1 <TABLE> <CAPTION> SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________ <S> <C> 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 26, 1996 [ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________ to ______________ 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 (I.R.S. Employer of Incorporation or Organization) Identification Number) 2299 Busse Road Elk Grove Village, Illinois 60007 (Address of Principal Executive Offices, including Zip Code) (847) 593-2300 (Registrant's 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. Yes X No __________ As of November 11, 1996, 5,460,240 shares of the Registrant's Common Stock, $.01 par value per share, excluding 117,900 treasury shares and 3,687,426 shares of the Registrant's Class A Common Stock, $.01 par value per share, were outstanding. </TABLE>
2 JOHN B. SANFILIPPO & SON, INC. INDEX TO FORM 10-Q PART I. FINANCIAL INFORMATION PAGE NO. Item 1 -- Consolidated Financial Statements: Consolidated Statements of Operations for the quarters and thirty-nine weeks ended September 26, 1996 and September 28, 1995 . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Balance Sheets as of September 26, 1996 and December 31, 1995. . . . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows for the thirty-nine weeks ended September 26, 1996 and September 28, 1995 . . . . . . . . . . . . . . . . . . . . . . . 5 Notes to Consolidated Financial Statements . . . . . . . . . . . 6 Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . 9 PART II. OTHER INFORMATION Item 2 -- Changes in Securities. . . . . . . . . . . . . . . . . . . . . .17 Item 6 -- Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . .17 SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 OMITTED FINANCIAL STATEMENTS None
3 PART I. FINANCIAL INFORMATION Item 1 -- Financial Statements JOHN B. SANFILIPPO & SON, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except earnings per share) <TABLE> <CAPTION> For The For The Thirty-Nine Quarter Ended Weeks Ended -------------- ------------------- September 26, September 28, September 26, September 28, 1996 1995 1996 1995 ------------- ------------- ------------- ------------- <S> <C> <C> <C> <C> Net sales. . . . . . . . . . . . . . $ 70,373 $ 67,048 $ 188,341 $ 172,955 Cost of sales. . . . . . . . . . . . 64,198 54,959 164,691 140,929 ------------- ------------- ------------- ------------- Gross profit . . . . . . . . . . . . 6,175 12,089 23,650 32,026 ------------- ------------- ------------- ------------- Selling expenses . . . . . . . . . . 5,945 4,975 16,351 14,571 Administrative expenses. . . . . . . 2,528 2,479 8,172 7,214 ------------- ------------- ------------- ------------- 8,473 7,454 24,523 21,785 ------------- ------------- ------------- ------------- Income (loss) from operations. . . . (2,298) 4,635 (873) 10,241 ------------- ------------- ------------- ------------- Other income (expense): Interest expense. . . . . . . . (2,073) (1,779) (6,895) (5,641) Interest income . . . . . . . . 5 28 22 173 Gain on disposition of properties 0 0 7 22 Rental income . . . . . . . . . 93 90 308 267 ------------- ------------- ------------- ------------- (1,975) (1,661) (6,558) (5,179) ------------- ------------- ------------- ------------- Income (loss) before income taxes. . (4,273) 2,974 (7,431) 5,062 Income tax (expense) benefit . . . . 1,683 (1,190) 2,894 (2,025) ------------- ------------- ------------- ------------- Net income (loss). . . . . . . . . . $ (2,590) $ 1,784 $ (4,537) $ 3,037 ============= ============= ============= ============= Earnings (loss) per common share . . $ (0.28) $ 0.20 $ (0.49) $ 0.34 ============= ============= ============= ============= </TABLE> The accompanying notes are an integral part of these financial statements.
4 JOHN B. SANFILIPPO & SON, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) September 26, December 31, 1996 1995 ------------- ------------ (Unaudited) ASSETS - ------ CURRENT ASSETS: Cash. . . . . . . . . . . . . . $ 105 $ 408 Accounts receivable, net. . . . 24,010 27,789 Inventories . . . . . . . . . . 76,071 96,360 Stockholder note receivable . . --- 354 Deferred income taxes . . . . . 762 762 Prepaid expenses and other current assets 4,784 682 ------------- ------------ TOTAL CURRENT ASSETS. . . . . . . . . . . 105,732 126,355 ------------- ------------ PROPERTIES: Buildings . . . . . . . . . . . . . . . 54,939 47,831 Machinery and equipment . . . . . . . . 60,513 52,825 Furniture and leasehold improvements. . 4,921 4,813 Vehicles. . . . . . . . . . . . . . . . 4,031 3,494 Construction in progress. . . . . . . . 1,314 8,977 ------------- ------------ 125,718 117,940 Less: Accumulated depreciation . . . . 48,122 42,854 ------------- ------------ 77,596 75,086 Land. . . . . . . . . . . . . . . . . . 1,945 1,945 ------------- ------------ 79,541 77,031 ------------- ------------ OTHER ASSETS: Goodwill and other intangibles. . . . . 8,897 9,450 Miscellaneous . . . . . . . . . . . . . 6,375 6,166 ------------- ------------ 15,272 15,616 ------------- ------------ $ 200,545 $ 219,002 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Notes payable . . . . . . . . . . . . . $ 24,371 $ 28,582 Current maturities. . . . . . . . . . . 12,713 3,586 Accounts payable. . . . . . . . . . . . 19,639 26,727 Accrued expenses. . . . . . . . . . . . 8,044 8,668 Income taxes payable. . . . . . . . . . --- 644 ------------- ------------ TOTAL CURRENT LIABILITIES . . . . . . . . 64,767 68,207 ------------- ------------ LONG-TERM DEBT. . . . . . . . . . . . . . 64,202 74,681 ------------- ------------ LONG-TERM DEFERRED INCOME TAXES . . . . . 503 503 ------------- ------------ STOCKHOLDERS' EQUITY Preferred Stock . . . . . . . . . . . . --- --- Class A Common Stock. . . . . . . . . . 37 37 Common Stock. . . . . . . . . . . . . . 56 56 Capital in excess of par value. . . . . 57,191 57,191 Retained earnings . . . . . . . . . . . 14,993 19,531 Treasury stock. . . . . . . . . . . . . (1,204) (1,204) ------------- ------------ 71,073 75,611 ------------- ------------ $ 200,545 $ 219,002 ============= ============ The accompanying notes are an integral part of these financial statements.
5 JOHN B. SANFILIPPO & SON, INC CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) <TABLE> <CAPTION> For The Thirty-Nine Weeks Ended ------------------- September 26, September 28, 1996 1995 ------------- ------------- <S> <C> <C> Cash flows from operating activities: Net income (loss). . . . . . . . . . . . . . . . . $ (4,537) $ 3,037 Adjustments: Depreciation and amortization. . . . . . . . . . . 6,249 5,508 Gain on disposition of properties. . . . . . . . (7) (22) Change in current assets and current liabilities: Accounts receivable, net . . . . . . . . . . . 3,779 (2,793) Inventories. . . . . . . . . . . . . . . . . . 20,289 9,689 Prepaid expenses and other current assets . . . . . . . . . . . . . . . (4,102) 1,061 Accounts payable . . . . . . . . . . . . . . . (7,088) (3,489) Accrued expenses . . . . . . . . . . . . . . . (624) 2,726 Income taxes payable . . . . . . . . . . . . . (644) 691 ------------- ------------ Net cash provided by operating activities. . . . . 13,315 16,408 ------------- ------------ Cash flows from investing activities: Acquisition of properties. . . . . . . . . . . . . (6,562) (7,326) Proceeds from disposition of properties. . . . . . 10 50 Stockholder note receivable. . . . . . . . . . . . 354 91 Note receivable from affiliate, net of repayments . . . . . . . . . . . . . . . . . . . --- 5,790 Other. . . . . . . . . . . . . . . . . . . . . . . (603) (3,550) Payments to acquire Machine Design, net of cash received . . . . . . . . . . . . . . . . . . . . --- (31) ------------- ------------ Net cash (used in) investing activities. . . . . . (6,801) (4,976) ------------- ------------ Cash flows from financing activities: Borrowings on notes payable. . . . . . . . . . . . 53,309 50,436 Repayments on notes payable. . . . . . . . . . . . (57,524) (83,648) Proceeds from long-term debt . . . . . . . . . . . 191 27,500 Principal payments on long-term debt . . . . . . . (2,793) (5,354) Proceeds from the issuance of stock. . . . . . . . --- 210 ------------- ------------ Net cash (used in) financing activities. . . . . . (6,817) (10,856) ------------- ------------ Net increase (decrease) in cash. . . . . . . . . . (303) 576 Cash: Beginning of period. . . . . . . . . . . . . . . . 408 515 ------------- ------------ End of period. . . . . . . . . . . . . . . . . . . $ 105 $ 1,091 ============= ============ Supplemental Disclosures: Interest paid. . . . . . . . . . . . . . . . . . . $ 7,176 $ 5,405 Taxes paid . . . . . . . . . . . . . . . . . . . . 1,185 1,675 Supplemental Disclosure of noncash investing and financing activities: Acquisition of Fisher Nut properties payable pursuant to a promissory note. . . . . . . . 1,250 --- Acquisition of Machine Design. . . . . . . . . --- 1,520 </TABLE> The accompanying notes are an integral part of these financial statements.
