John B. Sanfilippo & Son, Inc. First Quarter Diluted EPS Increased by 2.2% To A First Quarter Record $0.91 Per Share

ELGIN, Ill.--(BUSINESS WIRE)--John B. Sanfilippo & Son, Inc. (NASDAQ: JBSS) (the “Company”) today announced operating results for its first quarter of fiscal 2018. Net income for the first quarter of fiscal 2018 was $10.4 million, or $0.91 per share diluted, compared to $10.2 million, or $0.89 per share diluted, for the first quarter of fiscal 2017.

Net sales decreased by 3.4% to $214.8 million for the first quarter of fiscal 2018 from net sales of $222.3 million for the first quarter of fiscal 2017. Sales volume, which is defined as pounds sold to customers, was unchanged in the quarterly comparison. The decrease in net sales primarily resulted from a shift in sales volume mix from higher priced almonds, pecans and walnuts to lower priced peanuts and trail mixes, which led to a reduction in the weighted average selling price per pound in the quarterly comparison. Sales volume increased by 14.7% in the contract packaging distribution channel mainly from increased sales of trail mixes and snack bite cluster products to existing customers. Sales volume in the commercial ingredients distribution channel declined by 17.1% primarily due to the loss of the bulk almond butter customer that occurred in the second quarter of fiscal 2017.

Sales volume in the consumer distribution channel increased by 1.8% primarily from a 3.7% increase in sales volume for our private brand products due to sales growth for almonds and trail mixes with existing customers.

Sales volume for our branded products changed as follows:

Fisher recipe nut sales volume declined due to reductions in orders with a major customer. We were notified in the first quarter that this customer is preparing to replace small and some medium size packages of Fisher recipe nuts with private brand recipe nuts this November. At retail, Fisher recipe pound volume rose by 7%, while total category pound volume increased by 5% according to IRi market data.

The Fisher snack nuts sales volume decline resulted from reduced merchandising activity compared to merchandising activity that took place in last year’s first quarter. For the same reasons, pound volume for Fisher snack nuts at retail fell by 4%, while total category pound volume declined by 1% according to IRi market data.

The sales volume increase for our Orchard Valley Harvest produce products mainly resulted from expanded distribution for multi-pack items at retailers that do not report market data to IRi. At those retailers that report market data to IRi, pound volume at retail for Orchard Valley Harvest declined by 13%, while total category pound volume increased by 10% according to IRi market data. The decline in pound volume at retail resulted from a shift in the timing of promotional activity to the second quarter of fiscal 2018.

Gross profit decreased by 4.5% to $34.8 million for the first quarter of fiscal 2018 compared to $36.5 million for the first quarter of fiscal 2017. Gross profit margin, as a percentage of net sales, decreased to 16.2% for the first quarter of fiscal 2018 compared to 16.4% for the first quarter of fiscal 2017. The decreases in gross profit and gross profit margin were mainly attributable to higher pecan and cashew acquisition costs. Additionally, the shift in product mix that contributed to the decline in net sales also contributed to the decline in gross profit.

Total operating expenses, as a percentage of net sales, decreased to 8.1% for the first quarter of fiscal 2018 from 8.7% for the first quarter of fiscal 2017, and total operating expenses declined by $1.9 million to $17.5 million in the quarterly comparison. The declines in total operating expenses as a percentage of net sales and dollars resulted mainly from decreases in incentive compensation, base compensation and amortization expenses. The decline in base compensation primarily was attributable to the retirement of several executives in the second half of fiscal 2017.

Interest expense increased by $0.2 million in the quarterly comparison mainly due to higher debt levels.

The value of total inventories on hand at the end of the first quarter of fiscal 2018 increased by $18.7 million, or 12.7%, when compared to the value of total inventories on hand at the end of the first quarter of fiscal 2017. The increase in total inventory value was primarily attributable to higher acquisition costs for pecans and cashews. For the same reason, the weighted average cost per pound of raw nut and dried fruit input stocks on hand at the end of the first quarter of fiscal 2018 increased by 50.1% compared to the weighted average cost per pound at the end of the first quarter of fiscal 2017.

“The first quarter of fiscal 2018 contained some successes, which I am very proud of, and provided us with some future challenges. We continued our goal of returning profits to our stockholders by paying out our first ever annual dividend of $0.50 per share and supplemented that with a special dividend of $2.00 per share. We also achieved record net income and diluted earnings per share for a first quarter despite the unfavorable impact on gross profit that resulted from higher acquisition costs for pecans and cashews and the shift in product mix to lower priced products. The earnings improvement largely came from a reduction in total operating expenses, particularly compensation expenses,” stated Jeffrey T. Sanfilippo, Chief Executive Officer. “As we mentioned earlier, a major customer informed us that it will be replacing small and some medium package sizes of Fisher recipe nuts with private brand recipe nuts. In preparation for this transition, this customer purchased fewer branded recipe nuts during the first quarter than it did in last year’s first quarter. Consequently, we expect that challenges in growing the Fisher recipe nut brand from fiscal 2017 performance will continue during the remainder of fiscal 2018. We anticipate that this reduction in Fisher recipe nut sales will have an unfavorable impact on net sales, sales volume and gross profit. We believe that the declines in net sales and sales volume for Fisher recipe nuts should be offset by continuing sales volume growth in contract packaging, private brand snack nuts and trail mixes and Orchard Valley Harvest produce products in fiscal 2018. These anticipated sales volume increases, coupled with a decrease in compensation expense for fiscal 2018, should largely offset the anticipated decline in gross profit in such future quarters,” Mr. Sanfilippo stated. “To support sales volume in fiscal 2018, we also intend to focus additional resources on our Expanding Consumer Reach growth strategy by focusing on product lines that are tailored for alternative retail channels,” Mr. Sanfilippo concluded.

