company's peanut-free products will not be cross-contaminated by peanuts. Concerns generated by risks of peanut and tree nut cross- contamination and other food safety matters may discourage consumers from buying the Company's products, cause production and delivery disruptions, or result in product recalls. (g) Product Liability and Product Recalls - ------------------------------------------ The Company faces risks associated with product liability claims and product recalls in the event its food safety and quality control procedures fail and its products cause injury or become adulterated or misbranded. A product recall of a sufficient quantity, or a significant product liability judgment against the Company, could cause the Company's products to be unavailable for a period of time and could result in a loss of consumer confidence in the Company's food products. These kinds of events, were they to occur, would have a material adverse effect on demand for the Company's products and, consequently, the Company's income and liquidity. 18 (h) Retention of Key Personnel - ------------------------------- The Company's future success will be largely dependent on the personal efforts of its senior operating management team, including Michael J. Valentine, the Company's Executive Vice President Finance, Chief Financial Officer and Secretary, Jeffrey T. Sanfilippo, the Company's Executive Vice President Sales and Marketing, and Jasper B. Sanfilippo, Jr., the Company's Executive Vice President of Operations, which has assumed management of the day-to-day operation of the Company's business over the past two years. In addition, the Company's success depends on the talents of James M. Barker, Senior Vice President Sales and Marketing, Everardo Soria, Senior Vice President Pecan Operations and Procurement, Walter R. Tankersley, Jr., Senior Vice President Industrial Sales, Charles M. Nicketta, Senior Vice President of Manufacturing and Arthur L. Timp, Senior Vice President of Corporate Operations. The Company believes that the expertise and knowledge of these individuals in the industry, and in their respective fields, is a critical factor to the Company's continued growth and success. The Company has not entered into an employment agreement with any of these individuals, nor does the Company have key officer insurance coverage policies in effect. The loss of the services of any of these individuals could have a material adverse effect on the Company's business and prospects if the Company were unable to identify a suitable candidate to replace any such individual. The Company's success is also dependent upon its ability to attract and retain additional qualified marketing, technical and other personnel, and there can be no assurance that the Company will be able to do so. -- moving the Company's facilities to a new location may cause attrition in its personnel at levels that result in a significant interruption in its operations, and the Company expects to incur additional annual compensation costs of approximately $300,000 to facilitate the retention of certain of its key personnel while the facility consolidation project is in process; -- the Company may be required to fund a portion of the facility consolidation project through additional financing, which may be at rates less favorable than its current credit facilities; -- the Company may not receive the anticipated rental income for the unused portion of the Current Site; and -- the Company may not be able to recover its investment in the Original Site. If for any reason the Company were to realize less than the expected benefits from the facility consolidation project, its future income stream, cash flows and debt levels could be materially adversely affected. In addition, the facility consolidation project is in the early stages of planning and unanticipated risks may develop as the project proceeds. (j) Government Regulation - -------------------------- The Company is subject to extensive regulation by the United States Food and Drug Administration, the United States Department of Agriculture, the United States Environmental Protection Agency and other state and local authorities in jurisdictions where its products are manufactured, processed or sold. Among other things, these regulations govern the manufacturing, importation, processing, packaging, storage, distribution and labeling of the Company's products. The Company's manufacturing and processing facilities and products are subject to periodic compliance inspections by federal, state and local authorities. The Company is also subject to environmental regulations governing the discharge of air emissions, water and food waste, and the generation, handling, storage, transportation, treatment and disposal of waste materials. Amendments to existing statutes and regulations, adoption of new statutes and regulations, increased production at the Company's existing facilities as well as its