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Significant Accounting Policies | 12 Months Ended
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Jun. 28, 2012
Significant Accounting Policies [Abstract] |
SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Consolidation Our consolidated financial statements include the accounts of John B. Sanfilippo & Son, Inc., and its wholly-owned subsidiary, JBSS Properties, LLC. Our fiscal year ends on the last Thursday of June each year, and typically consists of fifty-two weeks (four thirteen week quarters). However, the year ended June 30, 2011 consisted of fifty-three weeks, as our fourth quarter consisted of fourteen weeks. The accompanying consolidated financial statements and related footnotes are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Management Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include reserves for customer deductions, allowances for doubtful accounts, the quantity and valuation of bulk inventories, the evaluation of recoverability of long-lived assets and goodwill, the realizability of deferred tax assets and various other accrual accounts. Actual results could differ from those estimates. Accounts Receivable Accounts receivable are stated at the amounts charged to customers, less: (i) allowances for doubtful accounts, and (ii) reserves for estimated cash discounts and customer deductions. The allowance for doubtful accounts is calculated by (i) specifically identifying customers that are credit risks and (ii) estimating the extent that other non-specifically identified customers will become credit risks. Account balances are charged off against the allowance when we conclude that it is probable the receivable will not be recovered. The reserve for estimated cash discounts is based on historical experience. The reserve for customer deductions represents known customer short payments and an estimate of future credit memos that will be issued to customers related to rebates and allowances for marketing and promotions based on historical experience. Inventories Inventories, which consist principally of inshell bulk-stored nuts, shelled nuts, dried fruit and processed and packaged nut products, are stated at the lower of cost (first-in, first-out) or market which approximates actual cost. Inventory costs are reviewed at least quarterly. Fluctuations in the market price of pecans, peanuts, walnuts, almonds, cashews and other nuts may affect the value of inventory, gross profit and gross profit margin. When expected market sales prices move below costs, we record adjustments to write down the carrying values of inventories to the lower of cost (first-in, first-out) or market. The results of our shelling process can also result in changes to inventory costs, such as adjustments made pursuant to actual versus expected crop yields. We maintain significant inventories of bulk-stored inshell pecans, peanuts and walnuts. Quantities of inshell bulk-stored nuts are determined based on our inventory systems and are subject to quarterly physical verification techniques including observation, weighing and other methods. The quantities of each crop year bulk-stored nut inventories are generally shelled out over a ten to fifteen month period, at which time revisions to any estimates are also recorded. We store a large amount of peanut inventory on behalf of the United States government at various facilities. As a licensed United States Department of Agriculture Nut Warehouse Operator, we are responsible for delivering the loan value of the peanut inventory in our possession as represented on the warehouse receipt to the holder of the warehouse receipt on demand. We are responsible for any decline in the value of the peanut inventory due to a decline in quality or shrinkage in excess of an allowable amount. No such declines in value are currently anticipated. Property, Plant and Equipment Property, plant and equipment are stated at cost. Major improvements that extend the useful life or add capacity are capitalized and charged to expense through depreciation. Repairs and maintenance are charged to expense as incurred. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts, and any gain or loss is recognized currently in operating income. Depreciation expense for the last three fiscal years is as follows:
|  | Year Ended June 28, 2012 |  |  | Year Ended June 30, 2011 |  |  | Year Ended June 24, 2010 |
Depreciation expense |  | $ | 14,062 |  |  | $ | 14,901 |  |  | $ | 14,115 |
Cost is depreciated using the straight-line method over the following estimated useful lives:
Classification |  | Estimated Useful Lives
Buildings |  | 10 to 40 years
Machinery and equipment |  | 5 to 10 years
Furniture and leasehold improvements |  | 5 to 10 years
Vehicles |  | 3 to 5 years
Computers and software |  | 3 to 5 years
No interest costs were capitalized for the last three fiscal years due to the lack of any significant project. In September 2006, we sold our Selma, Texas properties to two related party partnerships for $14,300 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, Texas properties has a ten-year term at a fair market value rent with three five-year renewal options. Also, we have an option to purchase the properties from the partnerships at 95% (100% in certain circumstances) of the then fair market value, but not to be less than the $14,300 purchase price. The financing obligation is being accounted for similar to the accounting for a capital lease whereby the $14,300 was recorded as a debt obligation, as the provisions of the arrangement were not eligible for sale-leaseback accounting. These partnerships are not considered variable interest entities subject to consolidation. Goodwill In accordance with authoritative guidance on goodwill under the provisions of ASC 350 “Intangibles-Goodwill and Other”, goodwill is subject to impairment testing at least annually or more frequently if an event occurs or conditions