JBSS

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

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

F4Q08 (Qtr End 06/26/08) Earnings Call Transcript

August 29, 2008 10:00 am ET

Executives

Mike Valentine – CFO

Jeff Sanfilippo – CEO

Analysts

Ron Strauss – Pekin Singer

Gregg Hillman – First Wilshire

Michael Curran – Wachovia Securities

Joe Christifano – Milwaukee

David Leibowitz – Horizon Asset Management

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the John B. Sanfilippo & Son, fourth quarter and fiscal 2008 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 call, Mr. Michael Valentine, CFO. Please proceed.

Mike Valentine

Thank you, Fab. First, on behalf of everyone here in JBSS we’d like to thank all of the participants for joining our quarterly conference call for the fourth quarter and fiscal year ended 2008.

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 filings that we have made the SEC, and we encourage everyone to refer to these filings to learn more about these risks and uncertainties.

Starting with the income statement, the current quarter net sales increased by 1.9% to $2.3 million to $125.3 million in comparison to the net sales in the fourth quarter of fiscal 2007, total pounds shipped to customers decreased by 16.2%. There was decline in the shipment of pounds of almonds, macadamias, mixed nuts, peanuts and walnuts in the quarterly comparison.

Pound shipped declined in all distribution channels except the food service channel. The increase in net sales was driven mainly by higher selling prices for almonds, cashews, fruit and nut mixes, mixed nuts, peanuts and walnuts in response to increasing acquisition cost for the commodities better in those products. Also a shift in sales mix from the industrial channel to the consumer and food service channels contributed to the increase in the overall weighted average selling price in the quarterly comparison.

Fiscal year net sales increased slightly to $541.8 million from fiscal 2007 net sales of $540.9 million. Total pound shipped to customers decreased by 9.7% as was the case in the quarterly comparison there was a decline in the shipped of pounds of almonds, macadamias, mixed nuts, peanuts and walnuts in the yearly comparison. Pound shipped declined at all distribution channels except the food service in the channel in the yearly comparison also.

The increase in net sales was driven mainly by higher selling prices for almonds, fruit and nut mixes, mixed nuts, peanuts and walnuts and response to increasing acquisition cost for those commodities. Additionally a shift in sales mix from the export industrial channels to sales in the consumer food service channels which typically have higher selling price contributed to the increase in the overall weighted average selling price in the early comparison.

Fourth quarter gross profit margin increased to 14.6% from 8.5% for last year’s fourth quarter as a percentage of net sales. This significant improvement in gross margin was achieved despite the incurrence of $600,000 in cost associated with the equipment start up, equipment moved and redundant manufacturing activities occurred in the remaining facility in Elk Grove earlier in the fourth quarter. The gross profit margin increase in all distribution channels in comparison to the margins in those channels to last year’s fourth quarter.

Gross profit margin improved on sales of all major product type, except cashews and peanuts because acquisition costs for these commodities increased at a greater rate than the rate of price increases that were implemented in the fourth quarter for those commodities. Fiscal 2008 gross profit margin as a percentage of net sales increased to 12.2% from 7.6% in the previous fiscal year. Gross profit margin for fiscal 2008 was impacted negatively as start up for new and moved equipment, redundant manufacturing cost and also equipment moving expenses which amounted to $12.3 million or approximately 2.3% of net sales.

Gross profit margins improved in all distribution channels and sales of all major commodities except peanuts and cashews in the early comparison. Fourth quarter 2008 total selling and administrative expenses as a percentage of net sales decreased to 10.6% from 10.9% for the fourth quarter of fiscal 2007. Declines in consulting fees, distribution cost, brokerage, commissions and bank fees contributed largely to the decline in total selling administrative expenses as a percentage of net sales in the quarterly comparison.

Fiscal 2008 total selling and administrative expenses as a percentage of net sales decreased to 9.9% from 10.3% for fiscal 2007. The decrease in total selling and administrative expenses in the early comparison was driven mainly from declines in distribution cost, advertising and brokerage commissions. Total operating expenses in fiscal 2008 included $1.8 million in restructuring cost while operating expenses in 2007 included a $3 million gain related to real estate sales that occurred that year.

Primarily because of the 74.5% increase in gross profit in the quarterly comparison operating income for the fourth quarter increased from an operating loss of $2.9 million to an operating income of $5 million and primarily because of the 60.4% increase in gross profit on a year-over-year comparison. Operating income for fiscal 2008 improved from an operating loss of $11.1 million, fiscal 2007 to an operating income of $10.7 million in fiscal 2008.

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