UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 25, 2014
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 0-19681
JOHN B. SANFILIPPO & SON, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 36-2419677 | |
(State or Other Jurisdiction of
Incorporation or Organization) |
(I.R.S. Employer
Identification No.) |
|
1703 North Randall Road Elgin, Illinois |
60123-7820 | |
(Address of Principal Executive Offices) | (Zip Code) |
(847) 289-1800
(Registrants Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check One)
Large accelerated filer | ¨ | Accelerated filer | x | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No
As of October 17, 2014, 8,468,705 shares of the Registrants Common Stock, $0.01 par value per share and 2,597,426 shares of the Registrants Class A Common Stock, $0.01 par value per share, were outstanding.
JOHN B. SANFILIPPO & SON, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 25, 2014
2
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
For the Quarter Ended | ||||||||
September 25,
2014 |
September 26,
2013 |
|||||||
Net sales |
$ | 205,037 | $ | 176,697 | ||||
Cost of sales |
174,353 | 147,328 | ||||||
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|||||
Gross profit |
30,684 | 29,369 | ||||||
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Operating expenses: |
||||||||
Selling expenses |
11,072 | 9,899 | ||||||
Administrative expenses |
7,599 | 7,142 | ||||||
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|
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Total operating expenses |
18,671 | 17,041 | ||||||
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|
|||||
Income from operations |
12,013 | 12,328 | ||||||
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Other expense: |
||||||||
Interest expense including $280 and $286 to related parties |
990 | 1,086 | ||||||
Rental and miscellaneous expense, net |
1,910 | 513 | ||||||
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|
|
|||||
Total other expense, net |
2,900 | 1,599 | ||||||
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Income before income taxes |
9,113 | 10,729 | ||||||
Income tax expense |
3,198 | 3,954 | ||||||
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Net income |
$ | 5,915 | $ | 6,775 | ||||
Other comprehensive income: |
||||||||
Amortization of prior service cost and actuarial gain included in net periodic pension cost |
239 | 222 | ||||||
Income tax expense related to pension adjustments |
(96 | ) | (89 | ) | ||||
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Other comprehensive income, net of tax: |
143 | 133 | ||||||
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Comprehensive income |
$ | 6,058 | $ | 6,908 | ||||
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Net income per common share-basic |
$ | 0.53 | $ | 0.62 | ||||
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Net income per common share-diluted |
$ | 0.53 | $ | 0.61 | ||||
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The accompanying unaudited notes are an integral part of these consolidated financial statements.
3
JOHN B. SANFILIPPO & SON, INC.
(Unaudited)
(Dollars in thousands, except per share amounts)
September 25,
2014 |
June 26,
2014 |
September 26,
2013 |
||||||||||
ASSETS |
||||||||||||
CURRENT ASSETS: |
||||||||||||
Cash |
$ | 1,705 | $ | 1,884 | $ | 1,195 | ||||||
Accounts receivable, less allowances of $3,282, $3,210 and $3,675 |
62,804 | 55,800 | 50,498 | |||||||||
Inventories |
171,439 | 182,830 | 158,066 | |||||||||
Deferred income taxes |
3,486 | 3,484 | 3,670 | |||||||||
Prepaid expenses and other current assets |
2,500 | 5,376 | 2,892 | |||||||||
Assets held for sale |
| | 6,175 | |||||||||
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|
|||||||
TOTAL CURRENT ASSETS |
241,934 | 249,374 | 222,496 | |||||||||
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PROPERTY, PLANT AND EQUIPMENT: |
||||||||||||
Land |
9,285 | 9,285 | 9,285 | |||||||||
Buildings |
102,923 | 102,796 | 102,424 | |||||||||
Machinery and equipment |
172,419 | 170,694 | 166,164 | |||||||||
Furniture and leasehold improvements |
4,363 | 4,363 | 4,363 | |||||||||
Vehicles |
468 | 468 | 524 | |||||||||
Construction in progress |
5,838 | 2,901 | 3,697 | |||||||||
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|
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|
|||||||
295,296 | 290,507 | 286,457 | ||||||||||
Less: Accumulated depreciation |
184,278 | 181,684 | 174,889 | |||||||||
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|
|||||||
111,018 | 108,823 | 111,568 | ||||||||||
Rental investment property, less accumulated depreciation of $7,460, $7,262 and $6,668 |
21,433 | 21,631 | 22,225 | |||||||||
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TOTAL PROPERTY, PLANT AND EQUIPMENT |
132,451 | 130,454 | 133,793 | |||||||||
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Cash surrender value of officers life insurance and other assets |
8,713 | 8,811 | 8,752 | |||||||||
Deferred income taxes |
1,136 | 726 | 1,002 | |||||||||
Intangible assets, net |
4,704 | 5,246 | 7,218 | |||||||||
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|||||||
TOTAL ASSETS |
$ | 388,938 | $ | 394,611 | $ | 373,261 | ||||||
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The accompanying unaudited notes are an integral part of these consolidated financial statements.
4
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
The accompanying unaudited notes are an integral part of these consolidated financial statements.
5
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Quarter Ended | ||||||||
September 25,
2014 |
September 26,
2013 |
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 5,915 | $ | 6,775 | ||||
Depreciation and amortization |
3,948 | 4,001 | ||||||
Loss on disposition of properties, net |
5 | 67 | ||||||
Deferred income tax expense |
(412 | ) | (122 | ) | ||||
Stock-based compensation expense |
271 | 216 | ||||||
Change in assets and liabilities: |
||||||||
Accounts receivable, net |
(6,956 | ) | (989 | ) | ||||
Inventories |
11,391 | 640 | ||||||
Prepaid expenses and other current assets |
267 | 1,011 | ||||||
Accounts payable |
14,770 | 466 | ||||||
Accrued expenses |
(5,128 | ) | (8,723 | ) | ||||
Income taxes payable |
3,436 | 3,737 | ||||||
Other long-term liabilities |
66 | 405 | ||||||
Other, net |
284 | (82 | ) | |||||
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Net cash provided by operating activities |
27,857 | 7,402 | ||||||
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CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchases of property, plant and equipment |
(5,217 | ) | (3,062 | ) | ||||
Other |
50 | (55 | ) | |||||
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|
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Net cash used in investing activities |
(5,167 | ) | (3,117 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Borrowings under revolving credit facility |
71,620 | 64,731 | ||||||
Repayments of revolving credit borrowings |
(92,366 | ) | (68,756 | ) | ||||
Principal payments on long-term debt |
(835 | ) | (836 | ) | ||||
(Decrease) increase in book overdraft |
(1,612 | ) | 862 | |||||
Issuance of Common Stock under equity award plans |
314 | 27 | ||||||
Tax benefit of equity award exercises |
10 | 48 | ||||||
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|
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Net cash used in financing activities |
(22,869 | ) | (3,924 | ) | ||||
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NET (DECREASE) INCREASE IN CASH |
(179 | ) | 361 | |||||
Cash, beginning of period |
1,884 | 834 | ||||||
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Cash, end of period |
$ | 1,705 | $ | 1,195 | ||||
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The accompanying unaudited notes are an integral part of these consolidated financial statements.
6
JOHN B. SANFILIPPO & SON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except where noted and per share data)
Note 1 Basis of Presentation and Description of Business
As used herein, unless the context otherwise indicates, the terms Company, we, us, our or our Company collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiaries, JBSS Real Estate, LLC, JBSS Ventures, LLC and Sanfilippo (Shanghai) Trading Co. Ltd. Our fiscal year ends on the final Thursday of June each year, and typically consists of fifty-two weeks (four thirteen-week quarters). Additional information on the comparability of the periods presented is as follows:
| References herein to fiscal 2015 and fiscal 2014 are to the fiscal year ending June 25, 2015 and the fiscal year ended June 26, 2014, respectively. |
| References herein to the first quarter of fiscal 2015 and fiscal 2014 are to the quarters ended September 25, 2014 and September 26, 2013, respectively. |
We are one of the leading processors and distributors of peanuts and tree nuts in the United States. These nuts are sold under a variety of private brands and under the Fisher, Orchard Valley Harvest and Sunshine Country brand names. We also market and distribute, and in most cases manufacture or process, a diverse product line of food and snack products, including peanut butter, almond butter, candy and confections, snacks and trail mixes, nut clusters, sunflower kernels, dried fruit, corn snacks, sesame sticks and other sesame snack products under private brands and brand names. Our products are sold through the major distribution channels to significant buyers of nuts, including food retailers, commercial ingredient users, contract packaging customers and international customers.
The accompanying unaudited financial statements fairly present the consolidated statements of comprehensive income, consolidated balance sheets and consolidated statements of cash flows, and reflect all adjustments, consisting only of normal recurring adjustments which are necessary for the fair statement of the results of the interim periods.
The interim results of operations are not necessarily indicative of the results to be expected for a full year. The balance sheet data as of June 26, 2014 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (U.S. GAAP). Accordingly, these unaudited financial statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2014 Annual Report on Form 10-K for the fiscal year ended June 26, 2014.
Note 2 Inventories
Inventories are stated at the lower of cost (first in, first out) or market which approximates actual cost. Raw materials and supplies include costs of nut and nut related products. Work-in-process and finished goods include labor and manufacturing overhead costs. Inventories consist of the following:
September 25,
2014 |
June 26,
2014 |
September 26,
2013 |
||||||||||
Raw material and supplies |
$ | 53,819 | $ | 89,417 | $ | 69,873 | ||||||
Work-in-process and finished goods |
117,620 | 93,413 | 88,193 | |||||||||
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Total |
$ | 171,439 | $ | 182,830 | $ | 158,066 | ||||||
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7
Note 3 Intangible Assets
Intangible assets subject to amortization consist of the following:
September 25,
2014 |
June 26,
2014 |
September 26,
2013 |
||||||||||
Customer relationships |
$ | 10,600 | $ | 10,600 | $ | 10,600 | ||||||
Non-compete agreement |
5,400 | 5,400 | 5,400 | |||||||||
Brand names |
8,090 | 8,090 | 8,090 | |||||||||
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Total intangible assets, gross |
24,090 | 24,090 | 24,090 | |||||||||
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Less accumulated amortization: |
||||||||||||
Customer relationships |
(6,581 | ) | (6,203 | ) | (5,067 | ) | ||||||
Non-compete agreement |
(4,737 | ) | (4,582 | ) | (3,771 | ) | ||||||
Brand names |
(8,068 | ) | (8,059 | ) | (8,034 | ) | ||||||
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Total accumulated amortization |
(19,386 | ) | (18,844 | ) | (16,872 | ) | ||||||
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Net intangible assets |
$ | 4,704 | $ | 5,246 | $ | 7,218 | ||||||
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|
Customer relationships and the non-compete agreement relate wholly to the Orchard Valley Harvest (OVH) acquisition completed in 2010. Customer relationships are being amortized on a straight line basis over seven years. The non-compete agreement is being amortized based upon the expected pattern of cash flow annual benefit over a five year period. The brand names consist primarily of the Fisher brand name, which we acquired in a 1995 acquisition. The Fisher brand name became fully amortized in fiscal 2011. The remaining brand name relates to the OVH acquisition and is being amortized on a straight line basis over five years.
Note 4 Primary Financing Facilities
On February 7, 2008, we entered into a Credit Agreement with a bank group (the Bank Lenders) providing a $117,500 revolving loan commitment and letter of credit subfacility. At September 25, 2014, we had $93,204 of available credit under the Credit Facility which reflects borrowings of $19,796 and reduced availability as a result of $4,500 in outstanding letters of credit. As of September 25, 2014, we were in compliance with all covenants under the Credit Facility. We would still be in compliance with all restrictive covenants under the Credit Facility if the entire available amount were borrowed. On September 30, 2014 we entered into an amendment to the Credit Agreement with the Bank Lenders. See Note 14-Subsequent Events below for additional details.
Also on February 7, 2008, we entered into a Loan Agreement with an insurance company (the Mortgage Lender) providing us with two term loans, one in the amount of $36,000 (Tranche A) and the other in the amount of $9,000 (Tranche B), for an aggregate amount of $45,000 (the Mortgage Facility). As of September 25, 2014, we were in compliance with all covenants under the Mortgage Facility. We have classified $18,400 under Tranche A and $4,600 under Tranche B as long-term debt at September 25, 2014, which represent scheduled principal payments due beyond twelve months.
Note 5 Income Taxes
At the beginning of fiscal 2015, we had gross state tax net operating losses of approximately $3,649 that will expire in 2024 if not utilized.
As of September 25, 2014, unrecognized tax benefits and accrued interest and penalties were not material. There were no material changes to the amount of unrecognized tax benefits during the first quarter of fiscal 2015. We do not anticipate that total unrecognized tax benefits will significantly change in the next twelve months.
We file income tax returns with federal and state tax authorities within the United States of America. Our federal tax returns are open for audit for fiscal 2011 and later. Our Illinois tax returns are currently under audit for fiscal 2011 and 2012. Our Illinois tax return is open for audit for fiscal 2013 and later. Our California tax returns are open for audit for fiscal 2009 and later. No other tax jurisdictions are material to us.