change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We perform our impairment test, annually during the fourth quarter, using the two-step method in which the carrying amount of our single reporting unit is compared to its fair value, estimated based on a weighting of income and market approach methods. If the carrying amount of our reporting unit exceeds its fair value, an impairment loss is recognized to the extent that the carrying value of the goodwill assigned to the reporting unit exceeds the implied fair value of that goodwill. The implied fair value is determined in the same manner as the amount of goodwill recognized in a business combination. We completed an acquisition of certain assets and liabilities of Orchard Valley Harvest (“OVH”) during the fourth quarter of fiscal 2010. The goodwill resulting from the OVH acquisition was assigned to our single operating segment and reporting unit. During the fourth quarter of fiscal 2011, we experienced a significant decline in the market value and operating results of the Company driven by challenging market conditions and also performed our annual impairment analysis under the provisions of ASC 350. We used a combination of the income approach and various market approaches to determine the fair value of our reporting unit. The first step of the goodwill impairment test indicated that a potential impairment existed, and therefore we performed the second step of the goodwill impairment analysis. Based upon a comparison of the implied fair value of goodwill of our reporting unit with its carrying value, we concluded that the entire goodwill balance of $5,662 was impaired. We did not record any impairment charges to goodwill during fiscal 2010. Impairment of Long-Lived Assets We review held and used long-lived assets, including our rental investment property and amortizable identifiable intangible assets, to assess recoverability from projected undiscounted cash flows whenever events or changes in facts and circumstances indicate that the carrying value of the assets may not be recoverable. When such events occur, we compare the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of the long lived asset or asset group. The cash flows are based on our best estimate of future cash flows derived from the most recent business projections. If this comparison indicates there is an impairment the carrying value of the asset is reduced to its estimated fair value. We did not record any impairment of long-lived assets during fiscal 2012, fiscal 2011 or fiscal 2010. Deferred Financing Costs Deferred financing costs are incurred to obtain long-term financing and are amortized using the effective interest method over the term of the related debt. The amortization of deferred financing costs, which is classified in interest expense in the consolidated statement of comprehensive income, was as follows for the last three fiscal years:
|  | Year ended June 28, 2012 |  |  | Year ended June 30, 2011 |  |  | Year ended June 24, 2010 |
Amortization of deferred financing costs |  | $ | 370 |  |  | $ | 733 |  |  | $ | 631 |
Facility Consolidation Project/Real Estate Transactions In April 2005, we acquired property to be used for the Elgin Site. Two buildings are located on the Elgin Site, one of which is an office building. Approximately 75% of the office building is currently vacant. The other building, a warehouse, was expanded and modified for use as our principal processing facility and headquarters. The allocation of the purchase price to the two buildings was determined through a third party appraisal. The value assigned to the office building is included in rental investment property on the balance sheet. The value assigned to the warehouse building is included in “Property, plant and equipment”. The net rental expense from the office building is included in the caption “Rental and miscellaneous (expense) income, net”. Gross rental income and Rental (expense), net for the last three fiscal years are as follows:
|  | Year ended June 28, 2012 |  |  | Year ended June 30, 2011 |  |  | Year ended June 24, 2010 |
Gross rental income |  | $ | 1,426 |  |  | $ | 1,458 |  |  | $ | 1,198 |
Rental (expense), net |  |  | (1,450 | ) |  |  | (1,412 | ) |  |  | (1,725 | )
Expected future gross rental income under operating leases within the office building is as follows for the fiscal years ending:
June 27, 2013 |  | $ | 1,825 |
June 26, 2014 |  |  | 1,957 |
June 25, 2015 |  |  | 1,684 |
June 30, 2016 |  |  | 1,697 |
June 29, 2017 |  |  | 1,541 |
Thereafter |  |  | 3,208 |
|  | $ | 11,912 |
On March 28, 2006, JBSS Properties, LLC acquired title by quitclaim deed to the site that was originally purchased in Elgin, Illinois (the “Old Elgin Site”) for our facility consolidation project and JBSS Properties, LLC entered into an Assignment and Assumption Agreement (the “Agreement”) with the City of Elgin (the “City”). Under the terms of the Agreement, the City assigned to us the City’s remaining rights and obligations under a development agreement entered into by and among the Company, certain related party partnerships and the City (the “Development Agreement”). While we currently have a prospective buyer of the Old Elgin Site, we cannot ensure that a sale will occur in the next twelve months, if at all. The Mortgage Facility is secured, in part, by the Old Elgin Site. We must obtain the consent of the Mortgage Lender prior to the sale of the Old Elgin Site. Also, the State of Illinois, the original owner of the Old Elgin Site that sold it to the City, has the option to repurchase the Old Elgin Site. A portion of the Old Elgin Site contains an office building (which we began renting during the third quarter of fiscal 2007) that may or may not be included in any possible future sale. We incurred $6,806 of gross costs under the Development Agreement which are recorded as “Rental Investment Property” at both June 28, 2012 and June 30, 2011. The net book value was $6,228 and $6,334 at June 28, 2012 and June 30, 2011, respectively. Introductory Funds The ability to sell to certain retail customers often requires upfront payments to be made by us. Such payments are frequently made pursuant to contracts that stipulate the term of the agreement, the quantity and type of products to be sold and any exclusivity requirements. If appropriate, the cost of these payments is recorded as an asset and is amortized over the term of the contract. We expense payments if no written arrangement exists and amounts are not recoverable in the event of customer cancellation. Total introductory funds included in prepaid expenses and other current assets were $170 and $251 at June 28, 2012 June 30, 2011, respectively. Amortization of introductory funds, which is recorded as a reduction in net sales, was as follows for the last three fiscal years:
|  | Year ended June 28, 2012 |  |  | Year ended June 30, 2011 |  |  | Year ended June 24, 2010 |
Amortization of introductory funds |  | $ | 82 |  |  | $ | 41 |  |  | $ | 1,092 |
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 June 28, 2012 and June 30, 2011 because of the short-term maturities and nature of these balances. The carrying value of our revolving credit facility borrowings approximates fair value at June 28, 2012 and June 30, 2011 because of the short term maturity and nature of this balance. In addition, there has been no significant change in our inherent credit risk. The estimated fair value of our long-term debt, including current maturities, was $53,327 at June 28, 2012 and the related carrying value was $48,930. 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 and the rates on the variable portion of our long-term debt were reset during the previous twelve months. Revenue Recognition We recognize revenue when persuasive evidence of an arrangement exists, title has transferred (based upon terms of shipment), price is fixed, delivery occurs and collection is reasonably assured. We sell our products under some arrangements which include customer contracts which fix the sales price for periods, typically of up to one year, for some industrial customers and through specific programs consisting of promotion allowances, volume and customer rebates and marketing allowances, among others, to consumer customers and commercial ingredient users. Reserves for these programs are established based upon the terms of specific arrangements. Revenues are recorded net of rebates and promotion and marketing allowances. Revenues are also recorded net of expected customer deductions which are provided for based upon past experiences. While customers do have the right to return products, past experience has demonstrated that product returns have been insignificant. Provisions for returns are reflected as a reduction in net sales and are estimated based upon customer specific circumstances. Billings for shipping and handling costs are included in revenues. Significant Customers The highly competitive nature of our business provides an environment for the loss of customers and the opportunity to gain new customers. Customers exceeding 10% of net sales for the last three fiscal years are as follows:
|  | Percentage of Net Sales |
|  | Year ended June 28, 2012 |  |  | Year ended June 30, 2011 |  |  | Year ended June 24, 2010 |
Wal-Mart Stores, Inc. |  |  | 21 | % |  |  | 20 | % |  |  | 19 | %
Target Corporation |  |  | 15 | % |  |  | 12 | % |  |  | 12 | %
Net accounts receivable from Wal-Mart Stores, Inc. were $6,998 and $5,584 at June 28, 2012 and June 30, 2011, respectively. Net accounts receivable from Target Corporation were $7,549 and $4,644 at June 28, 2012 and June 30, 2011, respectively. Promotion and Advertising Costs Promotion allowances, customer rebates and marketing allowances are recorded at the time revenue is recognized and are reflected as reductions in sales. Annual volume rebates are estimated based upon projected volumes for the year, while promotion and marketing allowances are recorded based upon terms of the actual arrangements. Coupon incentive costs are accrued based on estimates of product sold to retailers at our measurement date and an estimate of redemptions to occur. Advertising costs are expensed as incurred, recorded in selling expenses and were as follows for the last three fiscal years:
|  | Year ended June 28, 2012 |  |  | Year ended June 30, 2011 |  |  | Year ended June 24, 2010 |
Advertising expense |  | $ | 8,946 |  |  | $ | 7,864 |  |  | $ | 6,493 |
Shipping and Handling Costs Shipping and handling costs, which include freight and other expenses to prepare finished goods for shipment, are included in selling expenses. Shipping and handling costs for the last three fiscal years were as follows:
|  | Year ended June 28, 2012 |  |  | Year ended June 30, 2011 |  |  | Year ended June 24, 2010 |
Shipping and handling costs |  | $ | 15,757 |  |  | $ | 17,937 |  |  | $ | 13,970 |
Research and Development Expenses Research and development expense represents the cost of our research and development personnel and their related expenses and are charged to selling expense as incurred. Research and development expense for the last three fiscal years was as follows:
|  | Year ended June 28, 2012 |  |  | Year ended June 30, 2011 |  |  | Year ended June 24, 2010 |
Research and Development Expense |  | $ | 1,062 |  |  | $ | 861 |  |  | $ | 927 |