6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands, except per share data) Note 1 - Notes Payable - ----------------------- On March 27, 1996, John B. Sanfilippo & Son, Inc. (the "Company" or "JBS") entered into a new unsecured credit facility, with certain banks, totalling $60,000 (the "Bank Credit Facility"). The Bank Credit Facility is comprised of (i) a working capital revolving loan which (as described below, depending on the time of year) provides for working capital financing of up to approximately $51,740, in the aggregate, and matures on March 27, 1998, and (ii) an $8,260 standby letter of credit which matures on June 1, 1997. The Bank Credit Facility replaced the Company's prior unsecured credit facility which was in effect until the Bank Credit Facility was entered into. Borrowings under the working capital revolving loan accrue interest at a rate (the weighted average of which was 6.79% at September 26, 1996) determined pursuant to a formula based on the agent bank's quoted rate, the Federal Funds Rate and the Eurodollar Interbank Rate. The standby letter of credit replaced a prior letter of credit securing certain industrial development bonds which financed the original acquisition, construction, and equipping of the Company's Bainbridge, Georgia facility. In addition to the Bank Credit Facility, the Company has entered into (i) an unsecured long-term financing facility totalling $35.0 million (the "Long-Term Financing Facility"), and (ii) an unsecured long-term financing arrangement totalling $25.0 million (the "Additional Long-Term Financing"). See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources". The Bank Credit Facility, as amended, includes certain restrictive covenants that, among other things; (i) require the Company to maintain a minimum tangible net worth; (ii) comply with specified ratios; (iii) limit 1996 and 1997 annual capital expenditures to $8,200 (excluding expenditures related to the Fisher Nut business) and $7,200, respectively; (iv) restrict dividends to 25% of cumulative net earnings from January 1, 1996; and (v) require that certain officers and stockholders of the Company, together with their respective immediate family members and certain trusts created for the benefit of their respective children, continue to own shares representing the right to elect a majority of the directors of the Company. As of the end of the second quarter of 1996, the Company was not in compliance with the fixed charge coverage ratio covenants under the Bank Credit Facility and the Additional Long-Term Financing. In addition, on August 1, 1996 the Company violated the "clean down covenant" under the Bank Credit Facility, which requires that the aggregate amount outstanding under the Bank Credit Facility from August 1 through September 30 of each year not exceed $25,000. As of August 1, 1996, the Company's aggregate borrowings under the Bank Credit Facility totalled approximately $35,000. On September 9, 1996, the Company entered into Amendment No. 1 and Waiver to Credit Agreement ("Amendment No. 1") under the Bank Credit Facility. Amendment No. 1 waived the Company's failure to comply with the fixed charge coverage ratio covenant for the quarter ended June 27, 1996. Amendment No. 1 also amended the Bank Credit Facility's "clean down covenant" to increase the aggregate amount of indebtedness permitted to be outstanding from August 1, 1996 through September 30, 1996 from $25,000 to $40,000. Amendment No. 1 also, among other things, (a) reduced the capital expenditure limitation (excluding expenditures related to the Fisher Nut business) to $8,200 from $10,000 for 1996, and (b) increased the interest rate under the Bank Credit Facility by .50%. The Company also received from its lender under (i) the Additional Long-Term Financing a waiver of the above-described fixed charge coverage ratio violation and any cross-default under the Additional Long-Term Financing caused by the above-described violations under the Bank Credit Facility, and (ii) the Long-Term Financing Facility a waiver of the cross-default under that facility caused by the above-described violations under the Bank Credit Facility and the Additional Long-Term Financing. As of the end of the third quarter of 1996, the Company was not in compliance with the fixed charge coverage ratio covenants under the Bank Credit Facility, the Long-Term Financing Facility and the Additional Long- Term Financing. The Company entered into Amendment No. 2 and Waiver to Credit Agreement ("Amendment No. 2") as of October 30, 1996 under the Bank Credit Facility. Amendment No. 2 waived the Company's failure to comply with the fixed charge coverage ratio covenant for the quarter ended September 26, 1996. Amendment No. 2 also requires the Company to amend the Bank Credit Facility to, among other things: (i) convert the fixed charge coverage ratio covenant from a most recent four quarter calculation to an individual quarter
7 calculation, beginning with the quarter ending December 31, 1996 and continuing for each of the next four quarters; (ii) decrease the annual capital expenditure limitation to $7,200 from $10,000 for 1997; (iii) increase the aggregate amount outstanding limitation under the Bank Credit Facility's "clean down covenant" to $40,000 from $25,000, for the period from August 1, 1997 through September 30, 1997; and (iv) grant, by November 27, 1996, (a) a first priority perfected security interest and lien in substantially all of the Company's assets to secure the Company's obligations under the Bank Credit Facility, the Long-Term Financing Facility and the senior portion of the Additional Long-Term Financing; and (b) a junior security interest in the Company's assets to secure the obligations under the subordinated portion of the Additional Long-Term Financing. The Company also received from the lender under (i) the Additional Long-Term Financing a waiver of the above-described fixed charge coverage ratio violation and any cross-default under the Additional Long-Term Financing caused by violations under the Bank Credit Facility and the Long-Term Financing Facility, and (ii) the Long-Term Financing Facility a waiver of the above-described fixed charge coverage ratio violation and any cross-default under the Long-Term Financing Facility caused by violations under the Bank Credit Facility and the Additional Long-Term Financing. The Company also anticipates amending both the Long-Term Financing Facility and the Additional Long-Term Financing to conform them with the amended Bank Credit Facility. For further information regarding the terms of the amendments to the Bank Credit Facility see "Managements Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." Note 2 - Inventories - -------------------- Inventories are stated at the lower of cost (first in, first out) or market. Inventories consist of the following: September 26, December 31, 1996 1995 ------------- ------------ Raw material and supplies $ 45,176 $ 70,465 Work-in-process and finished goods 30,895 25,895 ------ ------- $ 76,071 $ 96,360 ====== ====== Note 3 - Stock Option Plan - -------------------------- Options to purchase Common Stock granted under the Company's 1991 Stock Option Plan are exercisable 25% annually commencing on the first anniversary of the date of grant and become fully exercisable on the fourth anniversary of the date of grant. Effective February 28, 1995, the Board of Directors terminated early the 1991 Stock Option Plan. The termination of the 1991 Stock Option Plan did not, however, affect options granted under the 1991 Stock Option Plan which remained outstanding as of the effective date of such termination. Accordingly, the unexercised options outstanding under the 1991 Stock Option Plan at September 26, 1996 will continue to be governed by the terms of the 1991 Stock Option Plan. The following is a summary of activity under the 1991 Stock Option Plan during the thirty-nine weeks ended September 26, 1996: Number Option Price of Shares Per Share --------- ------------- Outstanding at December 31, 1995 344,150 $6.00-$16.50 Cancelled (49,850) $6.00-$15.00 -------- Outstanding at September 26, 1996 294,300 $6.00-$16.50 ======= Options exercisable at September 26, 1996 253,413 ======= Options available for grant at September 26, 1996 0 =======