expansion into new operations and jurisdictions, may require the Company to obtain additional licenses and permits and could require it to adapt or alter methods of operations at costs that could be substantial. Compliance with applicable laws and regulations may adversely affect the Company's business. Failure to comply with applicable laws and regulations could subject the Company to civil remedies, including fines, injunctions, recalls or seizures, as well as possible criminal sanctions, which could have a material adverse effect on the Company's business. (k) Economic, Political and Social Risks of Doing Business in Emerging Markets - -------------------------------------------------------------- The Company purchases a substantial portion of its cashew inventories from India, Brazil and Vietnam, which are in many respects emerging markets. To this extent, the Company is exposed to risks inherent in emerging markets, including: -- increased governmental ownership and regulation of the economy; -- greater likelihood of inflation and adverse economic conditions stemming from governmental attempts to reduce inflation, such as imposition of higher interest rates and wage and price controls; -- potential for contractual defaults or forced renegotiations on purchase contracts with limited legal recourse; 20 -- tariffs and other barriers to trade that may reduce the Company's profitability; and -- civil unrest and significant political instability. The existence of these risks in these and other foreign countries that are the origins of the Company's raw materials could jeopardize or limit its ability to purchase sufficient supplies of cashews and other imported raw materials and may adversely affect the Company's income by increasing the costs of doing business overseas. (l) 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 2004, 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 commitments are for a fixed period of time, typically one year, but may be extended if remaining balances exist. 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 in order to maintain customer relationships or 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 reduced gross profit margins that have a material adverse effect on the Company's results of operations. The Company's results of operations were adversely affected during the last half of fiscal 2004 and the first quarter of fiscal 2005 as outside purchases of almonds and pecans were required to fulfill obligations under fixed-price contracts. (m) Inventory Measurement - -------------------------- The Company purchases its nut inventories from growers and farmers in large quantities at harvest times, which are primarily during the second and third quarters of the Company's fiscal year, and receives nut shipments in bulk truckloads. The weights of these nuts are measured using truck scales at the time of receipt, and inventories are recorded on the basis of those measurements. The nuts are then stored in bulk in large warehouses to be shelled or processed throughout the year. Bulk- stored nut inventories are relieved on the basis of continuous high- speed bulk weighing systems as the nuts are shelled or processed 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 bulk-stored 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 bulk-stored nut 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. (n) 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 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 21 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. Although this margin is now similar to the Company's total gross profit margin, the Company 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 would thus be materially adversely affected. (o) 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 has issued rules in each of these categories, which rules generally took effect on December 12, 2003. There can be no assurances that the effects of the Bioterrorism Act and the related rules, including any potential disruption in the Company's supply of imported nuts, which represented approximately 33% of the Company's total nut purchases in fiscal 2004, will not have a material adverse effect on the Company's business, financial position or results of operations in the future. (p) 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 it could concern other or additional business practices. The Company has responded to the subpoena and has produced documents to the Department of Justice, and two employees of the Company have appeared before the grand jury. The investigation, of which the Company and the employees are subjects, is on-going. 