8
Note 6 Earnings Per Common Share
Basic earnings per common share are calculated using the weighted average number of shares of Common Stock and Class A Common Stock outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue Common Stock (i) were exercised or converted into Common Stock or (ii) resulted in the issuance of Common Stock. The following table presents the reconciliation of the weighted average shares outstanding used in computing basic and diluted earnings per share:
For the Quarter Ended | ||||||||
September 25,
2014 |
September 26,
2013 |
|||||||
Weighted average number of shares outstanding basic |
11,092,130 | 10,960,737 | ||||||
Effect of dilutive securities: |
||||||||
Stock options and restricted stock units |
109,479 | 136,237 | ||||||
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Weighted average number of shares outstanding diluted |
11,201,609 | 11,096,974 | ||||||
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The following table presents a summary of anti-dilutive awards excluded from the computation of diluted earnings per share:
For the Quarter Ended | ||||||||
September 25,
2014 |
September 26,
2013 |
|||||||
Weighted average number of anti-dilutive shares |
| 3,750 | ||||||
Weighted average exercise price |
$ | | $ | 26.04 |
Note 7 Stock-Based Compensation Plans
During the quarter ended September 25, 2014 there was no significant stock option or restricted stock unit activity.
Compensation expense attributable to stock-based compensation during the first quarter of fiscal 2015 and fiscal 2014 was $271 and $216, respectively. As of September 25, 2014, there was $1,280 of total unrecognized compensation cost related to non-vested, share-based compensation arrangements granted under our stock-based compensation plans. We expect to recognize that cost over a weighted average period of 1.1 years.
Note 8 Retirement Plan
On August 2, 2007, our Compensation, Nominating and Corporate Governance Committee approved a restated Supplemental Retirement Plan (the SERP) for certain of our executive officers and key employees, effective as of August 25, 2005. The purpose of the SERP is to provide an unfunded, non-qualified deferred compensation benefit upon retirement, disability or death to certain executive officers and key employees. The monthly benefit is based upon each individuals earnings and his or her number of years of service. Administrative expenses include the following net periodic benefit costs:
For the Quarter Ended | ||||||||
September 25,
2014 |
September 26,
2013 |
|||||||
Service cost |
$ | 96 | $ | 81 | ||||
Interest cost |
161 | 159 | ||||||
Amortization of prior service cost |
239 | 239 | ||||||
Amortization of gain |
| (17 | ) | |||||
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Net periodic benefit cost |
$ | 496 | $ | 462 | ||||
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9
Note 9 Accumulated Other Comprehensive Loss
The tables below set forth the changes to accumulated other comprehensive loss (AOCL) for the quarters ended September 25, 2014 and September 26, 2013, respectively. These changes are all related to our defined benefit pension plan.
Accumulated other
comprehensive loss (a) |
||||
BalanceJune 26, 2014 |
$ | (3,503 | ) | |
Other comprehensive income before reclassifications |
| |||
Amounts reclassified from accumulated other comprehensive loss |
239 | |||
Tax effect |
(96 | ) | ||
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Net current-period other comprehensive income |
143 | |||
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|
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BalanceSeptember 25, 2014 |
$ | (3,360 | ) | |
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|
Accumulated other
comprehensive loss (a) |
||||
BalanceJune 27, 2013 |
$ | (3,164 | ) | |
Other comprehensive income before reclassifications |
| |||
Amounts reclassified from accumulated other comprehensive loss |
222 | |||
Tax effect |
(89 | ) | ||
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Net current-period other comprehensive income |
133 | |||
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BalanceSeptember 26, 2013 |
$ | (3,031 | ) | |
|
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(a) | Amounts in parenthesis indicate debits/expense. |
The reclassification out of accumulated other comprehensive loss for the quarter ended September 25, 2014 was as follows:
Reclassifications from AOCL to earnings |
Amount
Reclassified from AOCL (b) |
Affected line item in the
Consolidated Statements of Comprehensive Income |
||||
Amortization of defined benefit pension items: |
||||||
Unrecognized prior service cost |
$ | (239 | ) | Administrative expenses | ||
Tax effect |
96 | Income tax expense | ||||
|
|
|||||
Amortization of defined pension items, net of tax |
$ | (143 | ) | |||
|
|
10
The reclassifications out of accumulated other comprehensive loss for the quarter ended September 26, 2013 was as follows:
Reclassifications from AOCL to earnings |
Amount
Reclassified from AOCL (b) |
Affected line item in the
Consolidated Statements of Comprehensive Income |
||||
Amortization of defined benefit pension items: |
||||||
Unrecognized prior service cost |
$ | (239 | ) | Administrative expenses | ||
Unrecognized net gain |
17 | Administrative expenses | ||||
|
|
|||||
Total before tax |
(222 | ) | ||||
Tax effect |
89 | Income tax expense | ||||
|
|
|||||
Amortization of defined pension items, net of tax |
$ | (133 | ) | |||
|
|
(b) | Amounts in parenthesis indicate debits to expense. See Note 8-Retirement Plan above for additional details. |
Note 10 Distribution Channel and Product Type Sales Mix
We operate in a single reportable segment through which we sell various nut and nut related products through multiple distribution channels.
The following table summarizes net sales by distribution channel:
For the Quarter Ended | ||||||||
Distribution Channel |
September 25,
2014 |
September 26,
2013 |
||||||
Consumer (1) |
$ | 123,911 | $ | 96,510 | ||||
Commercial Ingredients |
47,946 | 50,020 | ||||||
Contract Packaging |
25,695 | 23,323 | ||||||
Export (2) |
7,485 | 6,844 | ||||||
|
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|
|||||
Total |
$ | 205,037 | $ | 176,697 | ||||
|
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|
|
(1) | Sales of branded products, primarily all Fisher brand, were approximately 28% and 29% of total consumer sales during the first quarter of fiscal 2015 and fiscal 2014, respectively. |
(2) | Export sales consist primarily of bulk products and consumer branded and private brand products. Consumer branded and private brand products accounted for approximately 75% and 81% of total sales in the export channel during the first quarter of fiscal 2015 and fiscal 2014, respectively. |
11
The following table summarizes sales by product type as a percentage of total gross sales. The information is based upon gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product type.
For the Quarter Ended | ||||||||
Product Type |
September 25,
2014 |
September 26,
2013 |
||||||
Peanuts |
14.8 | % | 15.8 | % | ||||
Pecans |
11.2 | 13.1 | ||||||
Cashews & Mixed Nuts |
21.4 | 18.9 | ||||||
Walnuts |
11.3 | 11.2 | ||||||
Almonds |
22.7 | 21.7 | ||||||
Trail & Snack Mixes |
12.9 | 12.6 | ||||||
Other |
5.7 | 6.7 | ||||||
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|
|
|||||
Total |
100.0 | % | 100.0 | % | ||||
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Note 11 Commitments and Contingent Liabilities
We are currently a party to various legal proceedings in the ordinary course of business. While management presently believes that the ultimate outcomes of these proceedings, individually and in the aggregate, will not materially affect our Companys financial position, results of operations or cash flows, legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur. Unfavorable outcomes could include substantial monetary damages in excess of any appropriate accruals which management has established. Were such unfavorable final outcomes to occur, there exists the possibility of a material adverse effect on our financial position, results of operations and cash flows.
Note 12 Fair Value of Financial Instruments
Authoritative guidance issued by the Financial Accounting Standards Board (FASB) defines fair value as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels:
Level 1 | | Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities. | ||
Level 2 | | Observable inputs other than quoted prices in active markets. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. | ||
Level 3 | | Unobservable inputs for which there is little or no market data available. |
The carrying values of cash, trade accounts receivable and accounts payable approximate their fair values at each balance sheet date because of the short-term maturities and nature of these balances.
The carrying value of our revolving credit facility borrowings approximates fair value at each balance sheet date because interest rates on this instrument approximate current market rates (Level 2 criteria), the short-term maturity and nature of this balance. In addition, there has been no significant change in our inherent credit risk.
12
The following table summarizes the carrying value and fair value estimate of our long term debt, including current maturities:
September 25,
2014 |
June 26,
2014 |
September 26,
2013 |
||||||||||
Carrying value of long-term debt: |
$ | 38,180 | $ | 39,015 | $ | 41,519 | ||||||
Fair value of long-term debt: |
42,051 | 43,091 | 45,371 |
The estimated fair value of our long-term debt was determined using a market approach based upon Level 2 observable inputs, which estimates fair value based on interest rates currently offered on loans with similar terms to borrowers of similar credit quality or broker quotes. In addition, there have been no significant changes in the underlying assets securing our long-term debt.
Note 13 Recent Accounting Pronouncements
In August 2014, the FASB issued ASU No. 2014-15 Presentation of Financial StatementsGoing Concern (Topic 205-40) . The guidance requires management to perform interim and annual assessments of an entitys ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entitys ability to continue as a going concern. The new guidance applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on our financial position, results of operations, cash flows or disclosures.
In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers and created a new ASC Topic 606, Revenue from Contracts with Customers , and added ASC Subtopic 340-40, Other Assets and Deferred CostsContracts with Customers . The guidance in this update supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition , and most industry-specific guidance throughout the industry topics of the codification. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance will be effective for the Company beginning in fiscal year 2017. This guidance can be adopted either retrospectively to each prior reporting period presented, or retrospectively with a cumulative-effect adjustment recognized as of the date of adoption. The Company is currently assessing the impact of this new guidance on our financial position, results of operations and cash flows.
Note 14 Subsequent Events
On October 28, 2014 our Board of Directors, after considering the financial position of our Company, declared a special cash dividend of $1.50 per share on all issued and outstanding shares of Common Stock and Class A Common Stock of the Company (the Special Dividend). The Special Dividend will be paid on December 12, 2014, to stockholders of record at the close of business on December 3, 2014. The ex-dividend date is the close of business on December 1, 2014. The total amount of cash expected to be paid to stockholders under the Special Dividend will be approximately $17,000.
On September 30, 2014, we entered into the Sixth Amendment to Credit Agreement (the Sixth Amendment) which extended the maturity date of the Credit Agreement from July 15, 2016 to July 15, 2019, and reduced the interest rates charged for ordinary course and letter of credit borrowings. The revolving loan commitment amount did not change. In addition, the Sixth Amendment allows the Company to, without obtaining Bank Lender consent, (i) make up to two cash dividends and distributions on our stock, or (ii) purchase, acquire, redeem or retire stock in any fiscal year, in any case, in an amount not to exceed $25,000, individually or in the aggregate, as long as the excess availability under the Credit Agreement remains over $30,000 after giving effect to any such dividend, distribution, purchase or redemption. The Sixth Amendment also increased the amount of permitted acquisitions to $100,000 from $50,000 and removed the annual limit on capital expenditures.
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
The following discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and the Notes to Consolidated Financial Statements.
Our fiscal year ends on the final Thursday of June each year, and typically consists of fifty-two weeks (four thirteen week quarters). Additional information on the comparability of the periods presented is as follows:
| References herein to fiscal 2015 and fiscal 2014 are to the fiscal year ending June 25, 2015 and the fiscal year ended June 26, 2014, respectively. |
| References herein to the first quarter of fiscal 2015 and fiscal 2014 are to the quarters ended September 25, 2014 and September 26, 2013, respectively. |
As used herein, unless the context otherwise indicates, the terms Company, we, us, our or our Company collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiaries, JBSS Real Estate, LLC, JBSS Ventures, LLC and Sanfilippo (Shanghai) Trading Co. Ltd. Our Companys Credit Facility and Mortgage Facility, as defined below, are sometimes collectively referred to as our financing arrangements.
We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States. These nuts are sold under a variety of private brands and under the Fisher, Orchard Valley Harvest, and Sunshine Country brand names. We also market and distribute, and in most cases manufacture or process, a diverse product line of food and snack products, including peanut butter, almond butter, candy and confections, snacks and trail mixes, nut clusters, sunflower kernels, dried fruit, corn snacks, sesame sticks and other sesame snack products under private brands and brand names. We distribute our products in the consumer, commercial ingredients, contract packaging and export distribution channels.
During the fourth quarter of fiscal 2013 we updated our strategic plan (the Strategic Plan), the goal of which is to drive profitable growth. Our long-term goals include:
i. | Growing Fisher and Orchard Valley Harvest into leading nut brands by focusing on consumers demanding quality nuts in the snacking, recipe and produce categories, |
ii. | Expanding globally and building our Company into a leading international branded and private brand snack nut company, and |
iii. | Providing integrated nut solutions to grow non-branded business at existing key customers in each distribution channel. |
We face a number of challenges in the future. During the first quarter of fiscal 2015, we were informed by our largest Fisher recipe nut customer that in March 2015 it intends to add a line of private brand recipe nut products to its baking section. We have submitted a bid on this private brand recipe nut business. This development may have a negative impact on our Fisher recipe nut market share.
Other specific challenges that we face include, among others: high tree nut commodity costs (due to the continued high demand for pecans and walnuts in China), increasing peanut costs, and intensified competition for market share from both private brand and name brand nut products. We will continue to focus on seeking profitable business opportunities to further utilize our additional production capacity at our primary manufacturing, processing and distribution facility located in Elgin, Illinois (the Elgin Site). We expect to maintain our recent level of promotional and advertising activity of our Fisher and Orchard Valley Harvest brands, and to develop new products for all product lines. We will continue to face the ongoing challenges specific to our business, such as food safety and regulatory issues and the maintenance and growth of our customer base. See the information referenced in Part II, Item 1A Risk Factors of this report for additional information about our risks, challenges and uncertainties.