8 Options to purchase Common Stock granted under the Company's 1995 Equity Incentive Plan are exercisable 25% annually commencing on the first anniversary of the date of grant and become fully exercisable on the fourth anniversary of the date of grant. On February 1, 1996, the Company's Stock Option Committee granted a stock option to purchase 2,000 shares of Common Stock at an exercise price of $8.625 per share, the closing price of the Common Stock on February 1, 1996. On April 30, 1996, the Company granted a stock option to purchase 1,000 shares of Common Stock to each of its three "outside directors" (i.e., directors who are not employees of the Company or any of its subsidiaries). These options were granted in accordance with a formula specified under the 1995 Equity Incentive Plan upon the election of such outside directors to the Company's Board on April 30, 1996 and, pursuant to such formula, have an exercise price of $6.625 per share, the closing price of the Common Stock on April 30, 1996. On June 24, 1996, the Company's Stock Option Committee granted a stock option to purchase 1,000 shares of Common Stock at an exercise price of $6.75, the closing price of the Common Stock on June 24, 1996. On August 5, 1996, the Company's Stock Option Committee granted a stock option to purchase 1,000 shares of Common Stock at an exercise price of $5.25, the closing price of the Common Stock on August 5, 1996. The following is a summary of activity under the 1995 Equity Incentive Plan: Number Option Price of Shares Per Share --------- -------------- Outstanding at December 31, 1995 92,300 $8.25-$10.50 Granted . 7,000 $5.25-$8.625 Cancelled (6,200) $9.375 -------- Outstanding at September 26, 1996 93,100 $5.25-$10.50 Options exercisable at September 26, 1996 1,500 ======== Options available for grant at September 26, 1996 106,900 ======== Note 4 - Earnings Per Common Share - ---------------------------------- Earnings per common share is calculated using the weighted average number of shares of Common Stock and Class A Common Stock outstanding during the period. Common stock equivalents (stock options) had an immaterial effect on earnings per share for the third quarter of 1996 and 1995 and, accordingly, have not been included in the weighted average shares outstanding. Fully diluted earnings per common share, which include the effect of conversion of common stock equivalents, for the third quarter of 1996 and 1995 are not materially different from the earnings per share presented. The weighted average number of shares aggregated 9,147,666 for both the third quarters of 1996 and 1995, and 9,147,666 and 9,044,111 for the thirty-nine weeks ended September 26, 1996 and September 28, 1995, respectively. Note 5 - Management's Statement - ------------------------------- The unaudited financial statements included herein have been prepared by the Company. In the opinion of the Company's management, these statements present fairly the consolidated statements of operations, consolidated balance sheets and consolidated statements of cash flows, and reflect all normal recurring adjustments which, in the opinion of management, are necessary for the fair presentation 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. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995.
9 Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations -------------------------------------------------- CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The statements contained in the following Management's Discussion and Analysis of Financial Condition and Results of Operations which are not historical are "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements, which are generally followed (and therefor identified) by a cross reference to "Factors That May Affect Future Results," represent the Company's present expectations or beliefs concerning future events. The Company cautions that such statements are qualified by important factors that could cause actual results to differ materially from those in the forward looking statements, including the factors described below under "Factors That May Affect Future Results." Results actually achieved thus may differ materially from expected results included in these statements. General - ------- The Company's business is seasonal. Demand for peanut and other nut products is highest during the months of October through December. Peanuts, pecans, walnuts, almonds and cashews, the Company's principal raw materials, are purchased primarily during the period from August to February and are processed throughout the year. As a result of this seasonality, the Company's personnel and working capital requirements peak during the last four months of the year. Also, due primarily to the seasonal nature of the Company's business, the Company maintains significant inventories of peanuts, pecans, walnuts, almonds and other nuts at certain times of the year, especially during the first and fourth quarters of each year. Fluctuations in the market prices of such nuts may affect the value of the Company's inventory and thus the Company's profitability. Declines in the market prices for pecans have negatively affected the Company's gross profit margins for the quarter and thirty-nine weeks ended September 26, 1996. Furthermore, the Company recorded a $2.6 million write down of its pecan inventory to market value as of September 26, 1996. At September 26, 1996, the Company's inventories totalled approximately $76.1 million compared to approximately $96.4 million at December 31, 1995, and approximately $79.3 million as of the end of the third quarter of 1995. See "-- Factors that May Affect Future Results -- Availability of Raw Materials and Market Price Fluctuations." The Company's net sales to industrial customers increased both in amount and as a percentage of the Company's total net sales from 1992 to 1995 due primarily to a combination of the Company's acquisition of Sunshine Nut Co., Inc. ("Sunshine"), which sells a greater portion of its products to industrial customers than JBS, and an overall increase in unit volume. In addition, the increase in the Company's processing and shelling capacity created by the Garysburg, North Carolina facility, the Selma, Texas facility and the Gustine, California facility has contributed to the increase in sales to industrial customers (which are generally made at lower margins than sales to other customers) both in amount and as a percentage of the Company's total net sales and could result in further such increases. See "-- Factors that May Affect Future Results -- Sales to Industrial Customers". Results of Operations - --------------------- Net Sales. Net sales increased from approximately $67.0 million in the third quarter of 1995 to approximately $70.3 million in the third quarter of 1996, an increase of approximately $3.3 million, or 5.0%. For the thirty- nine weeks ended September 26, 1996, net sales totalled approximately $188.3 million compared to approximately $173.0 million for the thirty-nine weeks ended September 28, 1995, representing an increase of approximately $15.4 million, or 8.9%. The increase in net sales for the quarter ended September 26, 1996 was due primarily to increased unit volume sales to the Company's retail customers. The increase in net sales
10 for the thirty-nine weeks ended September 26, 1996 was due primarily to increased unit volume sales to the Company's retail and industrial customers. The increase in net sales to retail customers for the quarter and thirty-nine weeks ended September 26, 1996 was due primarily to the additional sales generated by the Company's Fisher Nut division, which was acquired by the Company in the fourth quarter of 1995, and to additional sales generated under the Company's long-term supply contract with Preferred Products, Inc., a wholly-owned subsidiary of Supervalu, Inc., which was entered into in the first quarter of 1995. These increases in net sales to retail customers were partially offset by decreases in net sales to certain retail customers such as Sam's Club. During the first quarter of 1996, the Company was outbid for Sam's Club business, which accounted for approximately $23.4 million of the Company's net sales in 1995. See "--Gross Profit" and "Factors That May Affect Future Results - Competitive Environment". The increase in net sales to industrial customers for the thirty-nine weeks ended September 26 1996 was due primarily to additional unit volume sales by Sunshine during the first half of 1996. Net sales to industrial customers decreased in the third quarter of 1996 when compared to the third quarter of 1995 due primarily to lower selling prices for pecans. Net sales to the Company's contract manufacturing and government customers increased slightly for the quarter ended September 26, 1996, and are relatively unchanged for the thirty-nine weeks ended September 26, 1996. Net sales to food service customers increased for both the quarter and thirty-nine weeks ended September 26, 1996 due to higher sales to airlines. Gross Profit. Gross profit margin decreased from 18.0% in the third quarter of 1995 to 8.8% in the third quarter of 1996. For the thirty-nine weeks ended September 26, 1996, the gross profit margin decreased from 18.5% in 1995 to 12.6% in 1996. This decrease was due primarily to (i) declines in the market price for processed pecan meats throughout 1996 relative to the cost of pecan inventory, (ii) a $2.6 million write-down of pecan inventory to market value as of September 26, 1996, (iii) increases in raw material costs which the Company was unable to offset with increases in selling prices, and (iv) increases in production-related expenses resulting from the Company's relocation of its pecan shelling operations to a new facility, which began production in January 1996, and which during the first quarter of 1996, operated at levels of efficiency below those achieved at the Company's old pecan shelling facility. Selling and Administrative Expenses. Selling and administrative expenses as a percentage of net sales increased from 11.1% in the third quarter of 1995 to 12.0% in the third quarter of 1996. Selling expenses as a percentage of net sales increased from 7.4% in the third quarter of 1995 to 8.4% in