John B. Sanfilippo & Son, Inc. announced operating results for its fiscal 2012 fourth quarter and fiscal year ended June 28, 2012. Net income for the fourth quarter of fiscal 2012 was $3.9 million, or $0.36 per share diluted, compared to net income of $2.2 million, or $0.21 per share diluted, for the fourth quarter of fiscal 2011. Net income for fiscal 2012 was $17.1 million, or $1.58 per share diluted, compared to net income of $2.8 million, or $0.26 per share diluted, for fiscal 2011.
Fiscal 2012 fourth quarter net sales increased to $166.7 million from net sales of $166.4 million for the fourth quarter of fiscal 2011 primarily due to price increases for most major product types resulting from higher acquisition costs for tree nuts and peanuts. The fiscal 2011 fourth quarter, a 14-week quarter, included the impact from an additional week of net sales of approximately $12.6 million. Sales volume, which is defined as pounds of all products sold to customers, decreased by 12.0 percent in the quarterly comparison. The decrease in sales volume occurred in the consumer, commercial ingredients and export distribution channels mainly as a result of a decline in peanut sales, which were negatively affected by the impact of high prices on consumer demand and limited peanut supplies due to a smaller crop. Approximately 62 percent of the sales volume decrease in the quarterly comparison was attributable to the additional week in the fourth quarter of fiscal 2011.
Fiscal 2012 net sales increased by $26.4 million, or 3.9 percent, to $700.6 million from $674.2 million for fiscal 2011 primarily as a result of price increases for most major product types. Fiscal 2011, a fifty-three week year, included the impact from an additional week of net sales of approximately $12.6 million. Sales volume decreased by 8.7 percent in the yearly comparison. The decrease in sales volume occurred in the consumer, commercial ingredients and export distribution channels driven by declines in sales volume for peanuts, pecans, cashews, walnuts and mixed nuts. The decline in volume for these nut products resulted primarily from the impact of high prices on consumer demand. The decline in volume for peanuts and walnuts also was attributable to limited supplies due to smaller peanut and walnut crops. Approximately 21 percent of the sales volume decrease in the yearly comparison was attributable to the additional week in fiscal 2011.
Gross profit margin for the fourth quarter of fiscal 2012 increased to 16.6 percent of net sales from 15.9 percent of net sales for the fourth quarter of fiscal 2011, and gross profit increased by $1.3 million. The increases in gross profit margin and gross profit are primarily due to improved alignment of sales prices with acquisition costs of tree nuts and peanuts.
Gross profit margin for fiscal 2012 increased to 15.3 percent of net sales from 12.5 percent of net sales for fiscal 2011, and gross profit increased by $22.9 million. The increases in gross profit margin and gross profit in the fiscal year comparison were also mainly attributable to improved alignment of sales prices with acquisition costs of tree nuts and peanuts.
Total operating expenses for the fourth quarter of fiscal 2012 were 12.0 percent of net sales compared to 13.2 percent of net sales for the fourth quarter of fiscal 2011. The decline in total operating expenses, as a percentage of net sales, was mainly attributable to $5.7 million of goodwill impairment recorded in the fourth quarter of fiscal 2011, which was offset in part by a $0.7 million reduction in a litigation accrual. Both items did not recur in the fourth quarter of fiscal 2012. Total operating expenses for the fourth quarter of fiscal 2012 included increases in incentive compensation, advertising and marketing expenses, which were offset in part by a decrease in shipping expense.
Total operating expenses for fiscal 2012 were 10.6 percent of net sales compared to 11.0 percent of net sales for fiscal 2011. The decline in total operating expenses, as a percentage of net sales, was mainly attributable to the recording of goodwill impairment of $5.7 million, a $1.7 million increase in the projected earn-out payments related to the acquisition of Orchard Valley Harvest, Inc. and a $2.0 million increase to a litigation accrual, which were offset in part by a $1.1 million settlement benefit, all of which occurred in fiscal 2011. These items did not recur in fiscal 2012. Total operating expenses for fiscal 2012 included increases in incentive compensation, advertising and marketing expenses, which were offset in part by reductions in shipping and broker commission expenses.
Interest expense declined to $1.4 million for the fourth quarter of fiscal 2012 from $1.7 million for the fourth quarter of fiscal 2011. Interest expense declined to $5.4 million for fiscal 2012 from $6.4 million for fiscal 2011. The declines in interest expense in the quarterly and yearly comparisons were primarily attributable to lower average borrowing levels and lower average interest rates on short-term borrowings.
The value of total inventories on hand at the end of the fourth quarter of fiscal 2012 increased by $17.4 million or 13.5 percent when compared to the value of total inventories on hand at the end of the fourth quarter of fiscal 2011. The increase in total inventory value was attributable to increased quantities of raw pecans and almonds on hand. The weighted average cost per pound of raw nut input stocks on hand at the end of the fourth quarter of fiscal 2012 increased by 3.5 percent over the weighted average cost at the end of the fourth quarter of fiscal 2011. The increase in the weighted average cost per pound in the quarterly comparison was attributable to increased acquisition costs, especially for peanuts and walnuts. The weighted average cost per pound of finished goods on hand increased by 7.7 percent, and the pounds of finished goods on hand decreased by 10.8 percent at year-end fiscal 2012 compared to year-end fiscal 2011.
“For fiscal 2012, we reported record net sales and a substantial improvement in net income over fiscal 2011,” said Jeffrey T. Sanfilippo, chief executive officer in a prepared statement. “The improvement in operating results was attributable primarily to the continued efforts we made during the 2012 fiscal year to align our selling prices with acquisition costs for tree nuts and peanuts,” Sanfilippo explained. “Market prices for most tree nuts and peanuts stabilized in the second half of fiscal 2012 but remained at historically high levels. These high prices have had an unfavorable impact on our sales volume and on sales volume for the entire nut category,” Sanfilippo noted. “We anticipate that market prices will fall for cashews and peanuts in fiscal 2013, which should allow our customers and us to return to focusing on growing sales volume for these nuts through increased collaborative marketing and merchandising activities. We are also encouraged that, according to the most recently released market data, our company’s Fisher brand has shown a significant market share increase in the baking nut category,” concluded Sanfilippo.