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QUARTERLY HIGHLIGHTS
Our net sales of $205.0 million for the first quarter of fiscal 2015 increased 16.0% from our net sales of $176.7 million for the first quarter of fiscal 2014.
Sales volume, measured as pounds sold to customers, increased 4.1 million pounds, or 7.1%, compared to the first quarter of fiscal 2014.
Gross profit increased by $1.3 million; however our gross profit margin, as a percentage of net sales, decreased to 15.0% for the first quarter of fiscal 2015 compared to 16.6% for the first quarter of fiscal 2014.
Total operating expenses for the first quarter of fiscal 2015 increased by $1.6 million, or 9.6%. Operating expenses for the first quarter of fiscal 2015 declined to 9.1% of net sales from 9.6% of net sales for the first quarter of fiscal 2014.
The total value of inventories on hand at the end of the first quarter of fiscal 2015 increased by $13.4 million, or 8.5%, in comparison to the total value of inventories on hand at the end of the first quarter of fiscal 2014.
We have seen acquisition costs for domestic tree nuts and peanuts increase in the 2014 crop year (which falls into our current 2015 fiscal year). While we begin to procure inshell walnuts during the first quarter of fiscal 2015, the total payments due to our walnut growers will not be determined until the second and/or third quarters of fiscal 2015. We will determine the final prices to be paid to the walnut growers based upon current market prices and other factors. We have estimated the liability to our walnut growers and our walnut inventory costs using currently available information. Any difference between our estimated liability and the actual payments will be determined during the second and/or third quarters of fiscal 2015 and will be recognized in our financial results at that time.
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RESULTS OF OPERATIONS
Net Sales
Our net sales increased 16.0% to $205.0 million in the first quarter of fiscal 2015 compared to net sales of $176.7 million for the first quarter of fiscal 2014, and sales volume, which is defined as pounds sold to customers, increased by 7.1%, and sales volume increased for all major product types except pecans. The increase in net sales was attributable to the aforementioned sales volume increase and to an 8.3% increase in the weighted average sales price per pound, driven mainly by selling price increases for most major nut types due to higher commodity acquisition costs.
The following table summarizes sales by product type as a percentage of total gross sales. The information is based upon gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product type.
For the Quarter Ended | ||||||||
Product Type |
September 25,
2014 |
September 26,
2013 |
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Peanuts |
14.8 | % | 15.8 | % | ||||
Pecans |
11.2 | 13.1 | ||||||
Cashews & Mixed Nuts |
21.4 | 18.9 | ||||||
Walnuts |
11.3 | 11.2 | ||||||
Almonds |
22.7 | 21.7 | ||||||
Trail & Snack Mixes |
12.9 | 12.6 | ||||||
Other |
5.7 | 6.7 | ||||||
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Total |
100.0 | % | 100.0 | % | ||||
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The following table shows a comparison of net sales by distribution channel (dollars in thousands):
For the Quarter Ended | ||||||||||||||||
Distribution Channel |
September 25,
2014 |
September 26,
2013 |
Change |
Percent
Change |
||||||||||||
Consumer (1) |
$ | 123,911 | $ | 96,510 | $ | 27,401 | 28.4 | % | ||||||||
Commercial Ingredients |
47,946 | 50,020 | (2,074 | ) | (4.1 | ) | ||||||||||
Contract Packaging |
25,695 | 23,323 | 2,372 | 10.2 | ||||||||||||
Export (2) |
7,485 | 6,844 | 641 | 9.4 | ||||||||||||
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Total |
$ | 205,037 | $ | 176,697 | $ | 28,340 | 16.0 | % | ||||||||
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(1) | Sales of branded products, primarily all Fisher brand, were approximately 28% and 29% of total consumer sales during the first quarter of fiscal 2015 and fiscal 2014, respectively. |
(2) | Export sales consist primarily of bulk products and consumer branded and private brand products. Consumer branded and private brand products accounted for approximately 75% and 81% of total sales in the export channel during the first quarter of fiscal 2015 and fiscal 2014, respectively. |
Net sales in the consumer distribution channel increased by 28.4% in dollars and 18.7% in sales volume in the first quarter of fiscal 2015 compared to the first quarter of fiscal 2014. Private brand consumer sales volume increased 18.5% primarily due to a significant increase in sales of snack nut and trail mix products at two significant customers. Fisher recipe nut sales volume and snack nut sales volume increased 16.9% and 30.0%, respectively, primarily as a result of increased sales to a significant customer in each of these categories.
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Net sales in the commercial ingredients distribution channel decreased by 4.1% in dollars and 8.0% in sales volume in the first quarter of fiscal 2015 compared to the first quarter of fiscal 2014. The sales volume decrease is primarily attributable to lower pecan sales, which resulted from a major customer discontinuing a promotional item that contained pecans.
Net sales in the contract packaging distribution channel increased by 10.2% in dollars, yet sales volume decreased 4.7% in the first quarter of fiscal 2015 compared to the first quarter of fiscal 2014. The decrease in sales volume is mostly attributable to a former customer discontinuing a seasonal item.
Net sales in the export distribution channel increased by 9.4% in dollars and 16.7% in sales volume in the first quarter of fiscal 2015 compared to the first quarter of fiscal 2014 due primarily to increased sales of private brand and Fisher snack nuts.
Gross Profit
Gross profit increased by $1.3 million, or 4.5%, to $30.7 million for the first quarter of fiscal 2015 compared to the first quarter of fiscal 2014. Our gross profit margin, as a percentage of net sales, decreased to 15.0% for the first quarter of fiscal 2015 compared to 16.6% for the first quarter of fiscal 2014. The decrease in gross profit margin was primarily attributable to higher acquisition costs for certain grades of pecans and almonds.
Operating Expenses
Total operating expenses for the first quarter of fiscal 2015 increased by $1.6 million to $18.7 million. Operating expenses for the first quarter of fiscal 2015 decreased to 9.1% of net sales from 9.6% of net sales for the first quarter of fiscal 2014.
Selling expenses for the first quarter of fiscal 2015 were $11.1 million, an increase of $1.2 million, or 11.8%, from the first quarter of fiscal 2014. The increase was driven primarily by increased shipping expense of $0.8 million due to increased sales volume and $0.5 million more compensation related expenses.
Administrative expenses for the first quarter of fiscal 2015 were $7.6 million, an increase of $0.5 million, or 6.4%, from the first quarter of fiscal 2014 due primarily to a $0.7 million increase in compensation related expenses. This increase was partially offset by a $0.4 million decrease in professional expenses.
Income from Operations
Due to the factors discussed above, income from operations decreased to $12.0 million, or 5.9% of net sales, for the first quarter of fiscal 2015 from $12.3 million, or 7.0% of net sales, for the first quarter of fiscal 2014.
Interest Expense
Interest expense was $1.0 million for the first quarter of fiscal 2015 compared to $1.1 million in the first quarter of fiscal 2014. The decrease in interest expense was due primarily to lower short-term and long term-debt.
Rental and Miscellaneous Expense, Net
Net rental and miscellaneous expense was $1.9 million for the first quarter of fiscal 2015 compared to $0.5 million for fiscal 2014. This change was primarily due to increased maintenance expense on the exterior of the office building located on our Elgin, Illinois campus. This maintenance project is approximately 87% complete and we expect to incur an additional expense of $0.4 million to complete the project in the second quarter of fiscal 2015.
Income Tax Expense
Income tax expense was $3.2 million, or 35.1% of income before income taxes (the effective tax rate), for the first quarter of fiscal 2015 compared to $4.0 million, or 36.9% of income before income taxes for the first quarter of fiscal 2014. The decrease in the effective tax rate was due to the impact of favorable discrete income tax items in the first quarter of fiscal 2015.
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Net Income
Net income was $5.9 million, or $0.53 per common share (basic and diluted), for the first quarter of fiscal 2015, compared to $6.8 million, or $0.62 per common share (basic) and $0.61 per common share (diluted), for the first quarter of fiscal 2014. The majority of the net income decline was attributable to the Elgin, Illinois office building maintenance project as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
General
The primary uses of cash are to fund our current operations, fulfill contractual obligations, pursue our Strategic Plan and repay indebtedness. Also, various uncertainties could result in additional uses of cash. The primary sources of cash are results of operations and availability under our Credit Agreement, dated February 7, 2008 and subsequently amended in March 2010, July 2011, October 2011, January 2013, December 2013 and September 2014 (as amended, the Credit Facility), that provides a revolving loan commitment and letter of credit subfacility. We anticipate that expected net cash flow generated from operations and amounts available pursuant to the Credit Facility will be sufficient to fund our operations for the next twelve months. Increases in our available credit under our Credit Facility, due to our improved financial performance in the past, have allowed us to consummate business acquisitions, devote more funds to promote our products, (especially our Fisher and Orchard Valley Harvest brands), develop new products, pay a special cash dividend in December 2013 and December 2012, and explore other growth strategies outlined in our Strategic Plan, which includes expansion into existing markets and international markets such as China.
Cash flows from operating activities have historically been driven by net income but are also significantly influenced by inventory requirements, which can change based upon fluctuations in both quantities and market prices of the various nuts and nut products we buy and sell. Current market trends in nut prices and crop estimates also impact nut procurement.
The following table sets forth certain cash flow information for the first quarters of fiscal 2015 and 2014, respectively:
September 25,
2014 |
September 26,
2013 |
$ Change | ||||||||||
Operating activities |
$ | 27,857 | $ | 7,402 | $ | 20,455 | ||||||
Investing activities |
(5,167 | ) | (3,117 | ) | (2,050 | ) | ||||||
Financing activities |
(22,869 | ) | (3,924 | ) | (18,945 | ) | ||||||
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Total cash flow |
$ | (179 | ) | $ | 361 | $ | (540 | ) | ||||
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Operating Activities Net cash provided by operating activities was $27.9 million for the first quarter of fiscal 2015 compared to $7.4 million for the first quarter of fiscal 2014. This increase was primarily due to a decreased use of working capital for inventory and timing of accounts payable. Our nut commodity purchases were $10.3 million higher during the first quarter of fiscal 2015 than the same period of fiscal 2014, primarily due to the procurement of larger quantities of cashews and larger quantities of pecans at higher prices. However, at September 25, 2014 most of these additional purchases remained in accounts payable.
Net accounts receivable were $62.8 million at September 25, 2014, an increase of $7.0 million, or 12.6%, from the balance at June 26, 2014, and an increase of $12.3 million, or 24.4%, from the balance at September 26, 2013. The increase in net accounts receivable from June 26, 2014 to September 25, 2014 is due primarily to higher dollar sales in September 2014 compared to June 2014. The increase in net accounts receivable from September 26, 2013 to September 25, 2014 is due primarily to higher dollar sales in September 2014 compared to September 2013.
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Total inventories were $171.4 million at September 25, 2014, a decrease of $11.4 million, or 6.2%, from the inventory balance at June 26, 2014, and an increase of $13.4 million, or 8.5%, from the inventory balance at September 26, 2013. The decrease at September 25, 2014 compared to June 26, 2014 was primarily due to decreased on hand quantities of walnuts and pecans. The increase at September 25, 2014 compared to September 26, 2013 is due mainly to increased commodity acquisition costs for all major nut types except cashews.
Raw nut input stocks increased by 1.1 million pounds, or 3.2%, at September 25, 2014 compared to September 26, 2013. The increase was attributable mainly to increased quantities of walnuts and pecans. The weighted average cost per pound of raw nut input stocks on hand at the end of the first quarter of fiscal 2015 increased by 7.7% as compared to the first quarter of fiscal 2014 mainly driven by higher acquisition costs for peanuts, walnuts, pecans and almonds.
Accounts payable were $59.9 million at September 25, 2014, an increase of $15.0 million, or 33.4%, from the balance at June 26, 2014, and an increase of $15.4 million, or 34.6%, from the balance at September 26, 2013. The increase in accounts payable from June 26, 2014 to September 25, 2014 is due primarily to the new walnut crop beginning to be received and increased payables for inshell pecans. The increase in accounts payable at September 25, 2014 compared to September 26, 2013 is due to increased amounts due for almond and pecan purchases.
Investing Activities Cash used in investing activities increased $2.1 million during the first quarter of fiscal 2015 compared to same period last year. We spent $2.2 million more on capital expenditures in the first quarter of fiscal 2015 compared to the first quarter of fiscal 2014. We expect total capital expenditures for new equipment and facility upgrades, and food safety enhancements for fiscal 2015 to be approximately $12 million. Absent any material acquisitions or other significant investments, we believe that cash on hand, combined with cash provided by operations and borrowings available under the Credit Facility, will be sufficient to meet the cash requirements for planned capital expenditures.
Financing Activities Cash used in financing activities was $22.9 million during the first quarter of fiscal 2015 compared to $3.9 million for the same period last year. We repaid $20.7 million of short term borrowings outstanding under our Credit Facility during the first quarter of fiscal 2015 compared to only $4.0 million during the first quarter of fiscal 2014. This decrease in short-term borrowings under our Credit Facility occurred primarily as a result of increased grower liabilities in the first quarter of fiscal 2015 compared to the same period of fiscal 2014.