the third quarter of 1996. Administrative expenses as a percentage of net sales decreased slightly from 3.7% in the third quarter of 1995 to 3.6% in the third quarter of 1996. Selling and administrative expenses as a percentage of net sales for the thirty-nine weeks ended September 26, 1996 increased from 12.6% for the thirty-nine weeks ended September 28, 1995 to 13.0% for the thirty-nine weeks ended September 26, 1996. Selling expenses as a percentage of net sales for the thirty-nine weeks ended September 26, 1996 increased to 8.7% from 8.4% for the same period in 1995. Administrative expenses as a percentage of net sales for the thirty-nine weeks ended September 26, 1996 increased slightly to 4.3% from 4.2% for the same period in 1995. The increase in selling expenses as a percentage of net sales for both the quarter and thirty-nine weeks ended June 27, 1996 was due primarily to higher promotional allowances and commissions. The slight decrease in administrative expenses as a percentage of net sales for the third quarter ended September 26, 1996 was due primarily to lower compensation related expenses. The increase in administrative expenses as a percentage of net sales for the thirty-nine weeks ended September 26, 1996 was due primarily to (i) higher staffing costs related to the Company's acquisition of the Fisher Nut business and at Sunshine, and (ii) amortization expense related to acquisitions. Income from Operations. Due to the factors discussed above, income from operations decreased from approximately $4.6 million in the third quarter of 1995 to a loss of approximately $2.3 million in the third quarter of 1996, a decrease of approximately $6.9 million, or 150.0%. For the thirty-nine weeks ended September 26, 1996, income from operations decreased from approximately $10.2 million to a loss of approximately $0.9 million, a decrease of approximately $11.1 million, or 108.5%. Interest Expense. Interest expense increased from approximately $1.8 million in the third quarter of 1995 to approximately $2.1 million in the third quarter of 1996, an increase of approximately $0.3 million, or 16.5%.
11 Interest expense for the thirty-nine weeks ended September 26, 1996 increased from approximately $5.6 million to approximately $6.9 million, an increase of approximately $1.3 million, or 22.2%. The increase for both the third quarter and thirty-nine weeks ended September 26, 1996 were due primarily to higher average level of borrowings, due to increased working capital, acquisitions and capital expenditures. Income Taxes. The Company recorded an income tax benefit of approximately $1.7 million, or 37.4% of the loss before income taxes, for the third quarter of 1996, and approximately $2.9 million, or 38.9% of the loss before income taxes, for the thirty-nine weeks ended September 26, 1996. Liquidity and Capital Resources - ------------------------------- During the third quarter of 1996, the Company continued to finance its activities through (i) an unsecured credit facility totalling $60.0 million entered into by the Company in 1996 (the "Bank Credit Facility"), (ii) an unsecured long-term financing facility totalling $35.0 million entered into by the Company in 1992 (the "Long-Term Financing Facility"), and (iii) an unsecured long-term financing arrangement totalling $25.0 million entered into by the Company in 1995 (the "Additional Long-Term Financing"). As more fully described below, at the end of the third quarter of 1996, the Company was not in compliance with the fixed charge coverage ratio covenants under the Bank Credit Facility, the Long-Term Financing Facility and the Additional Long-Term Financing. The Company entered into, as of October 30, 1996, Amendment No. 2 and Waiver to Credit Agreement ("Amendment No. 2") under the Bank Credit Facility. Amendment No. 2 waived the Company's non-compliance with the fixed charge coverage ratio covenant for the quarter ended September 26, 1996. Amendment No. 2 also requires the Company to amend the Bank Credit Facility to, among other things: (i) convert the fixed charge coverage ratio covenant from a most recent four quarter calculation to an individual quarter calculation, beginning with the quarter ending December 31, 1996 and continuing for each of the next four quarters; (ii) decrease the annual capital expenditure limitation to $7.2 million from $10.0 million for 1997; (iii) increase the aggregate amount outstanding limitation under the Bank Credit Facility's "clean down covenant" to $40.0 million from $25.0 million for the period from August 1, 1997 through September 30, 1997; and (iv) grant, by November 27, 1996, (a) a first priority perfected security interest and lien in substantially all of the Company's assets to secure the Company's obligations under the Bank Credit Facility, the Long-Term Financing Facility and the senior portion of the Additional Long-Term Financing; and (b) a junior security interest in the Company's assets to secure the obligations under the subordinated portion of the Additional Long-Term Financing. The Company also anticipates amending both the Long-Term Financing Facility and the Additional Long-Term Financing to conform them with the amended Bank Credit Facility. The Company also received from the lender under (i) the Additional Long-Term Financing a waiver of the above-described fixed charge coverage ratio violation and any cross-default under the Additional Long-Term Financing caused by violations under the Bank Credit Facility and the Long-Term Financing Facility, and (ii) the Long-Term Financing Facility a waiver of the above-described fixed charge coverage ratio violation and any cross-default under the Long-Term Financing Facility caused by violations under the Bank Credit Facility and the Additional Long-Term Financing. Net cash provided by operating activities was approximately $13.3 million for the thirty-nine weeks ended September 26, 1996 compared to approximately $16.4 million for the same period of 1995. The most significant factor in the approximately $3.1 million decrease in net cash provided by operating activities is that a net loss of approximately $4.5 million was incurred for the thirty-nine weeks ended September 26, 1996, compared to net income of approximately $3.0 in the comparable period of 1995. The largest component of net cash provided by operating activities was a decrease of approximately $20.2 million in inventories. The largest component of net cash used in investing activities for the thirty-nine weeks ended September 26, 1996 was approximately $6.6 million in capital expenditures. During the thirty-nine weeks ended September 26, 1996, the Company repaid approximately $2.8 million of long-term debt, compared to approximately $5.4 million for the same period in 1995. The Bank Credit Facility is comprised of (i) a working capital revolving loan which (as described below, depending on the time of year) provides for working capital financing of up to approximately $51.7 million, in the aggregate, and matures on March 27, 1998, and (ii) an $8.3 million letter
12 of credit to secure the industrial development bonds described below which mature on June 1, 1997. Borrowings under the working capital revolving loan accrue interest at a rate (the weighted average of which was 6.79% at September 26, 1996) determined pursuant to a formula based on the agent bank's quoted rate, the Federal Funds Rate and the Eurodollar Interbank Rate. The aggregate amount outstanding under the Bank Credit Facility is limited to specified amounts which vary, because of the seasonal nature of the Company's business, from $60.0 million during January through March, to $50.0 million during April through May, to $40.0 million during June through July, to $25.0 million during August through September, to $50.0 million during October through December. The Bank Credit Facility was amended as of August 1, 1996 to increase the aggregate outstanding limit for August through September of 1996 to $40.0 million. The Bank Credit Facility was amended as of October 30, 1996 to increase the aggregate outstanding limit for August through September of 1997 to $40.0 million. As of September 26, 1996, there was approximately $28.9 million of borrowings outstanding under the Bank Credit Facility. Of the total $35.0 million of borrowings under the Long-Term Financing Facility, $25.0 million matures on August 15, 2004, bears interest at rates ranging from 6.49% to 8.33% per annum payable quarterly, and requires equal semi-annual principal installments of approximately $1.3 million based on a ten-year amortization schedule. The remaining $10.0 million of this indebtedness matures on May 15, 2006, bears interest at the rate of 8.31% per annum payable quarterly, and requires semi-annual principal installments ranging from $0.5 million to $0.6 million based on a ten-year amortization schedule. As of September 26, 1996, there was approximately $30.2 million of borrowings outstanding under the Long-Term Financing Facility. The Additional Long-Term Financing has a maturity date of September 1, 2005 and (i) as to $10.0 million of the principal amount thereof, bears interest at an annual rate of 8.3% payable semiannually and, beginning on September 1, 1999, requires annual principal payments of approximately $1.4 