John B. Sanfilippo & Son, Inc. announced operating results for its fiscal 2012 third quarter. Net income for the third quarter of fiscal 2012 was $1.4 million, or $0.13 per share diluted, compared to a net loss of $5.6 million, or $0.53 loss per share diluted, for the third quarter of fiscal 2011.
John B. Sanfilippo & Son, Inc. is a processor, packager, marketer and distributor of nut and dried fruit based products that are sold under a variety of private labels and under the company’s Fisher®, Orchard Valley HarvestTM and Sunshine Country® brand names.
Net income for the first three quarters of fiscal 2012 was $13.2 million, or $1.23 per share diluted, compared to net income of $0.6 million, or $0.06 per share diluted, for the first three quarters of fiscal 2011.
Net sales increased to $153.8 million for the third quarter of fiscal 2012 from $137.4 million for the third quarter of fiscal 2011. The increase in net sales was primarily attributable to price increases implemented over the last twelve months for virtually all nuts except almonds in response to rising tree nut and peanut acquisition costs.
Sales volume for the third quarter of fiscal 2012, which is measured as pounds sold to customers, was virtually unchanged in comparison to sales volume for the third quarter of fiscal 2011.
Sales volume increases in the commercial ingredients and contract packaging distribution channels, primarily resulting from increased almond sales and new sales of roasting services, were offset by sales volume declines in the consumer and export distribution channels. The declines in sales volumes in these distribution channels were mainly attributable to the unfavorable impact of high cashew, pecan and peanut prices on consumer demand for products containing these nuts.
The loss of some low margin private label business in the latter part of fiscal 2011 also contributed to the decline in sales volume in the consumer distribution channel in the quarterly comparison.
Net sales increased to $533.9 million for the first three quarters of fiscal 2012 from $507.8 million for the first three quarters of fiscal 2011. As was the case in the quarterly comparison, the increase in net sales was attributable primarily to price increases implemented over the last twelve months for virtually all nuts except almonds in response to rising tree nut and peanut acquisition costs.
Sales volume for the first three quarters of fiscal 2012 decreased by 7.6 percent in comparison to sales volume for the first three quarters of fiscal 2011. The sales volume decrease in the year to date comparison was driven by volume decreases in the consumer and export distribution channels.
The declines in sales volume in these distribution channels were mainly attributable to the unfavorable impact of high cashew, pecan, walnut and peanut prices on consumer demand for products containing these nuts. The loss of some low margin private label business in the latter part of fiscal 2011 also contributed to the decline in sales volume in the consumer and export distribution channels in the year to date comparison.
The gross profit margin, as a percentage of net sales, increased to 14.4 percent for the third quarter of fiscal 2012 from 7.3 percent for the third quarter of fiscal 2011. The gross profit margin for the current third quarter increased in the quarterly comparison primarily because of improved alignment of selling prices with acquisition costs.
Manufacturing efficiency improvements also contributed to the increase in gross profit margin as produced pounds increased by 17.8 percent while manufacturing spending remained relatively unchanged in the quarterly comparison. The efficiency improvements occurred primarily in the Gustine, Calif, Bainbridge, Ga. and Garysburg, N.C. facilities through a combination of spending control and increased output per hour.
The gross profit margin for the first three quarters of fiscal 2012, as a percentage of net sales, increased to 14.9 percent from 11.4 percent. The gross profit margin for the first three quarters of fiscal 2012 increased in the year to date comparison primarily because of improved alignment of selling prices with acquisition costs.
Total operating expenses for the current quarter decreased to 11.7 percent of net sales from 12.8 percent of net sales for the third quarter of fiscal 2011. Total operating expenses for the first three quarters of fiscal 2012 decreased slightly to 10.1 percent of net sales from 10.2 percent of net sales for the same year to date period in fiscal 2011. The decline in total operating expenses, as a percentage of net sales, in the quarterly comparison was due mainly to a higher sales base. Total operating expenses in the quarterly comparison increased by $0.5 million due to increases in incentive compensation expense, which was offset in part by a decrease in freight expense. Total operating expenses increased by $2.0 million in the year to date comparison due to increases in incentive compensation, marketing and advertising expenses, which were offset in part by decreases in freight and commissions expenses.
The third quarter and year to date periods in fiscal 2011 also included certain expenses that did not recur in the respective periods in the current fiscal year such as litigation related expenses, a loss for the write down of machinery and equipment related to the relocation of the Orchard Valley Harvest (OVH) Modesto, Calif. facility and an increase in the projected OVH earn-out payments.
Interest expense for the third quarter of fiscal 2012 declined to $1.4 million from $1.7 million for the third quarter of fiscal 2011. Interest expense for the current year to date period was $4.0 million compared to $4.7 million for the first three quarters of fiscal 2011. The declines in interest expense in the quarterly and year to date comparisons primarily resulted from lower average short-term borrowings.
As a result of higher acquisition costs for peanuts and tree nuts, the value of total inventories on hand at the end of the current third quarter increased by $18.8 million or 11.9 percent when compared to the value of total inventories on hand at the end of the third quarter of fiscal 2011. For the same reason, the weighted average cost per pound of raw nut input stocks on hand at the end of the current third quarter increased by 15.8 percent compared to the weighted average cost per pound of raw nut input stocks on hand at the end of last year’s third quarter.
Pounds of raw nut input stocks at the end of the current quarter decreased by 2.7 million pounds or 4.8 percent when compared to the quantity of raw nut input stocks on hand at the end of the third quarter of fiscal 2011. The weighted average cost per pound of finished goods on hand increased by 7.6 percent, and pounds of finished goods on hand increased by 8.3 percent in the quarterly comparison.
“The fiscal 2012 third quarter net income of $1.4 million marks our strongest third quarter since the third quarter of fiscal 2005. Additionally, the net income for the third quarter of fiscal 2012 was a vast improvement compared to the net loss of $5.6 million for the third quarter of fiscal 2011,” said Jeffrey T. Sanfilippo, chief executive officer in a prepared statement. “This was a remarkable accomplishment considering that acquisition costs for certain key nuts continued to increase significantly over the historically high acquisition costs that existed in last year’s third quarter. This accomplishment was primarily attributable to our efforts to maintain alignment of selling prices and acquisition costs and to control manufacturing spending,” Sanfilippo noted.
“High selling prices continued to have an unfavorable impact on sales volume in our consumer distribution channel and in the snack nut category as a whole,” he said. “The sales volume decrease in this channel was offset by increased sales of bulk products such as almond butter and peanut crushing stock for oil to other food manufactures in the commercial ingredients distribution channel and new sales of roasting services in the contract packaging distribution channel.”