Real Estate Matters
In August 2008, we completed the consolidation of our Chicago-based facilities into the Elgin Site. As part of the facility consolidation project, on April 15, 2005, we closed on the $48.0 million purchase of the Elgin Site. The Elgin Site includes both an office building and a warehouse, and affords us increased production capacity, such that we are currently able to offer our services to existing and new customers on an expanded basis.
We are currently attempting to find additional tenants for the available space in the office building at the Elgin Site. Until additional tenant(s) are found, we will not receive the benefit of rental income associated with such space. Approximately 74% of the office building is currently vacant. There can be no assurance that we will be able to lease the unoccupied space and further capital expenditures may be necessary to lease the remaining space, including the space previously rented by the seller of the Elgin Site.
Financing Arrangements
On February 7, 2008, we entered into the Credit Facility with a bank group (the Bank Lenders) providing a $117.5 million revolving loan commitment and letter of credit subfacility. Also on February 7, 2008, we entered into a Loan Agreement with an insurance company (the Mortgage Lender) providing us with two term loans, one in the amount of $36.0 million (Tranche A) and the other in the amount of $9.0 million (Tranche B), for an aggregate amount of $45.0 million (the Mortgage Facility).
The Credit Facility, as most recently amended in September 2014, is secured by substantially all our assets other than machinery and equipment, real property, and fixtures. The Mortgage Facility is secured by mortgages on essentially all of our owned real property located in Elgin, Illinois, Gustine, California and Garysburg, North Carolina (the Encumbered Properties).
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Credit Facility
On September 30, 2014 we entered into a Sixth Amendment to Credit Agreement (the Sixth Amendment) which extended the maturity date of the Credit Agreement to July 15, 2019 from July 15, 2016, and reduced the interest rates charged for ordinary course and letter of credit borrowings. The revolving loan commitment amount did not change. In addition, the Sixth Amendment allows us to, without obtaining Bank Lender Consent, (i) make up to two cash dividends and distributions on our stock, or (ii) purchase, acquire, redeem or retire stock in any fiscal year, in any case, in an amount not to exceed $25.0 million, individually or in the aggregate, as long as the excess availability under the Credit Agreement remains over $30.0 million after giving effect to any such dividend, distribution, purchase or redemption. The Sixth Amendment also increased the amount of permitted acquisitions to $100.0 million from $50.0 million and removed the annual limit on capital expenditures. At our election, borrowings under the Credit Facility currently accrue interest at either (i) a rate determined pursuant to the administrative agents prime rate plus an applicable margin determined by reference to the amount of loans which may be advanced under the borrowing base calculation, ranging from 0.75% to 1.25% or (ii) a rate based upon the London interbank offered rate (LIBOR) plus an applicable margin based upon the borrowing base calculation, ranging from 1.75% to 2.25%. The Sixth Amendment also reduced each upper and lower base rate margin by 25 basis points.
At September 25, 2014, the weighted average interest rate for the Credit Facility was 2.71%. The terms of the Credit Facility contain covenants that, among other things, require us to restrict investments, indebtedness, acquisitions and certain sales of assets, limit annual cash dividends or distributions, transactions with affiliates, redemptions of capital stock and prepayment of indebtedness (if such prepayment, among other things, is of a subordinate debt). If loan availability under the borrowing base calculation falls below $25.0 million, we will be required to maintain a specified fixed charge coverage ratio, tested on a monthly basis, until loan availability equals or exceeds $25.0 million for three consecutive months. All cash received from customers is required to be applied against the Credit Facility. The Bank Lenders have the option to accelerate and demand immediate repayment of our obligations under the Credit Facility in the event of default on the payments required under the Credit Facility, a change in control in the ownership of the Company, non-compliance with the financial covenants or upon the occurrence of other defaults by us under the Credit Facility (including a default under the Mortgage Facility). As of September 25, 2014, we were in compliance with all covenants under the Credit Facility and we currently expect to be in compliance with the financial covenant in the Credit Facility for the foreseeable future. At September 25, 2014, we had $93.2 million of available credit under the Credit Facility. We would still be in compliance with all restrictive covenants under the Credit Facility if this entire amount were borrowed.
Mortgage Facility
We are subject to interest rate resets for each of Tranche A and Tranche B. Specifically, on March 1, 2018 (the Tranche A Reset Date) and March 1, 2016 and every two years thereafter (each, a Tranche B Reset Date), the Mortgage Lender may reset the interest rates for each of Tranche A and Tranche B, respectively, in its sole and absolute discretion. If the reset interest rate for either Tranche A or Tranche B is unacceptable to us and we (i) do not have sufficient funds to repay amounts due with respect to Tranche A or Tranche B on the Tranche A Reset Date or Tranche B Reset Date, in each case, as applicable, or (ii) are unable to refinance amounts due with respect to Tranche A or Tranche B on the Tranche A Reset Date or Tranche B Reset Date, in each case, as applicable, on terms more favorable than the reset interest rates, then, depending on the extent of the changes in the reset interest rates, our interest expense could increase materially.
The Mortgage Facility matures on March 1, 2023. Tranche A under the Mortgage Facility accrues interest at a fixed interest rate of 7.63% per annum, payable monthly. As mentioned above, such interest rate may be reset by the Mortgage Lender on the Tranche A Reset Date. Monthly principal payments in the amount of $0.2 million commenced on June 1, 2008. Tranche B under the Mortgage Facility accrues interest, as reset on March 1, 2014, at a floating rate of the greater of (i) one month LIBOR plus 3.75% per annum or (ii) 4.50%, payable monthly (the Floating Rate). The margin on such Floating Rate may be reset by the Mortgage Lender on each Tranche B Reset Date; provided, however, that the Mortgage Lender may also change the underlying index on each Tranche B Reset Date occurring on or after March 1, 2016. Monthly principal payments in the amount of $0.1 million commenced on June 1, 2008. We do not currently anticipate that any change in the Floating Rate or the underlying index will have a material adverse effect upon our business, financial condition or results of operations.
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The terms of the Mortgage Facility contain covenants that require us to maintain a specified net worth of $110.0 million and maintain the Encumbered Properties. The Mortgage Lender is entitled to require immediate repayment of our obligations under the Mortgage Facility in the event we default in the payments required under the Mortgage Facility, non-compliance with the covenants or upon the occurrence of certain other defaults by us under the Mortgage Facility. As of September 25, 2014, we were in compliance with all covenants under the Mortgage Facility. We currently believe that we will be in compliance with the financial covenant in the Mortgage Facility for the foreseeable future and therefore $18.4 million of Tranche A and $4.6 million of Tranche B have been classified as long-term debt which represent scheduled principal payments that are due at least twelve months beyond September 25, 2014
Selma Property
In September 2006, we sold our Selma, Texas properties (the Selma Properties) to two related party partnerships for $14.3 million and are leasing them back. The selling price was determined by an independent appraiser to be the fair market value which also approximated our carrying value. The lease for the Selma Properties has a ten-year term at a fair market value rent with three five-year renewal options. Also, we currently have an option to purchase the Selma Properties from the partnerships at 95% (100% in certain circumstances) of the then fair market value, but not less than the original $14.3 million purchase price. The provisions of the arrangement are not eligible for sale-leaseback accounting and the $14.3 million was recorded as a debt obligation. No gain or loss was recorded on the Selma Properties transaction. As of September 25, 2014, $12.2 million of the debt obligation was outstanding.
Critical Accounting Policies and Estimates
For information regarding our Critical Accounting Policies and Estimates, see the Critical Accounting Policies and Estimates section of Item 7- Managements Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended June 26, 2014.
Recent Accounting Pronouncements
Refer to Note 13 Recent Accounting Pronouncements of the Notes to Consolidated Financial Statements, contained in Part I, Item 1 of this form 10-Q, for a discussion of recently issued accounting pronouncements.
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FORWARD LOOKING STATEMENTS
The statements contained in this report that are not historical (including statements concerning our expectations regarding market risk) are forward looking statements. These forward-looking statements may be generally identified by the use of forward-looking words and phrases such as will, anticipates, intends, may, believes, should and expects and are based on our current expectations or beliefs concerning future events and involve risks and uncertainties. We caution that such statements are qualified by important factors, including the factors referred to in Part II, Item 1A Risk Factors, and other factors, risks and uncertainties that are beyond our control. Consequently, our actual results could differ materially. We undertake no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors that affect the subject of these statements, except where expressly required to do so by law. Among the factors that could cause results to differ materially from current expectations are: (i) the risks associated with our vertically integrated model with respect to pecans, peanuts and walnuts; (ii) sales activity for our products, such as a decline in sales to one or more key customers, a decline in sales of private brand products or changing consumer preferences; (iii) changes in the availability and costs of raw materials and the impact of fixed price commitments with customers; (iv) the ability to pass on price increases to customers if commodity costs rise and the potential for a negative impact on demand for, and sales of, our products from price increases; (v) the ability to measure and estimate bulk inventory and fluctuations in the value and quantity of our nut inventories due to fluctuations in the market prices of nuts and bulk inventory estimation adjustments, respectively, (vi) our ability to appropriately respond to, or lessen the negative impact of, competitive and pricing pressures; (vii) losses associated with product recalls, product contamination, food labeling or other food safety issues, or the potential for lost sales or product liability if customers lose confidence in the safety of our products or in nuts or nut products in general, or are harmed as a result of using our products; (viii) our ability to retain key personnel; (ix) the effect of the actions and decisions of the group that has the majority of the voting power with regard to our outstanding common equity (which may make a takeover or change in control more difficult), including the effect of any agreements pursuant to which such group has pledged a substantial amount of its securities of the Company; (x) the potential negative impact of government regulations and laws and regulations pertaining to food safety, such as the Food Safety Modernization Act; (xi) our ability to do business in emerging markets while protecting our intellectual property in such markets; (xii) uncertainty in economic conditions, including the potential for economic downturn; (xiii) our ability to obtain additional capital, if needed; (xiv) the timing and occurrence (or nonoccurrence) of other transactions and events which may be subject to circumstances beyond our control; (xv) the adverse effect of labor unrest or disputes, litigation and/or legal settlements, including potential unfavorable outcomes exceeding any amounts accrued; (xvi) losses due to significant disruptions at any of our production or processing facilities; (xvii) the inability to implement our Strategic Plan or realize efficiency measures including controlling medical and personnel costs; (xviii) technology disruptions or failures; (xix) the inability to protect our intellectual property or avoid intellectual property disputes; (xx) our ability to manage successfully the price gap between our private brand products and those of our branded competitors; and (xxi) potential increased industry-specific regulation pending the U.S. Food and Drug Administration assessment of the risk of Salmonella contamination associated with tree nuts.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in our assessment of our sensitivity to market risk since our presentation set forth in Part IItem 7A Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K for the fiscal year ended June 26, 2014.
Item 4. Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of September 25, 2014. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 25, 2014, the Companys disclosure controls and procedures were effective.
In connection with the evaluation by our management, including our Chief Executive Officer and Chief Financial Officer, there were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended September 25, 2014 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
23
For a discussion of legal proceedings, see Note 11Commitments and Contingent Liabilities in Part I, Item 1 of this Form 10-Q.
In addition to the other information set forth in this report on Form 10-Q, you should also consider the factors, risks and uncertainties which could materially affect our Companys business, financial condition or future results as discussed in Part I, Item 1A Risk Factors of our Annual Report on Form 10-K for the fiscal year ended June 26, 2014. There were no significant changes to the risk factors identified on the Form 10-K for the fiscal year ended June 26, 2014 during the first quarter of fiscal 2015.
See Part I, Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources in this Form 10-Q, and see Part II, Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources in the Companys Annual Report on Form 10-K for the fiscal year ended June 26, 2014.
The exhibits filed herewith are listed in the exhibit index that follows the signature page and immediately precedes the exhibits filed.
24
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on October 29, 2014.
