Quarterly Overview:
- Net sales decreased by 2.1%
- Sales volume* increased by 1.1%
- Gross profit increased by 13.6%
- Net income increased by 48.0%
Year to Date Overview:
- Net sales decreased by 3.6%
- Sales volume* decreased by 0.2%
- Gross profit increased by 4.1%
- Net income decreased by 2.5%
January 30, 2019 04:10 PM Eastern Standard Time
ELGIN, Ill.--(BUSINESS WIRE)--John B. Sanfilippo & Son, Inc. (Nasdaq: JBSS) (the “Company”) today announced operating results for its fiscal 2019 second quarter. Net income for the second quarter of fiscal 2019 was $11.3 million, or $0.98 per share diluted, compared to net income of $7.6 million, or $.67 per share diluted, for the second quarter of fiscal 2018. Net income for the first two quarters of fiscal 2019 was $17.9 million, or $1.56 per share diluted, compared to net income of $18.3 million, or $1.60 per share diluted, for the first two quarters of fiscal 2018.
* References to changes in sales volume do not include the decline in sales volume for peanut crushing stock sold to peanut oil processors in the quarterly and year to date comparisons, as the sales volume decline for this product had no significant impact on net sales due to typically low selling prices. Including the decline in sales volume for peanut crushing stock, total sales volume would have declined by 0.6% and 1.9% in the quarterly and year to date comparisons, respectively. The declines in sales volume for this product in both comparisons resulted from the shutdown of our peanut shelling plant in Bainbridge, Georgia to install new shelling equipment. The shutdown commenced in July and ended in December of the current fiscal year.
Net sales for the second quarter of fiscal 2019 were $253.3 million compared to net sales of $258.8 million for the second quarter of fiscal 2018. The decline in net sales was primarily attributable to a shift in sales volume, which is defined as pounds sold to customers, from higher priced tree nuts to lower priced peanuts. Sales volume increased by 1.1%, as the 12.8% sales volume increase in the consumer distribution channel was largely offset by a sales volume decline in the contract packaging distribution channel. The sales volume decline in the contract packaging distribution channel was due to the loss of some bulk business with an existing customer and the discontinuance of a product line and unit ounce weight reductions for tree nut items implemented by another existing customer. The sales volume decline in the contract packaging distribution channel was also due to our acquisition of the Squirrel Brand business at the end of November, 2017. Sales volume for Squirrel Brand and Southern Style Nuts was included in the contract packaging distribution channel for October and November in last year’s second quarter, while Squirrel Brand and Southern Style Nuts sales volume was included in the commercial ingredients and consumer distribution channels in the current second quarter. Sales volume declined by 3.9% in the commercial ingredients distribution channel because there was no excess walnut inventory available for export in the current second quarter, while we sold excess walnut inventory for export in the second quarter of fiscal 2018. The increase in sales volume in the consumer distribution channel primarily resulted from increased sales of snack nuts and trail mixes with new and existing private brand customers.
Sales volume for our branded products changed in the quarterly comparison as follows:
Fisher recipe nuts (10.8)%
Orchard Valley Harvest 16.5%
Fisher snack nuts 26.9%
The decrease in sales volume for Fisher recipe nuts resulted from lost distribution for some items at a major customer due to the introduction of private brand recipe nuts, which commenced in the second quarter of fiscal 2018. This lost distribution was offset in part by distribution gains at several new customers. The increase in sales volume for Orchard Valley Harvest was primarily driven by distribution gains at new and existing customers. The increase in sales volume for Fisher snack nuts resulted mainly from increased promotional and merchandising activity and distribution gains for our Oven Roasted Never Fried product line.
For the first two quarters of fiscal 2019, net sales decreased to $457.6 million from $474.5 million for the first two quarters of fiscal 2018. As was the case in the quarterly comparison, the decline in net sales was primarily attributable to a shift in sales volume from higher priced tree nuts to lower priced peanuts. Sales volume was relatively unchanged in the year to date comparison. The 10.1% increase in sales volume in the consumer distribution channel was offset by a sales volume decline in the contract packaging distribution channel. The sales volume increase in the consumer distribution channel primarily resulted from increased sales of private brand peanuts and trail mixes, Orchard Valley Harvest products and Fisher snack nuts. The reclassification of sales of Southern Style Nuts from the contract packaging distribution channel also contributed to the increase in sales volume in the consumer distribution channel. The sales volume decline in the contract packaging distribution channel was driven primarily by the same factors cited in the quarterly comparison. Sales volume in the commercial ingredients distribution channel was relatively unchanged in the year to date comparison.
Gross profit increased by $5.2 million, or 13.6%, for the second quarter of fiscal 2019 compared to the second quarter of fiscal 2018. Gross profit margin, as a percentage of net sales, increased to 16.9% for the second quarter of fiscal 2019 from 14.6% for the second quarter of fiscal 2018. The increases in gross profit and gross profit margin were mainly due to decreased commodity acquisition costs for pecans, walnuts and peanuts.