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. RECENT ACCOUNTING PRONOUNCEMENTS - -------------------------------- In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement No. 123R, "Share-Based Payment" ("SFAS 123R"), which requires compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of the compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be remeasured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS 123R replaces FASB Statement No. 123, "Accounting for Stock Based Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS 123R is effective for the Company's first quarter of fiscal 2006. The Company is currently evaluating the impact that the adoption of SFAS 123R will have on its consolidated financial position, results of operations and cash flows. In November, 2004, the FASB issued Statement No. 151, "Inventory Costs"("SFAS 151") an amendment of ARB No. 43, Chapter 4. SFAS 151 clarifies the accounting for abnormal amounts of the idle facility expense, freight, handling costs and wasted material (spoilage). SFAS 151 is effective for the Company's first quarter of fiscal 2006. The Company is currently evaluating the impact that the adoption of SFAS 151 will have on its consolidated financial position, results of operations and cash flows 22 Item 3 -- Quantitative and Qualitative Disclosures About Market Risk - -------------------------------------------------------------------- The Company is exposed to the impact of changes in interest rates and to commodity prices of raw material purchases. The Company has not entered into any arrangements to hedge against changes in market interest rates, commodity prices or foreign currency fluctuations. The Company is unable to engage in hedging activity related to commodity prices, since there are no established futures markets for nuts. Approximately 33% of nut purchases for fiscal 2004 were made from foreign countries, and while these purchases were payable in U.S. dollars, the underlying costs may fluctuate with changes in the value of the U.S. dollar relative to the currency in the foreign country. The Company is exposed to interest rate risk on the Bank Credit Facility, its only variable rate credit facility. A hypothetical 10% adverse change in weighted-average interest rates would have had an immaterial impact on the Company's net income and cash flows from operating activities. 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 23, 2004 that has materially affected, or is reasonably likely to materially affect the Company's internal control over financial reporting. 23 PART II. OTHER INFORMATION - --------------------------- Item 4 -- Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------- The Company's 2004 Annual Meeting of Stockholders was held on October 26, 2004 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) amending the Company's Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock from 10,000,000 to 17,000,000 (iv) ratifying the action of the Company's Audit Committee of the Board of Directors in appointing PricewaterhouseCoopers LLP as independent accountants for fiscal 2005, and (v) 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 2,597,426 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 7,243,096 votes cast for and 202,190 votes withheld, (iii) the holders of Common Stock elected John W. A. Buyers by a vote of 7,102,865 votes cast for and 342,421 votes withheld, (iv) the holders of Class A Common Stock and Common Stock approved the amendment to the Company's Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock from 10,000,000 to 17,000,000 by a total of 32,856,479 votes cast for the amendment, 558,481 votes against the amendment and 4,585 abstentions, and (v) the holders of Class A Common Stock and Common Stock ratified the appointment of PricewaterhouseCoopers LLP as the Company's independent accountants for fiscal 2005 by a total of 33,210,725 votes cast for ratification, 205,013 votes against ratification and 3,807 abstentions. Item 6 -- Exhibits and Reports on Form 8-K - ------------------------------------------ (a) The exhibits filed herewith are listed in the exhibit index that follows the signature page and immediately precedes the exhibits filed. (b) Reports on Form 8-K: On October 26, 2004, the Company filed a Current Report on Form 8-K, dated October 25, 2004, announcing quarterly financial results. On November 10, 2004, the Company filed a Current Report on Form 8-K dated November 10, 2004, disclosing information under Regulation FD that was provided to potential investors in a private placement memorandum for the issuance of senior unsecured notes. On November 15, 2004, the Company filed a Current Report on Form 8-K dated November 11, 2004, providing a press release issued by the City of Elgin. On November 23, 2004, the Company filed a Current Report on Form 8-K dated November 22, 2004, announcing that the Company had entered into an agreement with various lenders for the issuance of senior unsecured notes. On December 6, 2004, the Company filed a Current Report on Form 8-K dated December 1, 2004, disclosing an amendment to the Company's Bank Credit Facility. On December 8, 2004, the Company filed a Current Report on Form 8-K dated December 2, 2004, disclosing an agreement for the Company to purchase property in Elgin, Illinois. On December 21, 2004, the Company filed a Current Report on Form 8-K dated December 16, 2004, disclosing a note purchase agreement between the Company and various lenders. 