Income Taxes We account for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been reported in our financial statements or tax returns. Such items give rise to differences in the financial reporting and tax basis of assets and liabilities. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets if it is more likely than not that all or a portion of the asset will not be realized. Any investment tax credits are accounted for by using the flow-through method, whereby the credits are reflected as reductions of tax expense in the year they are recognized in the financial statements. In estimating future tax consequences, we consider all expected future events other than changes in tax law or rates. We record liabilities for uncertain income tax positions based on a two-step process. The first step is recognition, where we evaluate whether an individual tax position has a likelihood of greater than 50% of being sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation processes. For tax positions that are currently estimated to have a less than 50% likelihood of being sustained, no tax benefit is recorded. For tax positions that have met the recognition threshold in the first step, we perform the second step of measuring the benefit to be recorded. The actual benefits ultimately realized may differ from our estimates. In future periods, changes in facts, circumstances, and new information may require us to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in results of operations and financial position in the period in which such changes occur. As of June 28, 2012 and June 30, 2011, we had liabilities for uncertain tax positions totaling $122 and $79, respectively. We recognize interest and penalties accrued related to unrecognized tax benefits in the income tax (benefit)/expense caption in the consolidated statement of comprehensive income. We evaluate the realization of deferred tax assets by considering our historical taxable income and future taxable income based upon the reversal of deferred tax liabilities. As of June 28, 2012, we believe that our deferred tax assets are fully realizable and therefore we have provided no valuation allowance. Segment Reporting We operate in a single reportable operating segment that consists of selling various nut and nut related products through multiple distribution channels. Earnings per Share Basic earnings per common share are calculated using the weighted average number of shares of Common Stock and Class A 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 were exercised or converted into Common Stock or 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:
|  | Year Ended June 28, 2012 |  |  | Year Ended June 30, 2011 |  |  | Year Ended June 24, 2010 |
Weighted average shares outstanding — basic |  |  | 10,726,004 |  |  |  | 10,671,780 |  |  |  | 10,642,824 |
Effect of dilutive securities: |  |  |  |  |  |  |  |  |  |  |  |
Stock options and restricted stock units |  |  | 102,508 |  |  |  | 98,579 |  |  |  | 82,284 |
Weighted average shares outstanding — diluted |  |  | 10,828,512 |  |  |  | 10,770,359 |  |  |  | 10,725,108 |
A weighted average of 107,125, 125,375 and 133,625 anti-dilutive stock options with a weighted average exercise price of $17.63, $16.75 and $17.69 were excluded from the computation of diluted earnings per share for the years ended June 28, 2012, June 30, 2011 and June 24, 2010, respectively. Comprehensive Income We account for comprehensive income in accordance with ASC Topic 220, “Comprehensive Income”. This topic establishes standards for reporting and displaying comprehensive income and its components in a full set of general-purpose financial statements. The topic requires that all components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. A recent update to this topic also now requires that all non-owner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Recent Accounting Pronouncements In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This update establishes common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. generally accepted accounting principles and International Financial Reporting Standards. The amendments in this update are effective during interim and annual periods beginning after December 15, 2011. The adoption of this update did not have a material effect on our financial position, results of operations or cash flows. In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220) – Presentation of Comprehensive Income.” The objective of this update is to improve the comparability, consistency, and transparency of financial reporting to increase the prominence of items reported in other comprehensive income. This update requires that all non-owner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in this update are effective for fiscal years (and interim periods within those years) beginning after December 15, 2011 with early adoption permitted and full retrospective application required. In December 2011, the FASB issued guidance which indefinitely defers the guidance related to the presentation of reclassification adjustments out of other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. We adopted the update in fiscal 2012 and we elected to present the components of other comprehensive income in a single continuous statement for all periods presented. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. The adoption of this update did not have a material effect on our financial position, results of operations or cash flows. In September 2011, the FASB issued ASU 2011-09, “Disclosures about an Employer’s Participation in a Multiemployer Plan,” which pertains to an employer’s participation in multiemployer benefit plans, amending ASC 715-80. The adoption of this update is to enhance the disclosures about multiemployer plans in which an employer participates. The adoption of ASU 2011-09 is required for fiscal years ending after December 15, 2011, and other than enhanced disclosure, the adoption of this update did not have a material effect on our financial position, results of operations or cash flows.

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- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18861-107790 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18743-107790 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18780-107790 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18854-107790 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18726-107790 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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