million each through maturity, and (ii) as to the other $15.0 million of the principal amount thereof, bears interest at an annual rate of 9.38% payable semiannually and requires principal payments of $5.0 million each on September 1, 2003 and September 1, 2004, with a final payment of $5.0 million at maturity on September 1, 2005. As of September 26, 1996, there was approximately $25.0 million of borrowings outstanding under the Additional Long-Term Financing. The terms of the Company's financing facilities, as amended, include certain restrictive covenants that, among other things, (i) require the Company to maintain specified financial ratios, (ii) limit the amount the Company may spend annually on capital expenditures, and (iii) require that Jasper B. Sanfilippo (the Company's Chairman of the Board and Chief Executive Officer) and Mathias A. Valentine (a director and the Company's President) together with their respective immediate family members and certain trusts created for the benefit of their respective sons and daughters, continue to own shares representing the right to elect a majority of the directors of the Company. In addition, (i) the Long-Term Financing Facility limits the Company's payment of dividends to a cumulative amount not to exceed 25% of the company's cumulative net income from and after January 1, 1993, (ii) the Additional Long-Term Financing limits cumulative dividends to the sum of (a) 50% of the Company's cumulative net income (or minus 100% of the Company's cumulative net loss) from and after January 1, 1995 to the date the dividend is declared, (b) the cumulative amount of the net proceeds received by the Company during the same period from any sale of its capital stock, and, (c) $5.0 million, (iii) the Bank Credit Facility limits the Company's payment of dividends to a cumulative amount not to exceed 25% of the Company's net income from and after January 1, 1996, and (iv) the Bank Credit Facility prohibits the Company from spending more than $1.0 million to redeem shares of capital stock for the entire term of the agreement. As of the end of the second quarter of 1996, the Company was not in compliance with the fixed charge coverage ratio covenants under the Bank Credit Facility and the Additional Long-Term Financing. In addition, on August 1, 1996 the Company violated the "clean down covenant" under the Bank Credit Facility, which requires that the aggregate amount outstanding under the Bank Credit Facility from August 1 through September 30 of each year not exceed $25.0 million. As of August 1, 1996, the Company's aggregate borrowings under the Bank Credit Facility totalled approximately $35.0 million. On September 9, 1996, the Company entered into
13 Amendment No. 1 and Waiver to Credit Agreement ("Amendment No. 1") under the Bank Credit Facility. Amendment No. 1 waived the Company's failure to comply with the fixed charge coverage ratio covenant for the quarter ended June 27, 1996. Amendment No. 1 also amended the Bank Credit Facility's "clean down covenant" to increase the aggregate amount of indebtedness permitted to be outstanding under the Bank Credit Facility from August 1, 1996 through September 30, 1996 from $25.0 million to $40.0 million. Amendment No. 1 also, among other things, (a) reduced the capital expenditure limitation (excluding expenditures related to the Fisher Nut business) to $8.2 million from $10.0 million for 1996, and (b) increased the interest rate under the Bank Credit Facility by .50%. The Company also received from its lender under (i) the Additional Long-Term Financing a waiver of the above-described fixed charge coverage ratio violation and any cross-default under the Additional Long-Term Financing caused by the above-described violations under the Bank Credit Facility, and (ii) the Long- Term Financing Facility a waiver of the cross-default under that facility caused by the above-described violation under the Bank Credit Facility and the Additional Long-Term Financing. As of the end of the third quarter of 1996, the Company was not in compliance with the fixed charge coverage ratio covenants under the Bank Credit Facility, the Long-Term Financing Facility and the Additional Long- Term Financing. Amendment No. 2 waived the Company's failure to comply with the fixed charge coverage ratio covenant for the quarter ended September 26, 1996. Amendment No. 2 also requires the Company to amend the Bank Credit Facility to, among other things: (i) convert the fixed charge coverage ratio covenant from a most recent four quarter calculation to an individual quarter calculation, beginning with the quarter ending December 31, 1996 and continuing for each of the next four quarters; (ii) decrease the annual capital expenditure limitation to $7.2 million from $10.0 million for 1997; (iii) increase the aggregate amount outstanding limitation under the Bank Credit Facility's "clean down covenant" to $40.0 million from $25.0 million for the period from August 1, 1997 through September 30, 1997; and (iv) grant, by November 27, 1996, (a) a first priority perfected security interest and lien in substantially all of the Company's assets to secure the Company's obligations under the Bank Credit Facility, the Long-Term Financing Facility and the senior portion of the Additional Long-Term Financing; and (b) a junior security interest in the Company's assets to secure the obligations under the subordinated portion of the Additional Long-Term Financing. The Company also received from the lender under (i) the Additional Long-Term Financing a waiver of the above-described fixed charge coverage ratio violation and any cross-default under the Additional Long-Term Financing caused by violations under the Bank Credit Facility and the Long-Term Financing Facility, and (ii) the Long-Term Financing Facility a waiver of the above-described fixed charge coverage ratio violation and any cross-default under the Long-Term Financing Facility caused by violations under the Bank Credit Facility and the Additional Long-Term Financing. As described above, Amendment No. 2 also requires the Company to pledge substantially all of its assets by November 27, 1996, to secure the obligations under the Bank Credit Facility, the Long-Term Credit Facility and the Additional Long-Term Financing. The Company has $8.0 million in aggregate principal amount of industrial development bonds outstanding which were used to finance the original acquisition, construction and equipping of the Company's Bainbridge, Georgia facility. The bonds bear interest payable semi-annually at 6% through May 1997 and at a market rate to be determined thereafter. On June 1, 1997, and on each subsequent interest reset date for the bonds, the Company is required to redeem the bonds at face value plus any accrued and unpaid interest, unless a bondholder elects to retain his or her bonds. Any bonds redeemed by the Company at the demand of a bondholder on the reset date are required to be re-marketed by the underwriter of the bonds on a "best efforts" basis. In addition, the Company is required to redeem the bonds in varying annual installments, ranging from $170,000 to $780,000, beginning in 1998 and continuing through 2017. The Company is also required to redeem the bonds in certain other circumstances; for example, within 180 days after any determination that interest on the bonds is taxable. The Company has the option, subject to certain conditions, to redeem the bonds at face value plus accrued interest, if any. As of September 26, 1996, the Company had approximately $11.1 million of available credit under the Bank Credit Facility. The Company currently expects to incur a total of approximately $8.2 million in capital expenditures in 1996 (excluding capital expenditures related to the Fisher Nut business), of which an aggregate of approximately $6.6 million were incurred during the thirty-nine weeks ended September 26, 1996. The Company believes