JOHN B. SANFILIPPO & SON, INC. |
||
By |
/s/ M ICHAEL J. V ALENTINE | |
Michael J. Valentine | ||
Chief Financial Officer, Group President and Secretary |
25
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
26
Exhibit
|
Description |
|
10.16 | Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as of February 7, 2008, made by JBSS Properties, LLC related to its Elgin, Illinois property for the benefit of TFLIC (10) | |
10.17 | Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as of February 7, 2008, made by the Company related to its Gustine, California property for the benefit of TFLIC (10) | |
10.18 | Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as of February 7, 2008, made by the Company related to its Garysburg, North Carolina property for the benefit of TFLIC (10) | |
10.19 | Promissory Note (Tranche A), dated February 7, 2008, in the principal amount of $36.0 million executed by the Company in favor of TFLIC (10) | |
10.20 | Promissory Note (Tranche B) dated February 7, 2008, in the principal amount of $9.0 million executed by the Company in favor of TFLIC (10) | |
*10.21 | The Registrants 2008 Equity Incentive Plan, as amended (1) | |
*10.22 | First Amendment to the Registrants 2008 Equity Incentive Plan (13) | |
*10.23 | The Registrants Employee Restricted Stock Unit Award Agreement under 2008 Equity Incentive Plan (14) | |
*10.24 | The Registrants First Form of Non-Employee Director Restricted Stock Unit Award Agreement under 2008 Equity Incentive Plan (14) | |
*10.25 | The Registrants Second Form of Non-Employee Director Restricted Stock Unit Award Agreement under 2008 Equity Incentive Plan (17) | |
10.26 | Form of Indemnification Agreement (15) | |
**10.27 | First Amendment to Credit Agreement, dated as of March 8, 2010, by and among the Registrant, Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as a lender and administrative agent and Burdale Financial Limited, as a lender (16) | |
10.28 | Form of Change-of-Control Employment Security Agreement and Non-Compete (18) | |
10.29 | Second Amendment to Credit Agreement, dated as of July 15, 2011, by and among the Registrant, Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender (19) | |
10.30 | Third Amendment to Credit Agreement, dated as of October 31, 2011, by and among the Registrant, Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender (21) | |
10.31 | Consent and Fourth Amendment to Credit Agreement, dated as of January 22, 2013, by and among the Registrant, Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender (22) | |
10.32 | Consent and Fifth Amendment to Credit Agreement, dated as of December 16, 2013, by and among the Registrant, Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender (23) | |
10.33 | Sixth Amendment to Credit Agreement, dated as of September 30, 2014, by and among the Registrant, Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, as lender. (24) | |
10.34 | The Registrants 2014 Omnibus Incentive Plan (20) |
27
Exhibit
|
Description |
|
*10.35 | The Registrants Form of Non-Employee Director Restricted Stock Unit Award Agreement (non-deferral) under 2014 Omnibus Plan, filed herewith | |
*10.36 | The Registrants Form of Non-Employee Director Restricted Stock Unit Award Agreement (deferral) under 2014 Omnibus Plan, filed herewith | |
*10.37 | The Registrants Form of Employee Restricted Stock Unit Award Agreement under 2014 Omnibus Plan, filed herewith | |
11-30 | Not applicable | |
31.1 | Certification of Jeffrey T. Sanfilippo pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended, filed herewith | |
31.2 | Certification of Michael J. Valentine pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended, filed herewith | |
32.1 | Certification of Jeffrey T. Sanfilippo pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended, filed herewith | |
32.2 | Certification of Michael J. Valentine pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended, filed herewith | |
33-100 | Not applicable | |
101.INS | XBRL Instance Document, filed herewith | |
101.SCH | XBRL Taxonomy Extension Schema Document, filed herewith | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document, filed herewith | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document, filed herewith | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document, filed herewith | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document, filed herewith |
* | Indicates a management contract or compensatory plan or arrangement. |
** | Confidential treatment has been requested for portions of this exhibit. These portions have been omitted and submitted separately to the Securities and Exchange Commission. |
(1) | Incorporated by reference to the Registrants Annual Report on Form 10-K for the fiscal year ended June 28, 2012 (Commission File No. 0-19681). |
(2) | Incorporated by reference to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (Commission File No. 0-19681). |
(3) | Incorporated by reference to the Registrants Registration Statement on Form S-1 (Amendment No. 3), Registration No. 33-43353, as filed with the Commission on November 25, 1991 (Commission File No. 0-19681). |
(4) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the first quarter ended September 24, 1998 (Commission File No. 0-19681). |
(5) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the second quarter ended December 28, 2000 (Commission File No. 0-19681). |
(6) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the second quarter ended December 25, 2003 (Commission File No. 0-19681). |
28
(7) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the third quarter ended March 25, 2004 (Commission File No. 0-19681). |
(8) | Incorporated by reference to the Registrants Annual Report on Form 10-K for the fiscal year ended June 30, 2005 (Commission File No. 0-19681). |
(9) | Incorporated by reference to the Registrants Annual Report on Form 10-K for the year ended June 28, 2007 (Commission File No. 0-19681). |
(10) | Incorporated by reference to the Registrants Current Report on Form 8-K dated February 8, 2008 (Commission File No. 0-19681). |
(11) | Incorporated by reference to the Registrants Current Report on Form 8-K dated February 3, 2014 (Commission File No. 0-19681). |
(12) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the third quarter ended March 24, 2005 (Commission File No. 0-19681). |
(13) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the second quarter ended December 25, 2008 (Commission File No. 0-19681). |
(14) | Incorporated by reference to the Registrants Current Report on Form 8-K dated November 12, 2009 (Commission File No. 0-19681). |
(15) | Incorporated by reference to the Registrants Current Report on Form 8-K dated May 5, 2009 (Commission File No. 0-19681). |
(16) | Incorporated by reference to the Registrants Current Report on Form 8-K dated March 12, 2010 (Commission File No. 0-19681). |
(17) | Incorporated by reference to the Registrants Current Report on Form 8-K dated November 8, 2010 (Commission File No. 0-19681). |
(18) | Incorporated by reference to the Registrants Current Report on Form 8-K dated January 31, 2011 (Commission File No. 0-19681). |
(19) | Incorporated by reference to the Registrants Current Report on Form 8-K dated July 18, 2011 (Commission File No. 0-19681). |
(20) | Incorporated by reference to the Registrants Registration Statement on Form S-8, filed with the Commission on October 28, 2014 (Commission File No. 0-19681). |
(21) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the first quarter ended September 29, 2011 (Commission File No. 0-19681). |
(22) | Incorporated by reference to the Registrants Current Report on Form 8-K dated February 1, 2013 (Commission File No. 0-19681). |
(23) | Incorporated by reference to the Registrants Current Report on Form 8-K dated December 17, 2013 (Commission File No. 0-19681). |
(24) | Incorporated by reference to the Registrants Current Report on Form 8-K dated October 3, 2014 (Commission File No. 0-19681). |
29
Exhibit 10.11
Amended and Restated
John B. Sanfilippo & Son, Inc.
Sanfilippo Value Added Plan
I. | Purposes of the Plan |
The purpose of the Plan is to more closely link incentive cash compensation to the creation of stockholder value. The Plan is intended to foster a culture of performance and ownership, promote employee accountability, and establish a framework of manageable risks imposed by variable pay. The Plan is also intended to reward continuing improvements in stockholder value with an opportunity to participate in a portion of the wealth created. The Plan is amended and restated as of August 27, 2014 to be effective for the 2015 Plan Year and thereafter. All awards under the Plan are intended to qualify as Cash-Based Awards under the John B. Sanfilippo & Son, Inc. 2014 Omnibus Plan, as may be amended from time to time (the Omnibus Plan), and at the Committees discretion may be designated as performance-based compensation under Section 162(m) of the Code and any rules and regulations thereunder. In the event of a conflict between the terms of this Plan and the Omnibus Plan, the terms of this Plan will govern.
II. Definitions
Actual Improvement means the annual change in SVA, as determined under Section V(B)(1) of the Plan, which can be positive or negative.
Annual Salary means, with respect to a Participant, his or her final and actually paid (or fully earned, but not yet paid) annual or pro-rated (in the case of employment for less than the full Plan Year) base salary in a particular fiscal year of the Company.
Award has the meaning set forth in the Omnibus Plan.
Award Agreement has the meaning set forth in the Omnibus Plan.
Board means the Board of Directors of the Company.
Bonus Declared means the annual or pro-rated (in the case of employment for less than the full Plan Year) bonus amount for a Plan Year, as determined under Section V of the Plan.
Bonus Interval means the amount of SVA growth or diminution as a variance from Target SVA Improvement that would either (A) result in two times the Target Bonus for SVA performance above Target SVA Improvement; or, (B) result in zero times the Target Bonus for SVA performance below Target SVA Improvement.
Capital Charge means the Cost of Capital multiplied by the Companys invested capital, as determined by the Committee in its sole discretion.
Cause means, in the judgment of the Committee, (A) the breach by the Participant of any employment agreement, employment arrangement or any other agreement with the Company or a Subsidiary, (B) the Participant engaging in a business that competes with the Company or a Subsidiary, (C) the Participant disclosing business secrets, trade secrets or confidential information of the Company or a Subsidiary to any party, (D) dishonesty, misconduct, fraud or disloyalty by the Participant, (E) misappropriation of corporate funds, (F) failure to substantially perform his or her duties as an employee (for reasons other than physical or mental illness) or (G) such other conduct by the Participant of an insubordinate or criminal nature as to have rendered the continued employment or association of the Participant incompatible with the best interests of the Company and its Subsidiaries.
Change in Control means the first date on which one of the following events occurs:
A. the consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entitys securities outstanding immediately after such merger, consolidation or other reorganization is owned by persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization;
B. the sale, transfer or other disposition of all or substantially all of the Companys assets other than a sale or disposition by the Company of all or substantially all of the Companys assets to an entity, where more than 50% of the combined voting power of such entitys securities outstanding immediately after such sale or disposition is owned by persons who were not stockholders of the Company immediately prior to such sale or disposition;
C. a change in the composition of the Board, as a result of which fewer than one-half of the directors following such change in composition of the Board are directors who either (1) had been directors of the Company on the date 12 months prior to the date of the event that may constitute a Change in Control (the Original Directors ) or (2) were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the aggregate of (a) the Original Directors who were still in office at the time of the election or nomination and (b) the directors whose election or nomination was previously approved pursuant to this Clause (2); or
D. any transaction as a result of which any person or group (as such terms are used in Section 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, or any group that is controlled by Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) (during the 12 month period ending on the date of the most recent acquisition of voting securities), directly or indirectly, of the voting securities of the Company representing at least 30% of the total voting power of the Company (with respect to all matters other than the election of directors) represented by the Companys then outstanding voting securities. For purposes of this Clause (D), the term transaction shall include any conversion of the Class A Stock, whether or not such conversion occurs in connection with a sale, transfer or other disposition of such Class A Stock.
For purposes of this definition: (1) the term person shall exclude: (a) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a Subsidiary; and (b) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock (it being understood that for purposes of subsequently determining whether a Change in Control has occurred, all references to the Company in the definition of Change in Control shall be deemed to be references to the Company and/or such corporation, as applicable); (2) the term group shall exclude any group controlled by any person identified in Clause (1)(A) above and (3) the term control shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract, or otherwise, and the terms controlling and controlled have meanings correlative thereto.
Except as otherwise determined by the Committee, any spin-off of a division or subsidiary of the Company to its stockholders will not constitute a Change in Control of the Company.
Class A Stock means the Class A Common Stock, $.01 par value per share, of the Company.
Code means the Internal Revenue Code of 1986, as amended.
Committee has the meaning set forth in Section IV(A).
Common Stock means the Common Stock, par value $.01 per share, of the Company, and any other shares into which such Common Stock shall thereafter be exchanged by reason of a recapitalization, merger, consolidation, split-up, combination, exchange of shares or the like.
Company means John B. Sanfilippo & Son, Inc., a Delaware corporation, and its successors and assigns.
Cost of Capital means the Companys assumed cost of equity plus its cost of debt, expressed as a percentage, using a weighted average of the expected return on the Companys debt and equity capital, all as determined in the sole discretion of the Committee. Cost of Capital is intended to reflect the rate of return that an investor could earn by choosing another investment with equivalent risk.
Declared Bonus Multiple means the multiple determined in accordance with Section V(B)(4) of the Plan for purposes of determining a Participants Bonus Declared.
Disability means a mental or physical condition which, in the opinion of the Committee, renders a Participant unable or incompetent to carry out the job responsibilities which such Participant held or tasks to which such Participant was assigned at the time the disability was incurred and which is expected to be permanent or for an indefinite period. With respect to any amount payable under the Plan that constitutes deferred compensation under Code Section 409A and is subject to Code Section 409A, the Committee may not find that a Disability exists with respect to the applicable Participant unless, in the Committees opinion, such Participant is also disabled within the meaning of Code Section 409A.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Excess Improvement has the meaning set forth in Section V(B)(2).
2
Guidelines has the meaning set forth in Section IV(B)(3).
NOPAT means the Companys net operating profit after tax, as determined by the Committee from the Companys audited financial statements.
Omnibus Plan has the meaning set forth in Section I.
Participant has the meaning set forth in Section III.
Performance-Based Compensation has the meaning set forth in the Omnibus Plan.
Permitted Holder means:
A. Jasper B. Sanfilippo ( Jasper ), Mathias A. Valentine, ( Mathias ), a spouse of Jasper, a spouse of Mathias, any lineal descendant of Jasper or any lineal descendant of Mathias (collectively referred to as the Family Members );
B. a legal representative of a deceased or disabled Family Members estate, provided that such legal representative is a Family Member;
C. a trustee of any trust of which all the beneficiaries (and any donees and appointees of any powers of appointment held thereunder) are Family Members and the trustee of which is a Family Member;
D. a custodian under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act for the exclusive benefit of a Family Member, provided that such custodian is a Family Member;
E. any corporation, partnership or other entity, provided that at least 75% of the equity interests in such entity (by vote and by value) are owned, either directly or indirectly, in the aggregate by Family Members;
F. any bank or other financial institution, solely as a bona fide pledgee of shares of Class A Stock by the owner thereof as collateral security for indebtedness due to the pledgee; or
G. any employee benefit plan, or trust or account held thereunder, or any savings or retirement account (including an individual retirement account), held for the exclusive benefit of a Family Member.
Plan means the Amended and Restated John B. Sanfilippo & Son, Inc. Sanfilippo Value Added Plan.
Plan Year means the fiscal year of the Company.
Retirement means a Participants termination of employment, other than for Cause, if the Participant has either: (A) attained age 60 and completed 5 years of service with the Company or any Subsidiary, or (B) attained age 55 and completed 10 years of service with the Company or any Subsidiary.