ELGIN, Ill.--(BUSINESS WIRE)--John B. Sanfilippo & Son, Inc. (NASDAQ: JBSS) (the “Company”) today announced operating results for its first quarter of fiscal 2018. Net income for the first quarter of fiscal 2018 was $10.4 million, or $0.91 per share diluted, compared to $10.2 million, or $0.89 per share diluted, for the first quarter of fiscal 2017.

Net sales decreased by 3.4% to $214.8 million for the first quarter of fiscal 2018 from net sales of $222.3 million for the first quarter of fiscal 2017. Sales volume, which is defined as pounds sold to customers, was unchanged in the quarterly comparison. The decrease in net sales primarily resulted from a shift in sales volume mix from higher priced almonds, pecans and walnuts to lower priced peanuts and trail mixes, which led to a reduction in the weighted average selling price per pound in the quarterly comparison. Sales volume increased by 14.7% in the contract packaging distribution channel mainly from increased sales of trail mixes and snack bite cluster products to existing customers. Sales volume in the commercial ingredients distribution channel declined by 17.1% primarily due to the loss of the bulk almond butter customer that occurred in the second quarter of fiscal 2017.

Sales volume in the consumer distribution channel increased by 1.8% primarily from a 3.7% increase in sales volume for our private brand products due to sales growth for almonds and trail mixes with existing customers.

Sales volume for our branded products changed as follows:

Fisher recipe nut sales volume declined due to reductions in orders with a major customer. We were notified in the first quarter that this customer is preparing to replace small and some medium size packages of Fisher recipe nuts with private brand recipe nuts this November. At retail, Fisher recipe pound volume rose by 7%, while total category pound volume increased by 5% according to IRi market data.

The Fisher snack nuts sales volume decline resulted from reduced merchandising activity compared to merchandising activity that took place in last year’s first quarter. For the same reasons, pound volume for Fisher snack nuts at retail fell by 4%, while total category pound volume declined by 1% according to IRi market data.

The sales volume increase for our Orchard Valley Harvest produce products mainly resulted from expanded distribution for multi-pack items at retailers that do not report market data to IRi. At those retailers that report market data to IRi, pound volume at retail for Orchard Valley Harvest declined by 13%, while total category pound volume increased by 10% according to IRi market data. The decline in pound volume at retail resulted from a shift in the timing of promotional activity to the second quarter of fiscal 2018.

Gross profit decreased by 4.5% to $34.8 million for the first quarter of fiscal 2018 compared to $36.5 million for the first quarter of fiscal 2017. Gross profit margin, as a percentage of net sales, decreased to 16.2% for the first quarter of fiscal 2018 compared to 16.4% for the first quarter of fiscal 2017. The decreases in gross profit and gross profit margin were mainly attributable to higher pecan and cashew acquisition costs. Additionally, the shift in product mix that contributed to the decline in net sales also contributed to the decline in gross profit.

Total operating expenses, as a percentage of net sales, decreased to 8.1% for the first quarter of fiscal 2018 from 8.7% for the first quarter of fiscal 2017, and total operating expenses declined by $1.9 million to $17.5 million in the quarterly comparison. The declines in total operating expenses as a percentage of net sales and dollars resulted mainly from decreases in incentive compensation, base compensation and amortization expenses. The decline in base compensation primarily was attributable to the retirement of several executives in the second half of fiscal 2017.

Interest expense increased by $0.2 million in the quarterly comparison mainly due to higher debt levels.

The value of total inventories on hand at the end of the first quarter of fiscal 2018 increased by $18.7 million, or 12.7%, when compared to the value of total inventories on hand at the end of the first quarter of fiscal 2017. The increase in total inventory value was primarily attributable to higher acquisition costs for pecans and cashews. For the same reason, the weighted average cost per pound of raw nut and dried fruit input stocks on hand at the end of the first quarter of fiscal 2018 increased by 50.1% compared to the weighted average cost per pound at the end of the first quarter of fiscal 2017.

“The first quarter of fiscal 2018 contained some successes, which I am very proud of, and provided us with some future challenges. We continued our goal of returning profits to our stockholders by paying out our first ever annual dividend of $0.50 per share and supplemented that with a special dividend of $2.00 per share. We also achieved record net income and diluted earnings per share for a first quarter despite the unfavorable impact on gross profit that resulted from higher acquisition costs for pecans and cashews and the shift in product mix to lower priced products. The earnings improvement largely came from a reduction in total operating expenses, particularly compensation expenses,” stated Jeffrey T. Sanfilippo, Chief Executive Officer. “As we mentioned earlier, a major customer informed us that it will be replacing small and some medium package sizes of Fisher recipe nuts with private brand recipe nuts. In preparation for this transition, this customer purchased fewer branded recipe nuts during the first quarter than it did in last year’s first quarter. Consequently, we expect that challenges in growing the Fisher recipe nut brand from fiscal 2017 performance will continue during the remainder of fiscal 2018. We anticipate that this reduction in Fisher recipe nut sales will have an unfavorable impact on net sales, sales volume and gross profit. We believe that the declines in net sales and sales volume for Fisher recipe nuts should be offset by continuing sales volume growth in contract packaging, private brand snack nuts and trail mixes and Orchard Valley Harvest produce products in fiscal 2018. These anticipated sales volume increases, coupled with a decrease in compensation expense for fiscal 2018, should largely offset the anticipated decline in gross profit in such future quarters,” Mr. Sanfilippo stated. “To support sales volume in fiscal 2018, we also intend to focus additional resources on our Expanding Consumer Reach growth strategy by focusing on product lines that are tailored for alternative retail channels,” Mr. Sanfilippo concluded.

Full report.