14 that cash flow from operating activities and funds available under the Bank Credit Facility (assuming the Company maintains compliance - or obtains waivers of any subsequent noncompliance - with the covenants under the Bank Credit Facility, as amended) will be sufficient to meet working capital requirements and anticipated capital expenditures for the foreseeable future. See "-- Factors That May Affect Future Results -- Growth Initiatives". Factors That May Affect Future Results - -------------------------------------- (a) Growth Initiatives ------------------ Over the past three years, the Company has substantially increased its shelling, processing and manufacturing capacity by a combination of strategic acquisitions and improvements to and expansions of its facilities. The Company has increased its borrowings to finance these acquisitions, improvements and expansions, as well as its increased costs of operations and increased investments in inventory related to the resulting increased production capacity. Underutilization of its increased production capacity has had a negative impact on the Company's gross profit and gross profit margin. Until such time as the Company is able to more fully utilize its increased production capacity through further increases in its sales volume, the Company's results of operations may continue to be adversely affected. Furthermore, although the Company believes that cash flow from operations and funds available under its credit facilities (assuming the Company maintains compliance - or obtains waivers of any subsequent noncompliance - with the covenants under its financing arrangements as currently in effect and as subsequently amended) will be sufficient to meet the Company's working capital requirements and anticipated capital expenditures for 1996, there can be no assurance that such cash flow and credit availability will be sufficient to meet future capital requirements or that the Company will remain in compliance with such covenants. The Company strives to update and improve its management information systems to ensure their adequacy. Although the Company believes that its management information systems currently provide the Company with the information necessary to manage its businesses, there can be no assurance that the Company's management information systems will meet the Company's future requirements. See "-- Liquidity and Capital Resources". (b) Availability of Raw Materials and Market Price Fluctuations ----------------------------------------------------------- The availability and cost of raw materials for the production of the Company's products, including peanuts, pecans,other nuts, dried fruit and chocolate, are subject to crop size and yield fluctuations caused by factors beyond the Company's control, such as weather conditions and plant diseases. Additionally, the supply of edible nuts and other raw materials used in the Company's products could be reduced upon any determination by the USDA or other government agency that certain pesticides, herbicides or other chemicals used by growers have left harmful residues on portions of the crop or that the crop has been contaminated by aflatoxin or other agents. Shortages in the supply of and increases in the prices of nuts and other raw materials used by the Company in its products could have an adverse impact on the Company's profitability. Furthermore, fluctuations in the market prices of nuts, dried fruit or chocolate may affect the value of the Company's inventory and the Company's profitability. The Company has a significant inventory of nuts, dried fruit and chocolate that would be adversely affected by any decrease in the market price of such raw materials. Market price declines for pecans have negatively affected the Company's gross profit margins in 1996, and required the Company to write down its pecan inventory $2.6 million as of September 26, 1996. (c) Competitive Environment ----------------------- The Company operates in a highly competitive environment. The Company's principal products compete against food and snack products manufactured and sold by numerous regional and national companies, some of which are substantially larger and have greater resources than JBS, such as Planters Lifesavers Company (a subsidiary of RJR Nabisco, Inc.). JBS also competes with other shellers in the industrial market and with regional processors in the retail and wholesale markets. In order to maintain or increase its market share, the Company must continue to price
15 its products competitively, which may lower revenue per unit and cause declines in gross margin, if the Company is unable to increase unit volumes as well as reduce its costs. (d) Sales to Industrial Customers ----------------------------- The increase in the Company's processing and shelling capacity created by its recently constructed or expanded facilities and increased sales by Sunshine may result in further increases in net sales to industrial customers, both in amount and as a percentage of the Company's total sales. Because sales to industrial customers are generally made at lower margins than sales to other customers, increases in such sales may adversely affect the Company's profit margins. (e) Fixed Price Commitments ----------------------- From time to time, the Company enters into fixed price commitments with its customers. However, such commitments typically represent 10% or less of the Company's annual net sales and are normally only entered into after the Company's cost to acquire the nut products necessary to satisfy the fixed price commitment is substantially fixed. The Company will continue to enter into fixed price commitments in respect of certain of its nut products prior to fixing its acquisition cost when, in management's judgment, market or crop harvest conditions so warrant. To the extent the Company does so, these fixed price commitments may result in losses. Historically, however, such losses have generally been offset by gains on other fixed price commitments. However, there can be no assurance that losses from fixed price commitments may not have a material adverse effect on the Company's results of operations. (f) Federal Regulation of Peanut Prices, Quotas and Poundage Allotments ------------------------------------------------------------------- Approximately 50% of the total pounds of products processed by the Company during 1993, 1994, and 1995 were peanuts, peanut butter and other products containing peanuts. The Company purchases a majority of its peanut requirements directly from growers and obtains its remaining requirements from other shellers. The supply of peanuts is subject to federal regulations which restrict peanut imports and the tonnage of peanuts farmers may market domestically. These regulations create market conditions which may not be indicative of conditions that would prevail if the federal program were eliminated. The 1996 Farm Bill, which became law during the first quarter, phases out over a seven-year period many of the existing federal farm support and subsidy programs, but rejects efforts to eliminate the federal support program for peanuts. However, the federal price support for peanuts was cut to $610 per ton from $678 per ton. The North American Free Trade Agreement ("NAFTA"), effective January 1, 1994, committed the United States, Mexico and Canada to the elimination of quantitative restrictions and tariffs on the cross-border movement of industrial and agricultural products. Under NAFTA, United States import restrictions on Mexican shelled and in-shell peanuts are replaced by a tariff rate quota, initially set at 3,377 tons, which will grow by a 3% compound rate over a 15-year transition period. In-quota shipments enter the U.S. duty-free, while above-quota imports from Mexico face tariff rates equivalent to approximately 120% on shelled and 185% on in-shell peanuts. The tariff rates will be phased out at a rate of 15% per year in each of the first six years, with the remaining tariff rate to be phased out in equal installments over the next nine years. The Company does not believe NAFTA will have a material impact on the federal peanut program in the near term. Because of the relatively small amount of peanuts currently grown in Mexico, the full effect of NAFTA on the Company's business and opportunities cannot yet be fully assessed. However, than can be no assurance that NAFTA will not have a material adverse effect on the federal peanut program and the Company in the future. The Uruguay Round Agreement of the General Agreement on Trade and Tariffs ("GATT") took effect on July 1, 1995. Under GATT, the United States must allow peanut imports to grow to 5% of domestic consumption within six years. Import quotas on peanuts have been replaced by high ad valorem tariffs, which must be reduced by 15% annually. The United States may limit imports of peanut butter, but must establish a tariff rate
16 quota for peanut butter imports based on 1993 import levels. Peanut butter imports above the quota are subject to an over-quota ad valorem tariff, which will be reduced by 15% annually. Although NAFTA and GATT do not directly affect the federal peanut program, the federal government may, in future legislative initiatives, reconsider the federal peanut program in light of these agreements. Changes in, or the elimination or nonrenewal of, the federal peanut program could significantly affect the supply of, and price for, peanuts. While JBS has successfully operated in a market shaped by the federal peanut program for many years, JBS believes that it could adapt to a market without federal regulation. However, JBS has no experience in operating in such a peanut market, and no assurances can be given that the elimination or modification of the federal peanut program would not adversely affect JBS's business. Future changes in import quota limitations or the quota support price for peanuts at a time when the Company is maintaining a significant inventory of peanuts or has significant outstanding purchase commitments could adversely affect the Company's business by lowering the market value of the peanuts in its inventory or the peanuts which it is committed to buy. While the Company believes that its ability to use its raw peanut inventories in its own processing operations gives it greater protection against these changes than is possessed by certain competitors whose operations are limited to either shelling or processing, no assurances can be given that future changes in, or the elimination of, the federal peanut program or import quotas will not adversely affect the Company's business.