Section 409A means Code Section 409A and all applicable rules and regulations related thereto.
Shortfall has the meaning set forth in Section V(B)(3).
Subsidiary means any corporation at least eighty percent (80%) of the outstanding voting stock of which is owned by the Company.
SVA means the stockholder value added of the Company determined each Plan Year by deducting the Companys Capital Charge from NOPAT, as determined by the Committee.
Target Bonus means the Bonus Declared a Participant would be paid for a Plan Year if Actual Improvement equaled Target SVA Improvement, determined by multiplying a Participants Annual Salary for that Plan Year by the Participants Target Bonus Percentage for that Plan Year.
Target Bonus Percentage means the percentage of a Participants Annual Salary, as established or approved by the Committee for purposes of determining a Participants Target Bonus.
3
Target SVA Improvement means the targeted improvement in annual SVA growth as determined by the Committee pursuant to Section V(A)(1)(c).
Termination for Cause means a determination by the Committee following a Participants termination of employment for any reason that, prior to such termination of employment, circumstances constituting Cause existed with respect to such Participant.
Termination Year has the meaning set forth in Section VI(B)(1)(a).
III. | Eligibility |
An employee of the Company or a Subsidiary who, individually or as part of a group, is selected by the Committee to be eligible to participate in the Plan for the Plan Year shall become a participant as of the first day of such Plan Year, unless otherwise determined by the Committee (each, a Participant ). Except as provided in this Section III, no Participant or other employee of the Company or any Subsidiary shall, at any time, have a right to participate in the Plan for any Plan Year, notwithstanding having previously participated in the Plan.
IV. | Administration |
A. | The Committee |
The Board hereby appoints the Compensation Committee of the Board to be the Committee hereunder unless a new, independent committee is selected by the Board. For this purpose, a new Committee will be deemed independent if it is comprised solely of two or more directors who are independent directors within the meaning of the The Nasdaq Stock Market, Inc.s rules and regulations. The Board hereby delegates to the Committee all compensation review and approval powers associated with the Plan and the Guidelines.
B. | Powers |
The Committee shall have full and exclusive discretionary power to:
1. Interpret and administer the Plan,
2. Determine those employees of the Company and its Subsidiaries who are eligible to participate in the Plan,
3. Adopt such rules, regulations, and guidelines (including the establishment of performance criteria) the Guidelines , for administering the Plan as the Committee may deem necessary or proper, including the full discretion not to make payment of any or all of the Bonus Declared determined in Section VI, and
4. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, or inconsistent with the Companys Amended and Restated Bylaws, Restated Certificate of Incorporation or Committee charter, allocate all or any portion of its responsibilities and powers under this Plan to any one or more of its members or delegate all or any part of its responsibilities and powers to any person or persons selected by it. Such delegation shall include, unless limited by its terms, all of the responsibility and authority held by the Committee hereunder, and any such allocation or delegation may be revoked by the Committee at any time.
C. | Adjustment to Payments |
1. If a Participant violates any Company policy, the Company retains the right to declare forfeited any award granted to a Participant hereunder, to the extent it remains unpaid; provided , however , that in the event that a Participants prior Plan Years Bonus Declared has not yet been paid at the time the Company declares such Participants award forfeited, such forfeited amounts shall be distributed to other Participant(s) (other than with respect to Awards designated as Performance-Based Compensation) on a pro-rata basis, or distributed to other Participant(s) as otherwise determined by the Committee.
2. If (a) the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under securities laws, (b) the Committee determines a Termination for Cause occurred with respect to a Participant or (c) the Company is required by law, rule or regulation or the rules of the stock exchange on which the Companys securities are listed to clawback any amounts paid hereunder, the Committee may require any or all of the following: (i) any award granted to the Participant hereunder, to the extent it remains unpaid at the time of the restatement, be forfeited; provided , however , that in the event that a Participants prior Plan Years Bonus Declared has not yet been paid at the time the Committee declares such Participants award forfeited, such forfeited amounts shall be distributed to other Participant(s) on a pro-rata basis, or distributed to other Participant(s) as otherwise determined by
4
the Committee; and (ii) the Participant shall pay to the Company in cash all of the amounts paid hereunder during the three-year period (or such other period as determined by the Committee) prior to the date the Company is required to prepare the financial restatement based on the erroneous data or the Participants termination of employment, as the case may be, together with any other amounts which may be required to be paid under any law, rule or regulation or the rules of the stock exchange on which the Companys securities are listed.
D. | Third-Party Advisors |
The Committee may employ attorneys, consultants, accountants, and other persons. The Board, Committee, the Company and its officers shall be entitled to rely upon the advice or opinion of such persons.
E. | Binding Effect of Committee Actions |
All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, the Company, and all other interested persons. No member of the Committee shall be personally liable for any action, determination, or interpretations made in good faith with respect to the Plan. All members of the Committee shall be fully protected and indemnified by the Company, to the fullest extent permitted by applicable law, in respect of any such action, determination, or interpretation of the Plan.
F. | Foreign Jurisdiction |
The Committee shall have the discretion to modify or amend the Plan, or adopt additional terms and/or conditions, as may be deemed necessary or advisable in order to comply with the local laws and regulations of any jurisdiction.
V. | Determination of Bonus Declared |
A. | Determination of SVA and Actual Improvement |
1. Beginning of Plan Year Determinations . At or around the beginning of each applicable Plan Year, the following determinations shall be made:
a) The Committee shall determine, or approve the determination of, the Companys annual SVA as of the end of the preceding Plan Year.
b) The Committee shall determine or approve Target Bonus Percentages for each Participant and the Companys Cost of Capital for the applicable Plan Year.
c) The Committee shall establish the Target SVA Improvement and the Bonus Interval for the applicable Plan Year.
d) The Committee shall adopt Guidelines for the applicable Plan Year.
e) Participation for a given Plan Year shall be evidenced by an Award Agreement, describing applicable terms and conditions of participation for that Plan Year, including whether such award is intended to be treated as Performance-Based Compensation.
2. End of Plan Year Determinations. After the end of each applicable Plan Year, the following determinations shall be made:
a) The Committee shall determine and certify the Companys annual SVA as of the end of the Plan Year and the resulting Actual Improvement.
b) The Committee shall determine, or approve the determination of, the Declared Bonus Multiple for such Plan Year, consistent with the terms of the Plan and the Guidelines thereunder.
B. | Determination of Bonus Declared |
Each Participants Bonus Declared, if any, shall be determined for a Plan Year according to the following:
1. The Actual Improvement in SVA for a Plan Year shall be determined by subtracting the SVA for the immediately preceding Plan Year (or such other amount as determined by the Committee) from the SVA for the Plan Year.
5
2. If the Actual Improvement exceeds the Target SVA Improvement, the amount of that excess shall be the Excess Improvement ;
3. If the Target SVA Improvement exceeds the Actual Improvement, the amount of that excess shall be the Shortfall ;
4. The Declared Bonus Multiple shall be determined by comparing the Excess Improvement or Shortfall to the Target SVA Improvement and Bonus Interval, according to the following:
a) If the Actual Improvement equals the Target SVA Improvement, the Declared Bonus Multiple shall equal one (1).
b) If the Actual Improvement exceeds the Target SVA Improvement, the Declared Bonus Multiple shall equal the Excess Improvement divided by the Bonus Interval, plus one (1); provided, however , that if the Declared Bonus Multiple is greater than 2.0, then it shall still be deemed to be 2.0 for the purposes of this Plan and the Guidelines.
c) If the Actual Improvement is less than the Target SVA Improvement, the Declared Bonus Multiple shall equal the Shortfall (expressed as a negative number) divided by the Bonus Interval, plus one (1); provided, however , that if the Declared Bonus Multiple is less than 0, then it shall still be deemed to be 0 for the purposes of this Plan and the Guidelines.
5. The Bonus Declared for each Participant shall equal the Participants Target Bonus, multiplied by the Declared Bonus Multiple.
VI. | Payment of Bonus Declared |
A. | Payment |
1. The Bonus Declared shall be paid by the Company within thirty (30) days following the Committees determination of the Declared Bonus Multiple, but in no event earlier than the first day of the Plan Year following the applicable Plan Year and no later than the fifteenth (15th) day of the third month following the end of the applicable Plan Year. In the event that a Participants prior Plan Years Bonus Declared has not yet been paid at the time such Participants award is forfeited pursuant to the terms of this Plan, such forfeited amounts shall be distributed to other Participant(s) (other than with respect to Awards designated as Performance-Based Compensation) on a pro-rata basis, or distributed to other Participant(s) as otherwise determined by the Committee.
B. | Payment Upon Termination of Employment |
1. In General . Subject to Section IV(C) and except as specified below, and unless otherwise determined by the Committee, in the event a Participants employment is terminated by the Company or by the Participant other than as described in Section VI(B)(2), or the Participant becomes ineligible to participate in the Plan:
a) the Participant shall not be paid any Bonus Declared for the Plan Year in which the termination occurs (the Termination Year );
b) in the event that the prior Plan Years Bonus Declared has not yet been paid, the Participant shall not be paid any Bonus Declared for such prior Plan Year; provided , however , that any amounts forfeited pursuant to this VI(B)(1)(b) shall be distributed to other Participant(s) (other than with respect to Awards designated as Performance-Based Compensation) on a pro-rata basis, or distributed to other Participant(s) as otherwise determined by the Committee; and
c) the Participant shall have no rights or interests in the Plan thereafter.
Any payments made under this Section VI(B)(1) at the discretion of the Committee shall be within the time set forth in Section VI(A) and the Participant shall have no rights or interests in the Plan thereafter.
2. Upon Death, Disability, Retirement, or Termination by the Company Other than for Cause. Subject to Section IV(C), in the event of a Participants death, Disability, Retirement or termination by the Company other than for Cause:
6
a) | to the extent not previously paid, any Bonus Declared with respect to the Plan Year preceding the Termination Year shall be paid by the Company to the former Participant, or in the event of his or her death, to his or her estate or designated beneficiary, within the time set forth in Section VI(A); |
b) | with respect to the Termination Year, a Participant shall receive a pro-rated Bonus Declared determined in accordance with Section VI(A) of the Plan and such pro-rated Bonus Declared shall be paid by the Company to the former Participant, or in the event of his or her death, to his or her estate or designated beneficiary, within the time set forth in Section VI(A), for the avoidance of doubt the Bonus Declared is considered pro-rated because the Annual Salary used in the determination of the Bonus Declared in Section V is the final and actually paid (or fully earned, but not yet paid) pro-rated base salary; and |
c) | the Participant shall have no rights or interests in the Plan thereafter. |
3. Condition of Payments. At the discretion of the Committee, any payment hereunder that is due to termination of employment by the Company or by the Participant may be subject to a requirement that the Participant execute a release of claims (including claims relating to age discrimination) against the Company and its Subsidiaries and related persons at the time and in the form determined by the Company from time to time (provided that such requirement shall not cause a delay in the time of payment otherwise provided for herein).
VII. | General Provisions |
A. | No Right to Employment or Participation |
No Participant or other person shall have any claim or right to be retained in the employment of the Company or a Subsidiary by reason of the Plan or any Bonus Declared. Selection for eligibility to participate in the Plan for any given Plan Year shall not entitle the Participant to participate in any subsequent Plan Year.
B. | Plan Expenses |
The expenses of the Plan and its administration shall be borne by the Company.
C. | Plan Not Funded |
The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Bonus Declared under the Plan. No Participant or other person shall have any right, title or interest in any fund or in any specific asset of the Company or any Subsidiary by reason of any award or Bonus Declared hereunder. To the extent that a Participant or other person acquires a right to receive payment with respect to a Bonus Declared hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company or any Subsidiary, as applicable.
D. | Reports |
The appropriate officers of the Company shall cause to be filed any reports, returns, or other information regarding the Plan, as may be required by applicable statute, rule, or regulation.
E. | Governing Law |
The validity, construction, and effect of the Plan, and any actions relating to the Plan, shall be determined in accordance with the laws of the state of Delaware and applicable federal law, without regard to the conflicts of laws provisions of any state.
F. | Withholding |
The Company shall have the right to deduct from any payment hereunder any amounts that Federal, state, local or foreign laws require, including tax laws, with respect to such payments.
G. | No Fiduciary Relationship |
Nothing contained in the Plan (or in any document related thereto, including the Guidelines), nor the creation or adoption of the Plan, nor any action taken pursuant to the provisions of the Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company or any Subsidiary and any Participant or other person.
7
H. | Severability |
If any provision of the Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions hereof; instead, each provision shall be fully severable and the Plan shall be construed and enforced as if said illegal or invalid provision had never been included herein.
