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John B. Sanfilippo & Son Inc. Reports Operating Results (10-Q)

January 25, 2011 | About:
10qk

10qk

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John B. Sanfilippo & Son Inc. (JBSS) filed Quarterly Report for the period ended 2010-12-23.

Sanfilippo Jb&s has a market cap of $127.7 million; its shares were traded at around $12 with a P/E ratio of 12.1 and P/S ratio of 0.2. Hedge Fund Gurus that owns JBSS: Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Total operating expenses for second quarter of fiscal 2011 were favorably impacted by a $1.1 million insurance settlement related to the fiscal 2009 pistachio recall and a $1.5 million for the estimated forfeiture of amounts previously accrued for incentive compensation due to current year performance. These favorable items were offset in part by an increase in the OVH earn-out liability of $0.8 million and an increase in the accrual for a pending legal matter of $0.9 million. For the first twenty-six weeks of fiscal 2011, total operating expenses include $1.5 million for the OVH earn-out liability and $1.1 million for the accrual for a pending legal matter. The expenses related to the OVH earn-out liability reflect changes in the estimated amounts to be paid as additional consideration to the acquisition price if OVH sales exceed certain targets.

Selling and administrative expenses for the second quarter of fiscal 2011 decreased to 7.8% of net sales from 9.6% of net sales for the second quarter of fiscal 2010. Selling expenses for the second quarter of fiscal 2011 and second quarter of fiscal 2010 were $11.8 million. Quarterly increases in selling expenses related to freight costs of $0.9 million were offset by a $1.0 million decrease in incentive compensation expense, $0.5 million of which relates to the estimated forfeiture of amounts previously accrued for incentive compensation due to current year performance. Administrative expenses for the second quarter of fiscal 2011 were $5.6 million, an increase of 0.7% from the second quarter of fiscal 2010. This slight increase is primarily due to (i) a $0.8 million increase in the projected earn-out payments related to the OVH acquisition, (ii) a $0.4 million in amortization related to OVH intangibles, (iii) a $0.9 million increase in litigation accruals, (iv) a $0.4 million write down of machinery and equipment related to the planned disposal of OVH equipment, and (v) a $0.2 million increase in compensation expense. These increases in administrative expenses were offset by (i) a $1.1 million settlement related to the fiscal 2009 pistachio recall and (ii) a $1.9 million reduction in incentive compensation expense, $1.0 million of which relates to the estimated forfeiture of amounts previously accrued for incentive compensation due to current year performance.

Selling and administrative expenses for the first twenty-six weeks of fiscal 2011 decreased to 9.3% of net sales from 10.3% of net sales for the first twenty-six weeks of fiscal 2010. Selling expenses for the first twenty-six weeks of fiscal 2011 were $22.0 million, an increase of $1.4 million, or 7.0%, over the amount recorded for the first twenty-six weeks of fiscal 2010. Increases in selling expenses related to (i) compensation expense of $0.5 million and (ii) freight costs of $1.5 million, which were partially offset by a $1.5 million decrease in incentive compensation expense, $0.5 million of which relates to the estimated forfeiture of amounts previously accrued for incentive compensation due to current year performance. Administrative expenses for the first twenty-six weeks of fiscal 2011 were $12.4 million, an increase of $1.4 million, or 13.2% from the first twenty-six weeks of fiscal 2010. This increase is primarily due to (i) a $1.5 million increase in the projected earn-out payments related to the OVH acquisition, (ii) a $1.0 million in amortization related to OVH intangibles, (iii) a $1.1 million increase in litigation accruals, (iv) a $0.4 million write down of machinery and equipment related to the planned disposal of OVH equipment, and (v) a $0.5 million increase in compensation expense. These increases in administrative expenses were offset by (i) a $1.1 million settlement related to the fiscal 2009 pistachio recall and (ii) a $2.8 million reduction in incentive compensation expense, $1.0 million of which relates to the estimated forfeiture of amounts previously accrued for incentive compensation due to current year performance.

Due to the factors discussed above, income from operations decreased to $9.9 million, or 4.4% of net sales, for the second quarter of fiscal 2011 from $15.4 million, or 8.5% of net sales, for the second quarter of fiscal 2010. Due to the factors discussed above, income from operations decreased to $13.4 million, or 3.6% of net sales, for the first twenty-six weeks of fiscal 2011 from $25.1 million, or 8.2% of net sales, for the first twenty-six weeks of fiscal 2010.

Net income was $5.2 million, or $0.48 per common share (basic and diluted), for the second quarter of fiscal 2011, compared to $8.8 million, or $0.83 per common share (basic) and $0.82 per common share(diluted), for the second quarter of fiscal 2010. Net income was $6.3 million, or $0.59 per common share (basic) and $0.58 per common share (diluted), for the first twenty-six weeks of fiscal 2011, compared to $13.6 million, or $1.28 per common share (basic) and $1.27 per common share(diluted), for the first twenty-six weeks of fiscal 2010.

Net accounts receivable were $46.0 million at December 23, 2010, an increase of $6.1 million, or 15.2%, from the balance at June 24, 2010, and an increase of $8.8 million, or 23.7%, from the balance at December 24, 2009. The increase in net accounts receivable from June 24, 2010 to December 23, 2010 is due primarily to higher sales in the month of December 2010 compared to June 2010 due to the seasonality in our business and higher average selling prices. The increase in net accounts receivable from December 24, 2009 to December 23, 2010 is due to higher sales in December 2010 compared to December 2009, which was largely due to OVH sales and higher average selling prices. Accounts receivable allowances were $5.6 million, $2.1 million and $3.7 million at December 23, 2010, June 24, 2010 and December 24, 2009, respectively. The increase in accounts receivable allowances at December 23, 2010 compared to June 24, 2010 and December 24, 2009 basically corresponds to the higher monthly sales in December 2010 compared to June 2010 and December 2009. Also, we experienced higher sales deduction activity during the month of December 2010 compared to June 2010 and December 2009.

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10qk
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