17 PART II. OTHER INFORMATION Item 2 -- Changes in Securities - ------------------------------- As described above under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" under Part I of this report, there are restrictive covenants under the Company's financing facilities which limit the payment of dividends. Item 6 -- Exhibits and Reports on Form 8-K - ------------------------------------------ (a) Exhibits: The exhibits required by Item 601 of Regulation S-K follow: EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2 None 3.1 Restated Certificate of Incorporation of Registrant(2) 3.2 Certificate of Correction to Restated Certificate(2) 3.3 Bylaws of Registrant(1) 4.1 Specimen Common Stock Certificate(3) 4.2 Specimen Class A Common Stock Certificate(3) 4.3 Amended and Restated Note Purchase and Private Shelf Agreement by and between the Registrant and The Prudential Insurance Company of America ("Prudential") dated as of October 19, 1993 (the "Long-Term Credit Facility")(8) 4.4 7.87% Series A Senior Note dated September 29, 1992 in the original principal amount of $4.0 million due August 15, 2004 executed by the Registrant in favor of Prudential(5) 4.5 8.22% Series B Senior Note dated September 29, 1992 in the original principal amount of $6.0 million due August 15, 2004 executed by the Registrant in favor of Prudential(5) 4.6 8.22% Series C Senior Note dated September 29, 1992 in the original principal amount of $4.0 million due August 15, 2004 executed by the Registrant in favor of Prudential(5) 4.7 8.33% Series D Senior Note dated January 15, 1993 in the original principal amount of $3.0 million due August 15, 2004 executed by the Registrant in favor of Prudential(6) 4.8 6.49% Series E Senior Note dated September 15, 1993 in the original principal amount of $8.0 million due August 15, 2004 executed by the Registrant in favor of Prudential(9)
18 4.9 8.31% Series F Senior Note dated June 23, 1994 in the original principal amount of $8.0 million due May 15, 2006 executed by the Registrant in favor of Prudential(11) 4.10 8.31% Series F Senior Note dated June 23, 1994 in the original principal amount of $2.0 million due May 15, 2006 executed by the Registrant in favor of Prudential(11) 4.11 Amended and Restated Guaranty Agreement dated as of October 19, 1993 by Sunshine in favor of Prudential(8) 4.12 First Amendment to the Long-Term Credit Facility dated as of August 31, 1994 by and between Prudential, Sunshine Nut Co., Inc. ("Sunshine") and the Registrant(12) 4.13 Second Amendment to the Long-Term Credit Facility dated as of September 12, 1995 by and among Prudential, Sunshine and the Registrant(17) 4.14 Third Amendment to the Long-Term Credit Facility dated as of February 20, 1996 by and between Prudential, Sunshine and the Registrant(20) 4.15 $1.8 million Promissory Note dated March 31, 1989 evidencing a loan by Cohen Financial Corporation to LaSalle National Bank ("LNB"), as Trustee under Trust Agreement dated March 17, 1989 and known as Trust No. 114243(14) 4.16 Modification Agreement dated as of September 29, 1992 by and among LaSalle National Trust, N.A. ("LaSalle Trust"), a national banking association, not personally but as Successor Trustee to LNB under Trust Agreement dated March 17, 1989 known as Trust Number 114243; the Registrant; Jasper B. Sanfilippo and Mathias A. Valentine; and Mutual Trust Life Insurance Company(5) 4.17 Note Purchase Agreement dated as of August 30, 1995 between the Registrant and Teachers Insurance and Annuity Association of America ("Teachers")(17) 4.18 8.30% Senior Note due 2005 in the original principal amount of $10.0 million, dated September 12, 1995 and executed by the Registrant in favor of Teachers(17) 4.19 9.38% Senior Subordinated Note due 2005 in the original principal amount of $15.0 million, dated September 12, 1995 and executed by the Registrant in favor of Teachers(17) 4.20 Guaranty Agreement dated as of August 30, 1995 by Sunshine in favor of Teachers ("Senior Notes")(17) 4.21 Guaranty Agreement dated as of August 30, 1995 by Sunshine in favor of Teachers ("Senior Subordinated Notes")(17)
19 4.22 Amendment, Consent and Waiver, dated as of March 27, 1996, by and among Teachers, Sunshine and the Registrant(20) 10.1 Certain documents relating to $8.0 million Decatur County-Bainbridge Industrial Development Authority Industrial Development Revenue Bonds (the "John B. Sanfilippo & Son, Inc. Project") Series 1987 dated as of June 1, 1987(1) 10.2 Industrial Building Lease dated as of October 1, 1991 between JesCorp, Inc. and LNB, as Trustee under Trust Agreement dated March 17, 1989 and known as Trust No. 114243(16) 10.3 Industrial Building Lease (the "Touhy Avenue Lease") dated November 1, 1985 between Registrant and LNB, as Trustee under Trust Agreement dated September 20, 1966 and known as Trust No. 34837(13) 10.4 First Amendment to the Touhy Avenue Lease dated June 1, 1987(13) 10.5 Second Amendment to the Touhy Avenue Lease dated December 14, 1990(13) 10.6 Third Amendment to the Touhy Avenue Lease dated September 1, 1991(18) 10.7 Industrial Real Estate Lease (the "Lemon Avenue Lease") dated May 7, 1991 between Registrant, Majestic Realty Co. and Patrician Associates, Inc(1) 10.8 First Amendment to the Lemon Avenue Lease dated January 10, 1996(20) 10.9 $4.0 million Promissory Note dated October 5, 1988 evidencing a loan to Registrant by Jasper B. Sanfilippo(1) 10.10 Form of Receivable Assignment Agreement between Registrant and Jasper B. Sanfilippo and form of $1,153,801.36 Promissory Note executed by Jasper B. Sanfilippo in connection therewith(14) 10.11 Mortgage, Assignment of Rents and Security Agreement made on September 29, 1992 by LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 known as Trust Number 100628 in favor of the Registrant relating to the properties commonly known as 2299 Busse Road and 1717 Arthur Avenue, Elk Grove Village, Illinois(5) 10.12 Industrial Building Lease dated June 1, 1985 between Registrant and LNB, as Trustee under Trust Agreement dated February 7, 1979 and known as Trust No. 100628(1) 10.13 First Amendment to Industrial Lease dated September 29, 1992 by and between the Registrant and LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628(5)
20 10.14 Second Amendment to Industrial Building Lease dated March 3, 1995, by and between the Registrant and LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628(14) 10.15 Ground Lease dated January 1, 1995, between the Registrant and LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628(14) 10.16 Party Wall Agreement, dated March 3, 1995, between the Registrant, LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628 and the Arthur/Busse Limited Partnership(14) 10.17 Secured Promissory Note in the amount of $6,223,321.81 dated Sep- tember 29, 1992 executed by Arthur/Busse Limited Partnership in favor of the Registrant(5) 10.18 Tax Indemnification Agreement between Registrant and certain Stockholders of Registrant prior to its initial public offering(2) 10.19 Indemnification Agreement between Registrant and certain Stockholders of Registrant prior to its initial public offering(2) 10.20 The Registrant's 1991 Stock Option Plan(1) 10.21 First Amendment to the Registrant's 1991 Stock Option Plan(4) 10.22 John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number One among John E. Sanfilippo, as trustee of the Jasper and Marian Sanfilippo Irrevocable Trust, dated September 23, 1990, Jasper B. Sanfilippo, Marian R. Sanfilippo and Registrant, and Collateral Assignment from John E. Sanfilippo as trustee of the Jasper and Marian Sanfilippo Irrevocable Trust, dated September 23, 1990, as assignor, to Registrant, as assignee(7) 10.23 John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number Two among Michael J. Valentine, as trustee of the Valentine Life Insurance Trust, dated May 15, 1991, Mathias Valentine, Mary Valentine and Registrant, and Collateral Assignment from Michael J. Valentine, as trustee of the Valentine Life Insurance Trust, dated May 15, 1991, as assignor, and Registrant, as assignee(7) 10.24 License to Use Trade Name, Trademarks and Service Marks, dated April 15, 1993 by and among Bert S. Crane, Nancy M. Crane, Bert A. Crane, Mary Crane Couchman, Karen N. Crane, Crane Walnut Orchards Processing Division, Amsterdam Land and Cattle Company, Inc. and the Registrant(10) 10.25 Credit Agreement among the Registrant, American National Bank and Trust Company of Chicago ("ANB") as agent, LNB, National City Bank ("NCB") and ANB, dated as of October 19, 1993(8)