In the year to date comparison, gross profit increased by $3.0 million, or 4.1%, and gross profit margin increased to 16.6% for the first two quarters of fiscal 2019 from 15.4% for the first two quarters of fiscal 2018. The increases in gross profit and gross profit margin in the year to date comparison were primarily due to lower acquisition costs for pecans and peanuts.
Total operating expenses, as a percentage of net sales, increased to 10.4% for the second quarter of fiscal 2019 from 9.1% for the second quarter of fiscal 2018. Total operating expenses increased by $2.6 million in the quarterly comparison due to increases in incentive compensation, base compensation, advertising and shipping expenses. Total operating expenses also included a $0.5 million increase in amortization expense that was associated with the acquisition of the Squirrel Brand business.
Total operating expenses for the first two quarters of fiscal 2019 increased to 10.7% of net sales from 8.7% of net sales for the first two quarters of fiscal 2018. Total operating expenses increased by $8.0 million in the year to date comparison. The increase in total operating expenses was also primarily attributable to increases in incentive compensation, base compensation and shipping expenses. Total operating expenses also included a $1.4 million increase in amortization expense that was associated with the acquisition of the Squirrel Brand business.
Interest expense was $0.8 million for both the second quarter of fiscal 2019 and the second quarter of fiscal 2018. Interest expense for the first two quarters of fiscal 2019 was $1.7 million compared to $1.6 million for the first two quarters of fiscal 2018. The increase in interest expense in the year to date comparison was attributable primarily to higher average debt levels and interest rates, which were mainly driven by our acquisition of the Squirrel Brand business.
The total value of inventories on hand at the end of the second quarter of fiscal 2019 increased by $3.3 million, or 1.9%, compared to the total value of inventories on hand at the end of the second quarter of fiscal 2018. The increase in the total value of inventories on hand was primarily driven by increased quantities of inshell pecans and inshell peanuts on hand. The weighted average cost per pound of raw nut and dried fruit input stocks on hand at the end of the second quarter of fiscal 2019 decreased by 29.6% compared to the weighted average cost per pound at the end of the second quarter of fiscal 2018. The decrease in the weighted average cost per pound of raw nut and dried fruit input stocks was mainly due to lower acquisition costs for pecans, walnuts, cashews and peanuts. In anticipation of the shutdown of the U.S. Federal government we accelerated the purchase of inshell peanuts in the current second quarter to meet our third quarter inventory requirements. This increase in quantities on hand of inshell peanuts also drove the decrease in weighted average cost per pound.
“We continued to have another quarter of strong volume and sales growth in our consumer distribution channel. Sales volume in the consumer distribution channel accounted for 73.0% of our total sales volume in the current second quarter compared to 64.2% of total sales volume for last year’s second quarter. The increase in sales volume in the consumer distribution channel was driven by increased sales of private brand, Orchard Valley Harvest and Fisher snack nut and trail mix products. Additionally, distribution gains for Fisherrecipe nuts at several new grocery customers helped to offset some of the lost distribution at a major customer,” stated Jeffrey T. Sanfilippo, Chief Executive Officer. “At retail,
Fisher recipe nut pound volume declined by 9% while the total category pound volume declined by 4% in the quarterly comparison according to IRi market data. Our Orchard Valley Harvest brand continues to grow significantly, and it is currently our second largest brand in respect to net sales. Orchard Valley Harvest performed well at retail with pound volume up by 7%, while the total produce category pound volume fell by 1% in the quarterly comparison,” Mr. Sanfilippo stated. “Fisher snack nut pound volume at retail increased by 20%, while the total pound volume for the snack nut category increased by 2%. The increase in pound volume at retail was primarily attributable to distribution gains for our new Oven Roasted Never Fried product line,” Mr. Sanfilippo noted. Our Southern Style Nutsbrand also outperformed the snack mix and trail mix category with pound volume up by 1%, while the total category declined by 7%,” Mr. Sanfilippo stated. “As we noted in the year to date comparison, the increase in incentive compensation expense was a significant driver for the increase in total operating expenses, as this expense accounted for 32% of the increase. Our rising gross profit has allowed us to increase our incentive compensation over the prior year while still delivering value to our shareholders,” Mr. Sanfilippo concluded.
The Company will host an investor conference call and webcast on Thursday, January 31, 2019, at 10:00 a.m. Eastern (9:00 a.m. Central) to discuss these results. To participate in the call via telephone, dial 1-844-536-5471 from the U.S. or 1-614-999-9317 internationally and enter the participant passcode of 7267438. This call is being webcast by NASDAQ/OMX and can be accessed at the Company’s website at www.jbssinc.com.
See more of the reported results here.
