Stockholder's Report Third Quarter 1999

May 19, 1999

Dear Stockholder:

Typically the January through March time period is a difficult operating period for your company. This proved to be true for the third quarter of fiscal 1999. Net sales for the third quarter of fiscal 1999 of approximately $57.8 million was slightly below the third quarter net sales of fiscal 1998 of approximately $58.1 million. Fiscal 1999 year to date net sales of approximately $244.9 million trails fiscal 1998 year to date sales of approximately $248.1 million. Improved net sales at the end of the third quarter of fiscal 1999 are promising for the balance of the 1999 fiscal year. The fiscal 1999 third quarter reported a loss of approximately $(.8) million or (9) cents per share (basic and diluted) compared to a net loss of (1) cent per share (basic and diluted) for the third quarter in fiscal 1998. Fiscal 1999 year to date net income is approximately $1.3 million or 15 cents per share (basic and diluted) compared to approximately $4.6 million or 51 cents per share (basic) and 50 cents per share (diluted) for the comparable time period in fiscal 1998.

The gross profit margin for the third quarter of fiscal 1999 was negatively impacted by increased commodity costs and a shift in sales mix. These factors resulted in a gross profit margin of 16.1% of net sales for the third quarter of fiscal 1999 and a year to date gross profit margin of 15.9%. The gross profit margin in fiscal 1998 was 18.7% for the third quarter and 17.8% year to date. Selling and administrative expenses were approximately 14.4% of net sales in the third quarter of fiscal 1999 and approximately 12.2% year to date. In fiscal 1998 selling and administrative expenses as a percent of net sales were approximately 15.0% in the third quarter and approximately 12.3% year to date.

In fiscal 1999 income from operations was approximately $1.0 million in the third quarter and approximately $9.0 million year to date. Third quarter for fiscal 1998 was approximately $2.2 million and year to date of approximately $13.7 million. Capital expenditures for fiscal 1999 year to date are approximately $2.8 million as compared to approximately $3.3 million for the same time period in fiscal 1998.

At the beginning of the fiscal 1999 fourth quarter we integrated the operations of Sunshine Nut Company (a wholly owned subsidiary) into the corporate offices of your company. This integration resulted in the elimination of duplicate functions and activities. Unfortunately this integration resulted in the reduction of staff which proved to be unavoidable under the circumstances. On the positive side, the actions taken will improve control, efficiency, reduce costs and position your company for the future. Cost control will continue to be ongoing in our efforts to enhance stockholder value.

Jasper B. Sanfilippo
Chairman and Chief Executive Officer
Consolidated Statements of Operations & Balance Sheets