Business context and reporting period
This is John B. Sanfilippo & Son, Inc.’s unaudited Form 10-Q for the quarter ended March 28, 2024, and the first 39 weeks of fiscal 2024. The filing describes a nut, snack and food-products processor and distributor, selling branded and private-label products through consumer, commercial-ingredient and contract-packaging channels. Note: the request metadata says “2022 Q3,” but the filing itself is for fiscal 2024 Q3.
Financial results and liquidity
Dollars below are in millions unless otherwise noted.
| Metric | Q3 FY2024 | Q3 FY2023 | 39 weeks FY2024 | 39 weeks FY2023 |
|---|---|---|---|---|
| Net sales | $271.9 | $238.5 | $797.2 | $765.5 |
| Gross profit / margin | $49.2 / 18.1% | $49.8 / 20.9% | $164.1 / 20.6% | $156.9 / 20.5% |
| Operating income / margin | $18.4 / 6.7% | $21.8 / 9.1% | $70.5 / 8.8% | $68.7 / 9.0% |
| Net income | $13.5 | $15.7 | $50.2 | $48.2 |
| Diluted EPS | $1.15 | $1.35 | $4.30 | $4.14 |
| Operating cash flow | — | $66.4 | $72.4 |
Quarterly sales rose 14.0%, but net income fell about 14%; the 39-week figures rose 4.1% and 4.3%, respectively. Quarter sales volume increased 22.6%, primarily due to the Lakeville acquisition; excluding it, volume fell 1.4%. For the 39 weeks, reported volume increased 8.8%, while sales excluding the acquisition declined 5.7%. Cash used for capital expenditures was $17.5 million in the 39-week period.
At March 28, 2024, cash was $0.4 million, current assets $296.3 million and current liabilities $120.4 million. Inventory was $210.7 million. Revolver borrowings were $32.1 million; the company reported $114.1 million of remaining availability under its $150 million facility, after letters of credit. Related-party long-term debt, including current maturities, was $7.3 million. The company said it was covenant-compliant. The facility’s weighted-average interest rate was 8.1%.
Material changes and unusual items
- The September 2023 Lakeville snack-bar acquisition contributed $75.6 million of sales in the 39 weeks and approximately $46.9 million of Q3 sales. Net purchase price was $59.0 million, principally funded with credit-facility borrowings. The transaction generated a $2.2 million net bargain-purchase gain in the 39-week results.
- Q3 gross profit fell $0.6 million despite higher sales; the company cited higher peanut and walnut costs, reduced production volume, facility repairs and maintenance, noncompliant inventory and incentive compensation. The Q3 gross margin declined 2.8 percentage points.
- Q3 operating expenses rose 10.3% to $30.8 million, while operating income declined to $18.4 million. For the 39 weeks, operating income increased modestly, including the acquisition gain.
- Operating cash flow declined $6.0 million year over year, mainly due to working-capital changes. Investing cash outflow was $76.5 million, primarily reflecting the Lakeville purchase.
- The board declared a $1.00-per-share special cash dividend on May 1, 2024, payable June 20, 2024 to holders of record May 31, 2024. The company also entered into a 7.5-year lease for a 444,600-square-foot warehouse after quarter-end.
Outlook, management commentary and risks
Management expects operating cash generation and available credit to fund operations for the next 12 months and expects fiscal 2024 capital expenditures of approximately $28 million. It expects freight rates to remain flat for the rest of fiscal 2024; no full-year earnings or sales guidance is provided.
Management cited inflation and elevated interest rates, softer consumer demand and shifts toward value-priced products, continued labor and supply-chain constraints, commodity-price volatility, and potential cocoa shortages. It warned that cost increases may not be passed through promptly or fully, and that supply or labor disruptions could affect sales and operations. Other disclosed risks include food safety, customer concentration and demand, weather-related supply effects, acquisition integration, and litigation. The company reported ordinary-course legal proceedings and said unfavorable outcomes could potentially be material, although management does not currently expect them to materially affect results. It reported effective disclosure controls and no significant change in previously disclosed risk factors.
Important facts for investors to verify
- Confirm the intended reporting period: the supplied filing is for March 28, 2024, not 2022 Q3.
- Assess how much reported growth and earnings depend on Lakeville and whether acquired snack-bar sales and margins are sustainable.
- Track inventory, working-capital cash conversion, low cash on hand, revolver usage and the 8.1% borrowing rate.
- Monitor margin recovery, commodity and labor costs, consumer demand, and declines in commercial-ingredient and contract-packaging sales.
- Review the special dividend, planned capital spending and new warehouse lease against liquidity and future operating cash flow.