24 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 31, 2005 By: /s/ Michael J. Valentine ------------------------ Michael J. Valentine Executive Vice President Finance, Chief Financial Officer and Secretary 25 EXHIBIT INDEX (Pursuant to Item 601 of Regulation S-K) Exhibit Number Description - ------- ----------------------------------------------------------------- 2 Not applicable 3.1 Restated Certificate of Incorporation of Registrant(2) 3.2 Certificate of Correction to Restated Certificate(2) 3.3 Amendment to Restated Certificate of Incorporation(19) 3.4 Bylaws of Registrant(1) 4.1 Specimen Common Stock Certificate(3) 4.2 Specimen Class A Common Stock Certificate(3) 4.3 Note Purchase Agreement in the amount of $65 million by the Company with The Prudential Insurance Company of America, Pruco Life Insurance Company, American Skandia Life Assurance Corporation, Prudential Retirement Ceded Business Trust, ING Life Insurance and Annuity Company, Farmers New World Life Insurance Company, Physicians Mutual Insurance Company, Great-West Life & Annuity Insurance Company, The Great-West Life Assurance Company, United of Omaha Life Insurance Company and Jefferson Pilot Financial Insurance Company dated as of December 16, 2004(22) 5-9 Not applicable 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 LaSalle National Bank ("LNB"), as Trustee under Trust Agreement dated September 20, 1966 and known as Trust No. 34837(5) 10.3 First Amendment to the Touhy Avenue Lease dated June 1, 1987(5) 10.4 Second Amendment to the Touhy Avenue Lease dated December 14, 1990(5) 10.5 Third Amendment to the Touhy Avenue Lease dated September 1, 1991(8) 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(4) 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(4) 26 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(6) 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(10) 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(6) 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(6) 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 Outsource Agreement between the Registrant and Preferred Products, Inc. dated January 19, 1995 [CONFIDENTIAL TREATMENT REQUESTED](7) 10.16 Letter Agreement between the Registrant and Preferred Products, Inc. dated February 24, 1995, amending the Outsource Agreement dated January 19, 1994 [CONFIDENTIAL TREATMENT REQUESTED](7) 10.17 The Registrant's 1995 Equity Incentive Plan(8) 10.18 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")(9) 10.19 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(9) 10.20 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(9) 10.21 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(9) 10.22 Credit Agreement dated as of March 31, 1998 among the Registrant, Sunshine Nut Co, Inc., Quantz Acquisition Co., Inc., JBS International Inc. ("JBSI"), U.S. Bancorp Ag Credit, Inc. ("USB") as Agent, Keybank National Association ("KNA"), and LNB(10) 10.23 The Registrant's 1998 Equity Incentive Plan(12) 10.24 First Amendment to the Registrant's 1998 Equity Incentive Plan(14) 27 10.25 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)(13) 10.26 Third Amendment to Credit Agreement dated May 20, 2002 by and among the Registrant, JBSI, USB as Agent, LNB and STB(15) 10.27 Fourth Amendment to Credit Agreement dated May 30, 2003 by and among the Registrant, JBSI, USB as Agent, LNB and STB(16) 10.28 Consent, Waiver and Fifth Amendment to Credit Agreement dated December 1, 2004 by and among the Registrant, USB as Agent, LNB and STB(20) 10.29 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(15) 10.30 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(15) 10.31 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(15) 10.32 Industrial Building Lease between the Registrant and Cabot Acquisition, LLC dated April 18, 2003(17) 10.33 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(16) 10.34 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(16) 10.35 Request for Waiver and Restriction on Transfer, dated January 22, 2004, by and between the Registrant and each holder of the Registrant's Class A Common Stock(17) 10.36 Letter Agreement, dated January 21, 2004, by and between the Registrant and Mathias A. Valentine(17) 10.37 Letter Agreement, dated January 21, 2004, by and between the Registrant and Michael J. Valentine, Trustee of the Michael J. Valentine Trust(17) 10.38 Letter Agreement, dated January 21, 2004, by and between the Registrant and Michael J. Valentine, Trustee of the James Valentine Trust(17) 10.39 Letter Agreement, dated January 21, 2004, by and between the Registrant and Michael J. Valentine, Trustee of the Mary Jo Carroll Trust(17) 10.40 Letter Agreement, dated January 21, 