21 10.26 Guaranty Agreement dated as of October 19, 1993 by Sunshine in favor of ANB, as agent on behalf of LNB, NCB and ANB(8) 10.27 Amendment to Amended and Restated Reimbursement Agreement dated as of October 19, 1993 by and among the Registrant, LNB and ANB(8) 10.28 Amendment No. 1 to Bank Credit Facility entered into as of August 31, 1994 by and among the Registrant, ANB, LNB and NCB(12) 10.29 Amendment No. 2 to Bank Credit Facility entered into as of September 1, 1994 by and among the Registrant, ANB, LNB and NCB(12) 10.30 Amendment No. 3 to Bank Credit Facility dated as of September 13, 1995 by and among the Registrant, ANB, LNB and NCB.(17) 10.31 Memorandum of Agreement dated February 24, 1994, between the Registrant and The Fisher Nut Company ("Fisher")(13) 10.32 Asset Purchase and Sales Agreement, dated as of October 10, 1995, by and among The Procter & Gamble Company, ("P&G"), The Procter & Gamble Distribution Company ("P&GDC"), Fisher and the Registrant(19) 10.33 Inventory Purchase Agreement, dated as of October 10, 1995, by and among P&G, P&GDC, Fisher and the Registrant(19) 10.34 Equipment Purchase Agreement, dated as of October 10, 1995, by and between Fisher and the Registrant(19) 10.35 Lease Agreement, dated as of December 10, 1993, by and between LaSalle Trust and the Registrant for the premises at 3001 Malmo Drive, Arlington Heights, Illinois(16) 10.36 Certain documents relating to Reverse Split-Dollar Insurance Agreement between Sunshine and John Charles Taylor dated November 24, 1987(14) 10.37 Outsource Agreement between the Registrant and Preferred Products, Inc. dated January 19, 1995 [CONFIDENTIAL TREATMENT](14) 10.38 Letter Agreement between the Registrant and Preferred Products, Inc., dated February 24, 1995, amending the Outsource Agreement dated January 19, 1994 [CONFIDENTIAL TREATMENT](14) 10.39 The Registrant's 1995 Equity Incentive Plan(15) 10.40 Merger Agreement dated May 31, 1995, among the Registrant, Quantz Acquisition Co., Inc. James B. Quantz, the National Bank of South Carolina, as Trustee of the James Bland Quantz Irrevocable Trust dated May 6, 1980, and Machine Design Incorporated [CONFIDENTIAL TREATMENT](16) 10.41 Promissory Note (the "ILIC Promissory Note") in the original principal amount of $2.5 million, dated September 27, 1995 and executed by the Registrant in favor of Indianapolis Life Insurance Company ("ILIC")(18)
22 10.42 First Mortgage and Security Agreement (the "ILIC Mortgage") by and between the Registrant, as mortgagor, and ILIC, as mortgagee, dated September 27, 1995, and securing the ILIC Promissory Note and relating to the property commonly known as 3001 Malmo Drive, Arlington Heights, Illinois (the "Arlington Heights Facility")(18) 10.43 Assignment of Rents, Leases, Income and Profits dated September 27, 1995, executed by the Registrant in favor of ILIC and relating to the ILIC Promissory Note, the ILIC Mortgage and the Arlington Heights Facility(18) 10.44 Environmental Risk Agreement dated September 27, 1995, executed by the Registrant in favor of ILIC and relating to the ILIC Promissory Note, the ILIC Mortgage and the Arlington Heights Facility(18) 10.45 Credit Agreement among the Registrant, Bank of America Illinois ("BAI") as agent, NCB, The Northern Trust Company ("NTC") and BAI, dated as of March 27, 1996(20) 10.46 Reimbursement Agreement between the Registrant and BAI, dated as of March 27, 1996(20) 10.47 Guaranty Agreement dated as of March 27, 1996 by Sunshine in favor of BAI as agent on behalf of NCB, NTC and BAI(20) 10.48 Amendment No. 1 and Waiver to Credit Agreement dated as of August 1, 1996 by and among the Registrant, BAI, NCB, and NTC (filed as exhibit 10.48) 10.49 Amendment No. 2 and Waiver to Credit Agreement dated as of October 30, 1996 by and among the Registrant, BAI, NCB, and NTC (filed as exhibit 10.49) 11 None 15 None 18 None 19 None 22-24 None 27 Financial Data Schedule (filed as exhibit 27) 99 None - ------------------------- (1) Incorporated by reference to the Registrant's Registration Statement on Form S-1, Registration No. 33-43353, as filed with the Commission on October 15, 1991 (Commission File No. 0-19681). (2) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (Commission File No. 0-19681).
23 (3) Incorporated by reference to the Registrant's 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 Registrant's Quarterly Report on Form 10-Q for the second quarter ended June 25, 1992 (Commission File No. 0-19681). (5) Incorporated by reference to the Registrant's Current Report on Form 8-K dated September 29, 1992 (Commission File No. 0-19681). (6) Incorporated by reference to the Registrant's Current Report on Form 8-K dated January 15, 1993 (Commission File No. 0-19681). (7) Incorporated by reference to the Registrant's Registration Statement on Form S-1, Registration No. 33-59366, as filed with the Commission on March 11, 1993 (Commission File No. 0-19681). (8) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the third quarter ended September 30, 1993 (Commission File No. 0-19681). (9) Incorporated by reference to the Registrant's Current Report on Form 8-K dated September 15, 1993 (Commission file No. 0-19681). (10) Incorporated by reference to the Registrant's Amendment No. 1 to Registration Statement on Form S-1, Registration No. 33-59366, as filed with the commission on April 19, 1993 (Commission File No. 0- 19681). (11) Incorporated by reference to the Registrant's Current Report and Form 8-K dated June 23, 1994 (Commission File No. 0-19681). (12) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the third quarter ended September 29, 1994 (Commission File No. 0-19681). (13) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (Commission File No. 0-19681). (14) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (Commission File No. 0-19681). (15) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the first quarter ended March 30, 1995 (Commission File No. 0-19681). (16) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the second quarter ended June 29, 1995 (Commission File No. 0-19681). (17) Incorporated by reference to the Registrant's Current Report on Form 8-K dated September 12, 1995 (Commission File No. 0-19681). (18) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the third quarter ended September 28, 1995 (Commission file No. 0-19681).
24 (19) Incorporated by reference to the Registrant's Current Report on Form 8-K dated November 6, 1995 (Commission file No. 0-19681). (20) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 (Commission file No. 0-19681). John B. Sanfilippo & Son, Inc. will furnish any of the above exhibits to its stockholders upon written request addressed to the Secretary at the address given on the cover page of this Form 10-Q. The charge for furnishing copies of the exhibits is $.25 per page, plus postage. (b) Reports on Form 8-K: During the third quarter ended September 26, 1996, the Company filed one Current Report on Form 8-K dated July 3, 1996. The Current Report dated July 3, 1996 reported pursuant to Item 5 thereof that Larry D. Ray was resigning, effective August 2, 1996, as an officer and Director of the Company.
25 SIGNATURE 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. JOHN B. SANFILIPPO & SON, INC. Date: November 11, 1996 By: /s/Gary P. Jensen --------------------------- Gary P. Jensen Executive Vice President, Finance and Chief Financial Officer