Business context and reporting period
John B. Sanfilippo & Son, Inc. processes and distributes nuts and related food and snack products through consumer, commercial ingredients, and contract packaging channels. This 10-Q covers the third quarter and first 39 weeks of fiscal 2023, ended March 30, 2023, compared with periods ended March 24, 2022. The filing period does not match the request metadata of “2021 Q3.” Dollar amounts below are in millions unless noted.
Financial performance
| Metric | Q3 FY2023 | Q3 FY2022 | 39 weeks FY2023 | 39 weeks FY2022 |
|---|---|---|---|---|
| Net sales | $238.5 | $218.6 | $765.5 | $698.1 |
| Gross profit / margin | $49.8 / 20.9% | $39.4 / 18.0% | $156.9 / 20.5% | $143.4 / 20.5% |
| Operating income / margin | $21.8 / 9.1% | $17.4 / 8.0% | $68.7 / 9.0% | $63.0 / 9.0% |
| Net income | $15.7 | $11.9 | $48.2 | $44.4 |
| Diluted EPS | $1.35 | $1.02 | $4.14 | $3.83 |
Quarterly sales grew 9.1%, reflecting 5.0% higher volume and a 3.9% increase in weighted average selling price per pound. For the 39 weeks, sales rose 9.6%, driven mainly by an 8.8% higher average selling price and 0.8% volume growth. Quarter gross margin improved as margins recovered from inflation-pressured levels in the prior-year quarter; year-to-date gross margin was unchanged.
Operating cash flow was $72.4 million for the first 39 weeks, versus cash used of $12.6 million a year earlier, primarily reflecting a substantially smaller inventory-related cash outflow. Investing cash use was $19.1 million, including $15.6 million of capital expenditures and $3.5 million for the Just the Cheese acquisition. Financing cash use was $53.3 million, including $37.6 million of dividends and $12.6 million of net revolving-credit repayments. Cash declined $0.05 million to $0.37 million.
Liquidity, debt, and balance sheet
At March 30, 2023, current assets were $274.6 million and current liabilities were $102.8 million. Inventory was $190.4 million, down 7.1% from June 30, 2022. Revolver borrowings were $27.8 million; long-term debt, including current maturities, totaled $7.9 million. The company reported $85.5 million of available credit, net of letters of credit, and compliance with credit-facility covenants. The $45 million mortgage facility was repaid in February 2023. Management expects operating cash flow and available credit to fund operations for the next 12 months.
Changes, outlook, and risks
- Operating expenses rose 27.1% in the quarter, with higher incentive compensation and other compensation costs among the main drivers; lower freight expense partly offset the increase.
- Interest expense increased year to date due to higher weighted-average interest rates. The credit-facility rate was 7.2% at quarter-end.
- The December 2022 Just the Cheese brand acquisition cost $3.5 million and added baked cheese snacks to the product range; its financial impact was described as immaterial.
- Management expects fiscal 2023 capital expenditures of approximately $20–$23 million. It did not provide a specific earnings or revenue forecast.
- Management cited persistent inflation, changing consumer demand and trade-down, commodity and packaging costs, labor tightness, and supply-chain uncertainty. Ukraine-related disruption affected sunflower-based ingredients; mitigation included alternative sourcing and reformulation. Cost increases may not be passed on fully or promptly.
- Legal proceedings are in the ordinary course; management believes outcomes are not expected to materially affect the company, while acknowledging adverse outcomes could have a material effect. No significant risk-factor changes were reported.
- After quarter-end, the board declared a special dividend of $1.50 per share, payable June 22, 2023 to holders of record June 1, 2023.
Important facts for investors to verify
- Confirm the intended reporting period: the supplied filing is for fiscal Q3 2023, not 2021 Q3.
- Assess whether quarterly margin improvement can persist as commodity costs, consumer demand, and selling prices evolve.
- Track working-capital needs, especially inventory, and the company’s use of its revolving facility and covenant headroom.
- Review the planned capital spending, special dividend, and continuing ordinary dividends against cash generation and liquidity.
- Monitor customer distribution changes, input-cost pass-through, supply-chain and labor risks, and progress integrating Just the Cheese.