2004, by and between the Registrant and Marian Sanfilippo, Trustee of the John E. Sanfilippo Irrevocable Trust Agreement Dated 10/08/96(17) 10.41 Letter Agreement, dated January 21, 2004, by and between the Registrant and Marian Sanfilippo, Trustee of the James J. Sanfilippo Irrevocable Trust Agreement Dated 10/08/96(17) 10.42 Letter Agreement, dated January 21, 2004, by and between the Registrant and Marian Sanfilippo, Trustee of the Jeffrey T. Sanfilippo Irrevocable Trust Agreement Dated 10/08/96(17) 28 10.43 Letter Agreement, dated January 21, 2004, by and between the Registrant and Marian Sanfilippo, Trustee of the Lisa Sanfilippo Irrevocable Trust Agreement Dated 1/21/93(17) 10.44 Letter Agreement, dated January 21, 2004, by and between the Registrant and Marian Sanfilippo, Trustee of the Jasper B. Sanfilippo Irrevocable Trust Agreement Dated 10/08/96(17) 10.45 Amendment, dated February 12, 2004, to 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(17) 10.46 Amendment, dated February 12, 2004, to 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(17) 10.47 Development Agreement dated as of May 26, 2004, by and between the City of Elgin, an Illinois municipal corporation, the Registrant, Arthur/Busse Limited Partnership, an Illinois limited partnership, and 300 East Touhy Avenue Limited Partnership, an Illinois limited partnership(18) 10.48 Agreement For Sale of Real Property, dated as of June 18, 2004, by and between the State of Illinois, acting by and through its Department of Central Management Services, and the City of Elgin(18) 10.49 Agreement for Purchase and Sale between Matsushita Electric Corporation of America and the Company, dated December 2, 2004(21) 11 Not applicable 15 Not applicable 18-19 Not applicable 22-24 Not applicable 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 33-99 Not applicable (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). 29 (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 Current Report on Form 8-K dated September 29, 1992 (Commission File No. 0-19681). (5) 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). (6) 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). (7) 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). (8) 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). (9) 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). (10) 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). (11) 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). (12) 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). (13) 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). (14) 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). (15) 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). (16) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the second quarter ended December 25, 2003 (Commission File No. 0-19681). (17) Incorporated by reference to the Registrant's Registration Statement on Form S-3 (Amendment No. 2), Registration No. 333-112221, as filed with the Commission on March 10, 2004. (18) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 24, 2004 (Commission File No. 0-19681). 30 (19) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the first quarter ended September 23, 2004 (Commission File No. 0-19681). (20) Incorporated by reference to the Registrant's Current Report on Form 8-K dated December 1, 2004 (Commission File No. 0-19681). (21) Incorporated by reference to the Registrant's Current Report on Form 8-K dated December 2, 2004 (Commission File No. 0-19681). (22) Incorporated by reference to the Registrant's Current Report on Form 8-K dated December 16, 2004 (Commission File No. 0-19681). EX-31 2 exhibit311.txt 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 23, 2004; 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 31, 2005 /s/ JASPER B. SANFILIPPO ------------------------ Jasper B. Sanfilippo Chairman of the Board and Chief Executive Officer EX-31 3 exhibit312.txt EXHIBIT 31.2 ------------ CERTIFICATION ------------- I, Michael J. Valentine, certify that: 1. I have reviewed this Annual Report on Form 10-Q of John B. Sanfilippo & Son, Inc. for the quarter ended December 23, 2004; 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 31, 2005 /s/ MICHAEL J. VALENTINE ------------------------ Michael J. Valentine Executive Vice President Finance, Chief Financial Officer and Secretary EX-32 4 exhibit321.txt 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 23, 2004 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 31, 2005 /s/ JASPER B. SANFILIPPO ------------------------ Jasper B. Sanfilippo Chairman of the Board and Chief Executive Officer EX-32 5 exhibit322.txt 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 23, 2004 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 31, 2005 /s/ MICHAEL J. VALENTINE ------------------------ Michael J. Valentine Executive Vice President Finance, Chief Financial Officer and Secretary -----END PRIVACY-ENHANCED MESSAGE-----