John B. Sanfilippo & Son, Inc. Reports Profit Gain In Second Quarter

John B. Sanfilippo & Son, Inc. announced operating results for its fiscal 2011 second quarter. Net income for the current quarter was $5.2 million, or $0.48 per share diluted, compared to net income of $8.8 million, or $0.82 per share diluted, for the second quarter of fiscal 2010.
Net income for the first two quarters of fiscal 2011 was $6.3 million, or $0.58 per share diluted, compared to net income of $13.6 million, or $1.27 per share diluted, for the first two quarters of fiscal 2010.

Net sales increased to $223.6 million for the second quarter of fiscal 2011 from $180.1 million for the second quarter of fiscal 2010.

Approximately 39 percent of the net sales increase in the quarterly comparison was attributed to products associated with the acquisition of Orchard Valley Harvest, Inc. (OVH), which was completed in the fourth quarter of fiscal 2010.

Sales volume, which is measured in pounds shipped to customers, increased by 7.4 percent. Approximately 84 percent of the sales volume increase was attributed to OVH products. The increase in sales volume in the second quarter occurred in the consumer, contract packaging and food service distribution channels for almonds, chocolate-coated products, fruit and nut mixes and cashews.

Price increases implemented in the first and second quarters of the current fiscal year also led to the increase in net sales.

For the first two quarters of fiscal 2011, net sales increased to $370.4 million from $306.9 million for the first two quarters of fiscal 2010. Approximately 44 percent of the net sales increase in the year-to-date comparison was attributed to OVH products. Sales volume increased by 6.3 percent.

Approximately 98 percent of the sales volume increase in the year to date comparison was attributable to OVH products. The increase in sales volume in the first two quarters occurred in the consumer, contract packaging and food service distribution channels for all of the company's major products except peanut and pecan products. As was the case in the quarterly comparison, price increases implemented in the first and second quarters of the current fiscal year also contributed to the increase in net sales.

The gross profit margin, as a percentage of net sales, decreased from 18.2 percent for the second quarter of fiscal 2010 to 12.2 percent for the second quarter of fiscal 2011. The gross profit margin for the first two quarters of fiscal 2011, as a percentage of net sales, decreased to 12.9 percent from 18.4 percent for the first two quarters of fiscal 2010. The decrease in the gross profit margins in the quarterly and year-to-date comparisons was almost entirely attributable to significantly higher acquisition costs for tree nuts, to the extent that they were not offset by price increases implemented during those periods. Increased global demand for tree nuts was the primary driver for the increase in acquisition costs.

Total operating expenses for the second quarter of fiscal 2011 decreased to 7.8 percent of net sales from 9.6 percent of net sales for the second quarter of fiscal 2010. Total operating expenses for the current year to date period decreased to 9.3 percent of net sales from 10.3 percent of net sales for the same year to date period in fiscal 2010. The decrease in total operating expenses, as a percentage of net sales, in the quarterly and year to date comparisons was mainly attributable to a higher sales base.

Additionally, total operating expenses for the current quarter were favorably impacted by an insurance settlement of $1.1 million related to the fiscal 2009 pistachio recall and $1.5 million for the estimated forfeiture of amounts previously accrued for incentive compensation due to current year performance. These favorable items were offset in part by an increase in the OVH earn-out liability of $0.8 million and an increase in the accrual for a pending legal matter of $0.9 million. For the current year-to-date period, total operating expenses were increased by $1.5 million for the OVH earn-out liability and $1.1 million for the accrual for a pending legal matter.