John B. Sanfilippo & Son, Inc. (JBSS)

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John B. Sanfilippo & Son, Inc.

F4Q09 (Qtr End 06/25/09) Earnings Call

August 19, 2009 10:00 am ET


Michael J. Valentine – President & Chief Financial Officer

Jeffrey T. Sanfilippo – Chairman & Chief Executive Officer

Jasper B. Sanfilippo, Jr. – President & Chief Operating Officer


Bruce Baughman – Franklin Templeton Investments

Michael Traynor – Milwaukee Private Wealth Management

[Peter Abramson] – Private Investor



Good day, ladies and gentlemen, and welcome to the John B. Sanfilippo & Son, fourth quarter and fiscal 2009 year-end earnings conference call. My name is Fab, and I will be your coordinator for today. At this time all participants are in a listen-only mode. (Operator instructions).

I would now like to turn the presentation over to your host for today’s call, Mr. Mike Valentine, Chief Financial Officer. Please proceed.

Michael J. Valentine

Okay, thank you, Fab. First, we would like to thank everybody for participating in our quarterly conference call for the fourth quarter and fiscal year ended 2009.

Before we start, we want to remind everyone that we may make some forward-looking statements today. These statements are based on our current expectations and involve certain risks and uncertainties. The factors that could negatively impact results are explained in the various SEC filings that we have made the past, and then in the current year’s Form 10-K, which will be filed shortly. We encourage you to refer to these filings to learn more about these risks and uncertainties in our business.

Starting with the income statement, the current quarter net sales increased by 1.8% or $2.2 million to $127.5 million, in comparison with net sales in the fourth quarter of fiscal 2008. Total pounds shipped to customers increased by 9.5%, pounds of almonds, cashews, fruit and nut mixes, mixed nuts, peanuts, snack mix, mixes, and walnuts shipped to customers increased in the quarterly comparison. Pounds shipped increased in the consumer, industrial, and export channels and decreased in the food service and contract packaging channels.

The increase in net sales was driven mainly by the addition of a new customer, and increased shipments to an existing customer in the consumer channel. Increased supplies of walnuts fueled the increase of pounds shipped in the industrial and export channels.

Fiscal year net sales increased to $553.8 million from fiscal 2008 net sales of $541.8 million. Total pounds shipped to customers decreased by 1.8%, decreases in pounds of almonds, pecans, peanuts, and walnuts shipped to customers were offset in part by increases in pounds of cashews, fruit and nut mixes, and snack mixes shipped to customers in the yearly comparison.

Pounds shipped declined in all distribution channels except the consumer and contract packaging channels in the yearly comparison. The majority of the decline in pounds shipped occurred in the industrial channel particularly in respect to sales volume for peanuts, almonds, and pecans.

The bulk of the decline in peanut sales volume was attributed to a conscious decision to buy fewer peanuts for shelling to reduce relatively unprofitable sales of excess peanuts to other peanut shellers and peanut oil processors.

Fourth quarter gross profit margin increased to 16.0% from 14.6% from last year's fourth quarter as a percentage of net sales. This significant improvement in gross margin came mainly from improved margins on sales of almonds and walnuts, due to lower acquisition costs. Additionally, a significant improvement in manufacturing efficiencies in the Elgin facility in comparison to efficiencies in the fourth quarter of fiscal 2008 also contributed to improvement in gross profit margin.

Fiscal 2009 gross profit margin again as a percentage of net sales, increased to 13.1% from 12.2% in the previous fiscal year. This – as was the case in the quarterly comparison, improved margins on sales of almonds and walnuts and in addition to improve manufacturing efficiencies and the Elgin facility led to the overall improvement, to gross profit margin in the year-over-year comparison.

Fourth quarter 2009 total operating expenses as a percentage of net sales increased to 11.9% from 10.6% for the fourth quarter of fiscal 2008. Increases in spending on advertising, consumer marketing, broker commissions, and incentive compensation largely led through the increase in total operating expenses in the quarterly comparison.

Fiscal 2009 total operating expenses as percentage of net sales, remained unchanged at 10.3% in comparison with total operating expenses for fiscal 2008. Increases in advertising and consumer marketing expenses were largely offset by the non-recurrence of restructuring expenses that were recorded in fiscal 2008.

Interest expense in the current fourth quarter declined to $1.6 million from $2.5 million for the fourth quarter of fiscal 2008. The decline in interest expense in quarterly comparison was driven mainly by lower short-term interest rates, and lower total debt levels.

Interest expense in the current year decreased to $7.6 million from $10.5 million for fiscal 2008. Again, lower debt levels and lower short-term interest rates also led to the decline in interest expense in the yearly comparison.

In addition to the impact of making scheduled principal payments on long-term debt, lower inventory levels also contributed to a 29.1% decline, total debt levels during fiscal 2009. For example, the values of inventories on hand at the end of fiscal 2009 fell by $20.7 million or 16.3% from the value of inventories on hand at the end of fiscal 2008. The decline in the value of total inventories on hand came mainly from improved inventory management practices, as evidenced by a 21.2% decline in finished goods on hand in the yearly comparison.

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