I. | Successors |
All obligations of the Company under the Plan shall be binding upon and inure to the benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
VIII. | Amendment and Termination of the Plan; Change in Control; 409A |
A. | Amendment and Termination of the Plan. |
1. The Board may, from time to time, amend the Plan in any respect, or may discontinue or terminate the Plan at any time, provided , however , that:
a) Impact on Existing Rights . Except as required by law, no amendment, discontinuance or termination of the Plan shall alter or otherwise affect the amount of a Bonus Declared prior to the date of termination;
b) Impact on SVA Performance Measurement System . No amendment shall be made which would replace the SVA performance measurement system for purposes of determining the Bonus Declared under the Plan during a Plan Year for such Plan Year, provided that, subject to Section VIII(D), the Board or Committee shall have the authority to adjust and establish Target SVA Improvement, Target Bonus Percentages, and other criteria utilized in the SVA performance measurement system during a Plan Year due to, among other reasons, (i) a change in the Companys business, operations, corporate or capital structure, (ii) a change in the manner in which the Companys business is conducted or (iii) any other material change or event which will impact one or more elements of SVA in a manner the Committee did not intend, then the Committee may, reasonably contemporaneously with such change or event, make such adjustments as it shall deem appropriate or equitable in the manner of computing the relevant SVA performance measurement system during the Plan Year; and
c) Consequence of Full Termination of Plan . Subject to Section VIII(D), if the Plan is terminated prior to the end of a Plan Year, the Bonus Declared for that Plan Year shall be determined and paid to a Participant as set forth in Sections V and VI of the Plan, assuming that Target SVA Improvement for that Plan Year had been achieved, then pro-rated for the actual number of days in the Plan Year before the Plan was terminated. Any such payment shall be subject to the terms and conditions of this Plan.
B. | Consequence of Change in Control |
1. The Committee shall determine the treatment of the Bonus Declared to Participants prior to a Change in Control, except that to the extent that the Committee takes no action (and except as otherwise expressly provided for in the Guidelines), in the event of a Change in Control, then the Bonus Declared for that Plan Year shall be determined and paid as set forth in Sections V and VI of the Plan, but assuming that Target SVA Improvement for that Plan Year had been achieved, and pro-rating it for the actual number of days in the Plan Year before the Change in Control and such Bonus Declared shall be paid within the sixty (60) day period following the effective time of the Change in Control.
2. Except as expressly provided for in the Guidelines, the Committee may elect prior to a Change in Control, that, in the event of a Change in Control, the Plan shall continue on in full force and effect or be assumed or an equivalent Plan be implemented by the successor corporation in any Change in Control transaction, or parent or subsidiary of such successor corporation.
C. | Section 409A |
This Plan is intended to be exempt from Section 409A. However, to the extent Section 409A applies to any payment hereunder, notwithstanding anything to the contrary in this Plan the following shall apply:
8
1. To the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A, amounts that would otherwise be payable pursuant to this Plan during the six-month period immediately following the Participants termination of employment shall instead be paid on the first business day after the date that is six months following the Participants separation from service within the meaning of Section 409A;
2. A Participant shall not be entitled to any payments resulting from or arising due to a termination of employment, termination or retirement (or other similar term having a similar import) unless (and until) such Participant has separated from service within the meaning of Section 409A; and
3. To the extent any provision of the Plan or action by the Committee would subject any Participant to liability for interest or additional taxes under Section 409A, it will be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. It is intended that the Plan will be exempt from Section 409A (or if subject to Section 409A, compliant with Section 409A), and the Plan shall be interpreted and construed on a basis consistent with such intent. The Plan may be amended in any respect deemed necessary (including retroactively) by the Board in order to preserve exemption from (or compliance with) Section 409A. The preceding shall not be construed as a guarantee of any particular tax effect for Plan payments. A Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on such person in connection with any payments to such person under the Plan (including any taxes and penalties under Section 409A), and the Company (or any affiliate or subsidiary) shall have no obligation to indemnify or otherwise hold a Participant harmless from any or all of such taxes or penalties.
D. | Code Section 162(m) |
Any Award designated to be treated as Performance-Based Compensation shall be subject to Section 15 of the Omnibus Plan. This Plan, and any Award Agreement hereunder, shall be interpreted consistent with Code Section 162(m) and applicable rules and regulations thereunder.
9
Exhibit 10.35
[Non-Employee Director RSU Non-Deferral]
John B. Sanfilippo & Son, Inc. 2014 Omnibus Incentive Plan
Restricted Stock Unit Award Agreement
[Insert Date]
[Insert Name of Participant ]
In accordance with the terms of the John B. Sanfilippo & Son, Inc. 2014 Omnibus Incentive Plan (the Plan), pursuant to action of the Board of John B. Sanfilippo & Son, Inc. (the Company), the Company hereby grants to you (the Recipient), subject to the terms and conditions set forth in this Restricted Stock Unit Award Agreement (including Annex A hereto), Restricted Stock Units (RSUs), as set forth below.
Unless otherwise specified, capitalized terms shall have the meanings specified in the Plan. The terms and conditions of the Plan are incorporated by reference and govern except to the extent that, when permitted by the Plan, this RSU Award Agreement provides otherwise.
Each RSU corresponds to one Share and is an unfunded and unsecured promise by the Company to deliver such Share on a future date as set forth herein. Until such delivery, you only have the rights of a general unsecured creditor of the Company and not as a stockholder with respect to the Shares underlying your RSUs.
Number of RSUs Granted: |
[#] | |
Date of Grant: |
[xx/xx/xxxx] | |
Period of Restriction: |
Date of Grant through the date of the Companys fiscal Annual Meeting of stockholders. | |
Share Payment Date: |
Each RSU will convert to one Share on the day following the date the Period of Restriction ends with respect to that RSU, with the Share being delivered to the Recipient as soon as administratively possible thereafter, (but no later than 60 days thereafter). |
RSUs are subject to forfeiture as provided herein (including Annex A) and the Plan.
Further terms and conditions of your Award of RSUs are set forth in Annex A, which is an integral part of this RSU Award Agreement.
By accepting this Award, you hereby acknowledge the receipt of a copy of this RSU Award Agreement including Annex A, and a copy of the Plan and agree to be bound by all terms and provisions hereof and thereto.
Tom Fordonski
Senior Vice President, Human Resources
John B. Sanfilippo & Son, Inc.
[Non-Employee Director RSU Non-Deferral]
Annex A
Restricted Stock Unit Award Agreement
Further Terms and Conditions of Award. It is understood and agreed that the Award of RSUs evidenced by the RSU Award Agreement to which this is annexed is subject to the following additional terms and conditions:
1. | Termination of Service. Upon the Recipients Termination of Service, all unvested RSUs, (RSUs for which the Period of Restriction has not lapsed) shall be treated as follows: |
a. | Death or Disability If the Recipients Termination of Service is on account of death or Disability, then all of the unvested RSUs shall immediately become nonforfeitable and the restrictions with respect to the RSUs shall lapse as of the date of death or the date the Compensation Committee of the Company (the Committee) determines that a Disability occurred; |
b. | Retirement If the Recipients Termination of Service is on account of Retirement, then all unvested RSUs shall immediately become nonforfeitable and the restrictions with respect to such RSUs shall lapse as of the date of such Termination of Service; and |
c. | Any Other Reason If the Recipients Termination of Service is on account of any other reason, then all unvested RSUs shall be forfeited as of the end of the day of such Termination of Service. |
2. | Fractional Shares. If any calculation of Shares to be awarded or to be forfeited or to be released from restrictions or limitations would result in a fraction, any fraction of 0.5 or greater will be rounded to one, and any fraction of less than 0.5 will be rounded to zero. |
3. | Ratification of Actions. By accepting the RSU Award or other benefit under the Plan, the Recipient and each person claiming under or through him shall be conclusively deemed to have indicated the Recipients acceptance and ratification of, and consent to, any action taken under the Plan or the RSU Award by the Company, the Board or the Committee. |
4. | Notices. Any notice hereunder to the Company shall be addressed to its Vice President, Human Resources, and any notice hereunder to Recipient shall be addressed to him or her at the address contained in the Companys records, subject to the right of either party to designate at any time hereafter in writing some other address. |
5. | Nontransferability. Recipient may not sell, transfer, assign, pledge or otherwise dispose of the RSUs covered by this RSU Award Agreement, other than by will or by the laws of descent and distribution until the Share Payment Date. |
2
[Non-Employee Director RSU Non-Deferral]
6. | Governing Law and Severability. This RSU Award Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. To the extent not preempted by Federal law, the RSU Award Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of law provisions. The provisions of this RSU Award Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable. |
7. | Definitions. Capitalized terms not otherwise defined in the RSU Award Agreement or in this Annex A attached thereto shall have the meanings given them in the Plan. |
8. | Code Section 409A. It is intended that this RSU Award Agreement will be exempt from the application of Code Section 409A to the extent applicable, and the Plan and the RSU Award Agreement shall be interpreted and construed on a basis consistent with such intent. The RSU Award Agreement may be amended in any respect deemed necessary (including retroactively) by the Committee in order to preserve exemption from (or compliance with) Code Section 409A. The preceding shall not be construed as a guarantee of any particular tax effect for any benefits or amounts paid pursuant to this RSU Award Agreement. |
9. | Waiver . The Recipient and every person claiming under or through the Recipient hereby waives to the fullest extent permitted by applicable law any right to a trial by jury with respect to any litigation directly or indirectly arising out of, under, or in connection with the Plan or this RSU Award Agreement issued pursuant to the Plan. |
10. | Interpretation. The Committee shall have final authority to interpret and construe the Plan and this RSU Award Agreement and to make any and all determinations thereunder, and its decision shall be binding and conclusive upon the Recipient and his/her legal representative in respect of any questions arising under the Plan or this RSU Award Agreement. |
11. | Securities Laws . The Recipient acknowledges that certain restrictions under state or federal securities laws may apply with respect to the Shares underlying the RSUs granted pursuant to this RSU Award Agreement, even after the Shares have been delivered to the Recipient. Specifically, Recipient acknowledges that, to the extent he or she is an affiliate of the Company (as that term is defined by the Securities Act of 1933), the Shares underlying the RSUs granted pursuant to this RSU Award Agreement are subject to certain trading restrictions under applicable securities laws (including particularly the Securities and Exchange Commissions Rule 144). Recipient hereby agrees to execute such documents and take such actions as the Company may reasonably require with respect to state and federal securities laws and any restrictions on the resale of such shares which may pertain under such laws. |
3
Exhibit 10.36
[Non-Employee Director RSU Deferral]
John B. Sanfilippo & Son, Inc. 2014 Omnibus Incentive Plan
Restricted Stock Unit Award Agreement
[Insert Date]
[Insert Name of Participant ]
In accordance with the terms of the John B. Sanfilippo & Son, Inc. 2014 Omnibus Incentive Plan (the Plan), pursuant to action of the Board of John B. Sanfilippo & Son, Inc. (the Company), the Company hereby grants to you (the Recipient), subject to the terms and conditions set forth in this Restricted Stock Unit Award Agreement (including Annex A hereto), Restricted Stock Units (RSUs), as set forth below.
Unless otherwise specified, capitalized terms shall have the meanings specified in the Plan. The terms and conditions of the Plan are incorporated by reference and govern except to the extent that, when permitted by the Plan, this RSU Award Agreement provides otherwise.
Each RSU corresponds to one Share and is an unfunded and unsecured promise by the Company to deliver such Share on a future date as set forth herein. Until such delivery, you only have the rights of a general unsecured creditor of the Company and not as a stockholder with respect to the Shares underlying your RSUs.
Number of RSUs Granted: | [#] | |
Date of Grant: | [xx/xx/xxxx] | |
Period of Restriction: | Date of Grant through the date of the Companys fiscal _____ Annual Meeting of stockholders. | |
Share Payment Date: | Each RSU for which the Period of Restrictions has lapsed will convert to one Share on the day following the Recipients Termination of Service, with the Share being delivered to the Recipient as soon as administratively possible thereafter (but no later than 60 days thereafter). |
[Non-Employee Director RSU Deferral]
Dividend Equivalents: | During the period from the first day after the Period of Restriction through the Share Payment Date, each RSU shall include a right to Dividend Equivalents, if any, issuable during such period and for which the applicable record date occurs during such period. Such Dividend Equivalents shall be paid to the Recipient on a current basis. Dividend Equivalents are dividends or property distributions that would have been made in respect of each Share underlying an RSU (other than dividends or distributions of securities to the extent covered in Section 4.4 of the Plan). |
RSUs are subject to forfeiture as provided herein (including Annex A) and the Plan.
Further terms and conditions of your Award of RSUs are set forth in Annex A, which is an integral part of this RSU Award Agreement.
By accepting this Award, you hereby acknowledge the receipt of a copy of this RSU Award Agreement including Annex A, and a copy of the Plan and agree to be bound by all terms and provisions hereof and thereto.
Tom Fordonski
Senior Vice President, Human Resources
John B. Sanfilippo & Son, Inc.
2
[Non-Employee Director RSU Deferral]
Annex A
Restricted Stock Unit Award Agreement
Further Terms and Conditions of Award. It is understood and agreed that the Award of RSUs evidenced by the RSU Award Agreement to which this is annexed is subject to the following additional terms and conditions:
1. | Termination of Service. Upon the Recipients Termination of Service, all unvested RSUs, (RSUs for which the Period of Restriction has not lapsed) shall be treated as follows: |
a. | Death or Permanent Disability If the Recipients Termination of Service is on account of death or Disability, then all of the unvested RSUs shall immediately become nonforfeitable and the restrictions with respect to the RSUs shall lapse as of the date of death or the date the Compensation Committee of the Company (the Committee) determines that a Disability occurred; |
b. | Retirement If the Recipients Termination of Service is on account of Retirement, then all unvested RSUs shall immediately become nonforfeitable and the restrictions with respect to such RSUs shall lapse as of the date of such Termination of Service; and |
c. | Any Other Reason If the Recipients Termination of Service is on account of any other reason, then all unvested RSUs shall be forfeited as of the end of the day of such Termination of Service. |
2. | Fractional Shares. If any calculation of Shares to be awarded or to be forfeited or to be released from restrictions or limitations would result in a fraction, any fraction of 0.5 or greater will be rounded to one, and any fraction of less than 0.5 will be rounded to zero. |
3. | Ratification of Actions. By accepting the RSU Award or other benefit under the Plan, the Recipient and each person claiming under or through him shall be conclusively deemed to have indicated the Recipients acceptance and ratification of, and consent to, any action taken under the Plan or the RSU Award by the Company, the Board or the Committee. |
4. | Notices. Any notice hereunder to the Company shall be addressed to its Vice President, Human Resources, and any notice hereunder to Recipient shall be addressed to him or her at the address contained in the Companys records, subject to the right of either party to designate at any time hereafter in writing some other address. |
5. | Nontransferability. Recipient may not sell, transfer, assign, pledge or otherwise dispose of the RSUs covered by this RSU Award Agreement, other than by will or by the laws of descent and distribution until the Share Payment Date. |
3
[Non-Employee Director RSU Deferral]
6. | Governing Law and Severability. This RSU Award Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. To the extent not preempted by Federal law, the RSU Award Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of law provisions. The provisions of this RSU Award Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable. |
7. | Definitions. Capitalized terms not otherwise defined in the RSU Award Agreement or in this Annex A attached thereto shall have the meanings given them in the Plan. |
8. | Code Section 409A. It is intended that this RSU Award Agreement will comply with Code Section 409A to the extent applicable, and the Plan and the RSU Award Agreement shall be interpreted and construed on a basis consistent with such intent. The RSU Award Agreement may be amended in any respect deemed necessary (including retroactively) by the Committee in order to preserve compliance with (or exemption from) Code Section 409A. The preceding shall not be construed as a guarantee of any particular tax effect for any benefits or amounts deferred or paid pursuant to this RSU Award Agreement. |
9. | Waiver . The Recipient and every person claiming under or through the Recipient hereby waives to the fullest extent permitted by applicable law any right to a trial by jury with respect to any litigation directly or indirectly arising out of, under, or in connection with the Plan or this RSU Award Agreement issued pursuant to the Plan. |
10. | Interpretation. The Committee shall have final authority to interpret and construe the Plan and this RSU Award Agreement and to make any and all determinations thereunder, and its decision shall be binding and conclusive upon the Recipient and his/her legal representative in respect of any questions arising under the Plan or this RSU Award Agreement. |
11. | Securities Laws . The Recipient acknowledges that certain restrictions under state or federal securities laws may apply with respect to the Shares underlying the RSUs granted pursuant to this RSU Award Agreement, even after the Shares have been delivered to the Recipient. Specifically, Recipient acknowledges that, to the extent he or she is an affiliate of the Company (as that term is defined by the Securities Act of 1933), the Shares underlying the RSUs granted pursuant to this RSU Award Agreement are subject to certain trading restrictions under applicable securities laws (including particularly the Securities and Exchange Commissions Rule 144). Recipient hereby agrees to execute such documents and take such actions as the Company may reasonably require with respect to state and federal securities laws and any restrictions on the resale of such shares which may pertain under such laws. |
4
Exhibit 10.37
[Employee RSU]
John B. Sanfilippo & Son, Inc. 2014 Omnibus Incentive Plan
Restricted Stock Unit Award Agreement
[Insert Date]
[Insert Name of Participant
In accordance with the terms of the John B. Sanfilippo & Son, Inc. 2014 Omnibus Incentive Plan (the Plan), pursuant to action of the Compensation Committee (the Committee) of the Board of John B. Sanfilippo & Son, Inc. (the Company), the Company hereby grants to you (the Recipient), subject to the terms and conditions set forth in this Restricted Stock Unit Award Agreement (including Annex A hereto), Restricted Stock Units (RSUs), as set forth below.
Unless otherwise specified, capitalized terms shall have the meanings specified in the Plan. The terms and conditions of the Plan are incorporated by reference and govern except to the extent that, when permitted by the Plan, this RSU Award Agreement provides otherwise.
Each RSU corresponds to one Share and is an unfunded and unsecured promise by the Company to deliver one Share on a future date as set forth herein. Until such delivery, you only have the rights of a general unsecured creditor of the Company and not as a stockholder with respect to the Shares underlying your RSUs.
Number of RSUs Granted: | [#] | |
Date of Grant: | [xx/xx/xxxx] | |
Period of Restriction: | Date of Grant through [xx/xx/xxxx] | |
Share Payment Date: | Each RSU will convert to one Share on the day following the date the Period of Restriction ends with respect to that RSU, or such other date(s) as are specified by the Recipient in a valid deferral election filed with the Company, with the Share being delivered to the Recipient as soon as administratively possible thereafter, (but no later than 60 days thereafter). |
[Employee RSU]
Dividend Equivalents: | If a valid deferral election is made by the Recipient, then during the period from the first day after the Period of Restriction through the Share Payment Date, each RSU shall include a right to Dividend Equivalents, if any, issuable during such period and for which the applicable record date occurs during such period. Such Dividend Equivalents shall be paid to the Recipient on a current basis (less applicable withholding). Dividend Equivalents are a right to receive an amount equal to the dividends or property distributions that would have been made in respect of each Share underlying an RSU (other than dividends or distributions of securities to the extent covered in Section 4.4 of the Plan). |
RSUs are subject to forfeiture as provided herein (including Annex A) and the Plan.
Further terms and conditions of your Award of RSUs are set forth in Annex A, which is an integral part of this RSU Award Agreement.
By accepting this Award, you hereby acknowledge the receipt of a copy of this RSU Award Agreement including Annex A, and a copy of the Plan and agree to be bound by all terms and provisions hereof and thereto.
Tom Fordonski
Sr. Vice President, Human Resources
John B. Sanfilippo & Son, Inc.
2
[Employee RSU]
Annex A
Restricted Stock Unit Award Agreement
Further Terms and Conditions of Award. It is understood and agreed that the Award of RSUs evidenced by the RSU Award Agreement to which this is annexed is subject to the following additional terms and conditions:
1. | Termination of Service. Upon the Recipients Termination of Service, all unvested RSUs (RSUs for which the Period of Restriction has not lapsed) shall be treated as follows: |
a. | Death or Disability If the Recipients Termination of Service is on account of death or Disability, then all unvested RSUs shall immediately become nonforfeitable and the restrictions with respect to such RSUs shall lapse as of the date of death or the date the Committee determines that the Disability occurred, as applicable; |
b. | Retirement with Proper Advance Notice If the Recipients Termination of Service is on account of Retirement and the Recipient provided an officer of the Company at least 365 days advance written notice of the date of such Retirement, then all unvested RSUs shall immediately become nonforfeitable and the restrictions with respect to such RSUs shall lapse as of the date of such Termination of Service; and |
c. | Retirement without Proper Advance Notice If the Recipients Termination of Service is on account of Retirement and the Recipient failed to provide an officer of the Company at least 365 days advance written notice of the date of such Retirement, then all unvested RSUs shall be forfeited as of the end of the day of such Termination of Service unless the Committee, in its sole discretion, determines that all or some portion of such unvested RSUs shall become nonforfeitable and the restrictions with respect to such RSUs shall lapse as of the date of Retirement. |
d. | Any Other Reason If the Recipients Termination of Service is on account of any other reason, then all unvested RSUs shall be forfeited as of the end of the day of such Termination of Service. |
2. | Share Payment Date Deferral. If the Recipient makes a valid deferral election with respect to the RSUs in accordance with the requirements of Code Section 409A and as prescribed by the Committee, then the Shares underlying the RSUs for which restrictions have lapsed shall be paid out in accordance with such deferral election. Notwithstanding anything else herein to the contrary, if Recipient is a specified employee for purposes of Code Section 409A at the time of the Recipients Termination of Service and if an exception under Code Section 409A does not apply, any payment to the Recipient under this RSU Award Agreement that is payable on account of a Termination of Service (other than death or Disability) shall be delayed until six (6) months after the Recipients Termination of Service (other than death or Disability) as required by Code Section 409A. |
3
[Employee RSU]
3. | Fractional Shares. If any calculation of Shares to be awarded or to be forfeited or to be released from restrictions or limitations would result in a fraction, any fraction of 0.5 or greater will be rounded to one, and any fraction of less than 0.5 will be rounded to zero. |
4. | Tax Withholding. With respect to the minimum statutory tax withholding required upon the date the Period of Restriction ends, the Company may satisfy such withholding requirements by withholding from other wages, compensation and amounts otherwise owed to the Recipient or, at the written election of the Participant, by withholding Shares upon the date that the restrictions lapse to such RSUs, in whole or in part, but only with regard to that portion of the RSUs for which the Period of Restriction has ended. |
5. | Ratification of Actions. By accepting the RSU Award or other benefit under the Plan, the Recipient and each person claiming under or through him shall be conclusively deemed to have indicated the Recipients acceptance and ratification of, and consent to, any action taken under the Plan or the RSU Award by the Company, the Board or the Committee. |
6. | Notices. Any notice hereunder to the Company shall be addressed to its Vice President, Human Resources, and any notice hereunder to Recipient shall be addressed to him or her at the address contained in the Companys records, subject to the right of either party to designate at any time hereafter in writing some other address. |
7. | Nontransferability. Recipient may not sell, transfer, assign, pledge or otherwise dispose of the RSUs covered by this RSU Award Agreement, other than by will or by the laws of descent and distribution until the Share Payment Date. |
8. | No Employment Rights. This RSU Award Agreement does not provide Recipient with any rights to continued employment with the Company or a Subsidiary. The Company and its Subsidiaries reserve the right to terminate Recipients employment at any time, with or without cause. |
9. | Governing Law and Severability. This RSU Award Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. To the extent not preempted by Federal law, the RSU Award Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of law provisions. The provisions of this RSU Award Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable. |
10. | Definitions. Capitalized terms not otherwise defined in the RSU Award Agreement or in this Annex A attached thereto shall have the meanings given them in the Plan. |
11. | Code Section 409A. It is intended that this RSU Award Agreement will either comply with or be exempt from Code Section 409A to the extent applicable, and the Plan and the RSU Award Agreement shall be interpreted and construed on a basis consistent with such intent. The RSU Award Agreement may be amended in any respect deemed necessary (including retroactively) by the Committee in order to preserve compliance with (or exemption from) Code Section 409A. The preceding shall not be construed as a guarantee of any particular tax effect for any benefits or amounts deferred or paid pursuant to this RSU Award Agreement. |
4
[Employee RSU]
12. | Waiver. The Recipient and every person claiming under or through the Recipient hereby waives to the fullest extent permitted by applicable law any right to a trial by jury with respect to any litigation directly or indirectly arising out of, under, or in connection with the Plan or this RSU Award Agreement issued pursuant to the Plan. |
13. | Interpretation. The Committee shall have final authority to interpret and construe the Plan and this RSU Award Agreement and to make any and all determinations thereunder, and its decision shall be binding and conclusive upon the Recipient and his/her legal representative in respect of any questions arising under the Plan or this RSU Award Agreement. |
14. | Securities Laws . The Recipient acknowledges that certain restrictions under state or federal securities laws may apply with respect to the Shares underlying the RSUs granted pursuant to this RSU Award Agreement, even after the Shares have been delivered to the Recipient. Specifically, Recipient acknowledges that, to the extent he or she is an affiliate of the Company (as that term is defined by the Securities Act of 1933), the Shares underlying the RSUs granted pursuant to this RSU Award Agreement are subject to certain trading restrictions under applicable securities laws (including particularly the Securities and Exchange Commissions Rule 144). Recipient hereby agrees to execute such documents and take such actions as the Company may reasonably require with respect to state and federal securities laws and any restrictions on the resale of such shares which may pertain under such laws. |
5
Exhibit 31.1
CERTIFICATION
I, Jeffrey T. Sanfilippo, certify that:
1. | I have reviewed this Report on Form 10-Q of John B. Sanfilippo & Son, Inc. for the quarter ended September 25, 2014; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
October 29, 2014
/s/ Jeffrey T. Sanfilippo |
Jeffrey T. Sanfilippo |
Chairman of the Board and |
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Michael J. Valentine, certify that:
1. | I have reviewed this Report on Form 10-Q of John B. Sanfilippo & Son, Inc. for the quarter ended September 25, 2014; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
October 29, 2014
/s/ Michael J. Valentine Michael J. Valentine Chief Financial Officer, Group President and Secretary |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of John B. Sanfilippo & Son, Inc. (the Company) on Form 10-Q for the quarter ended September 25, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Jeffrey T. Sanfilippo, Chief Executive Officer and Chairman of the Board, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
October 29, 2014
/s/ Jeffrey T. Sanfilippo |
Jeffrey T. Sanfilippo |
Chief Executive Officer and Chairman of the Board |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of John B. Sanfilippo & Son, Inc. (the Company) on Form 10-Q for the quarter ended September 25, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Michael J. Valentine, Chief Financial Officer, Group President and Secretary, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
October 29, 2014
/s/ Michael J. Valentine Michael J. Valentine |
Chief Financial Officer, Group President and Secretary |