UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM
10-Q

(Mark one)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 26, 2019

24, 2020

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number
0-19681

JOHN B. SANFILIPPO & SON, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware
36-2419677

(State or Other Jurisdiction of


Incorporation or Organization)

(I.R.S. Employer

Identification No.)
 

(I.R.S. Employer

Identification No.)

1703 North Randall Road

Elgin, Illinois

60123-7820
(Address of Principal Executive Offices)
(Zip Code)

(847)
289-1800

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

 

Trading

Symbol

 

Name of Each Exchange

on Which Registered

Common Stock, $.01 par value per share
 
JBSS
 

The NASDAQ Stock Market LLC

(NASDAQ Global Select Market)

Securities registered pursuant to Section 12(g) of the Act: None

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
☐
  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes
☐
  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and, “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act. (Check One)

Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated
filer
☐
Smaller reporting company
☐
 Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting
Emerging growth company
☐

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).    
☐
  Yes    
☒  No

As of October 23, 2019, 8,791,50622, 2020, 8,822,211 shares of the Registrant’s Common Stock, $0.01 par value per share and 2,597,426 shares of the Registrant’s Class A Common Stock, $0.01 par value per share, were outstanding.

JOHN B. SANFILIPPO & SON, INC.

FORM
10-Q

FOR THE QUARTER ENDED SEPTEMBER 26, 2019

24, 2020

INDEX

Page

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited)

 

Consolidated Statements of Comprehensive Income for the Quarter Ended September 26, 201924, 2020 and September 27, 201826, 2019

3

Consolidated Balance Sheets as of September 26, 2019,24, 2020, June 27, 201925, 2020 and September 27, 201826, 2019

4

Consolidated Statements of Stockholders’ Equity for the Quarter Ended September 26, 201924, 2020 and September 27, 201826, 2019

6

Consolidated Statements of Cash Flows for the Quarter Ended September 26, 201924, 2020 and September 27, 201826, 2019

7

Notes to Consolidated Financial Statements

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

18
17

Item 3. Quantitative and Qualitative Disclosures About Market Risk

27

Item 4. Controls and Procedures

27

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

27

Item 1A. Risk Factors

27

Item 6. Exhibits

27

SIGNATURE

32
31

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except share and per share amounts)

   For the Quarter Ended 
   September 26,
2019		  September 27,
2018		 

Net sales

  $217,846  $204,288 

Cost of sales

   175,598   171,334 
  

 

 

  

 

 

 

Gross profit

   42,248   32,954 
  

 

 

  

 

 

 

Operating expenses:

   

Selling expenses

   14,112   14,071 

Administrative expenses

   9,074   8,831 
  

 

 

  

 

 

 

Total operating expenses

   23,186   22,902 
  

 

 

  

 

 

 

Income from operations

   19,062   10,052 
  

 

 

  

 

 

 

Other expense:

   

Interest expense including $247 and $309 to related parties

   521   879 

Rental and miscellaneous expense, net

   404   289 

Other expense

   566   487 
  

 

 

  

 

 

 

Total other expense, net

   1,491   1,655 
  

 

 

  

 

 

 

Income before income taxes

   17,571   8,397 

Income tax expense

   4,645   1,791 
  

 

 

  

 

 

 

Net income

  $12,926  $6,606 

Other comprehensive income:

   

Amortization of prior service cost and actuarial loss included in Other expense

   343   263 

Income tax expense related to pension adjustments

   (86)   (66) 
  

 

 

  

 

 

 

Other comprehensive income, net of tax:

   257   197 
  

 

 

  

 

 

 

Comprehensive income

  $13,183  $6,803 
  

 

 

  

 

 

 

Net income per common share-basic

  $1.13  $0.58 
  

 

 

  

 

 

 

Net income per common share-diluted

  $1.12  $0.57 
  

 

 

  

 

 

 

   
For the Quarter Ended
 
   
September 24,
2020
  
September 26,
2019
 
Net sales
  $210,273  $217,846 
Cost of sales
   170,941   175,598 
  
 
 
  
 
 
 
Gross profit
   39,332   42,248 
  
 
 
  
 
 
 
Operating expenses:
   
Selling expenses
   12,084   14,112 
Administrative expenses
   8,375   9,074 
  
 
 
  
 
 
 
Total operating expenses
   20,459   23,186 
  
 
 
  
 
 
 
Income from operations
   18,873   19,062 
  
 
 
  
 
 
 
Other expense:
   
Interest expense including $167 and $247 to related parties
   450   521 
Rental and miscellaneous expense, net
   432   404 
Other expense
   630   566 
  
 
 
  
 
 
 
Total other expense, net
   1,512   1,491 
  
 
 
  
 
 
 
Income before income taxes
   17,361   17,571 
Income tax expense
   4,549   4,645 
  
 
 
  
 
 
 
Net income
  $12,812  $12,926 
Other comprehensive income:
   
Amortization of prior service cost and actuarial loss included in Other expense
   416   343 
Income tax expense related to pension adjustments
   (104)   (86) 
  
 
 
  
 
 
 
Other comprehensive income, net of tax:
   312   257 
  
 
 
  
 
 
 
Comprehensive income
  $13,124  $13,183 
  
 
 
  
 
 
 
Net income per common share-basic
  $1.12  $1.13 
  
 
 
  
 
 
 
Net income per common share-diluted
  $1.11  $1.12 
  
 
 
  
 
 
 
The accompanying unaudited notes are an integral part of these consolidated financial statements.

3

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except share and per share amounts)

   September 26,
2019		   June 27,
2019		   September 27,
2018		 

ASSETS

      

CURRENT ASSETS:

      

Cash

  $887   $1,591   $1,215 

Accounts receivable, less allowance for doubtful accounts of $386, $350 and $263

   60,474    60,971    58,887 

Inventories

   156,453    157,024    181,031 

Prepaid expenses and other current assets

   5,291    5,754    4,190 
  

 

 

   

 

 

   

 

 

 

TOTAL CURRENT ASSETS

   223,105    225,340    245,323 
  

 

 

   

 

 

   

 

 

 

PROPERTY, PLANT AND EQUIPMENT:

      

Land

   9,285    9,285    9,285 

Buildings

   110,440    109,955    109,110 

Machinery and equipment

   212,403    210,962    199,871 

Furniture and leasehold improvements

   5,130    5,128    5,015 

Vehicles

   639    673    526 

Construction in progress

   2,454    1,127    7,201 
  

 

 

   

 

 

   

 

 

 
   340,351    337,130    331,008 

Less: Accumulated depreciation

   231,944    228,778    220,376 
  

 

 

   

 

 

   

 

 

 
   108,407    108,352    110,632 

Rental investment property, less accumulated depreciation of $11,413, $11,212 and $10,629

   17,630    17,831    18,264 
  

 

 

   

 

 

   

 

 

 

TOTAL PROPERTY, PLANT AND EQUIPMENT

   126,037    126,183    128,896 
  

 

 

   

 

 

   

 

 

 

Intangible assets, net

   13,954    14,626    16,812 

Cash surrender value of officers’ life insurance and other assets

   9,334    9,782    9,102 

Deferred income taxes

   5,972    5,723    5,644 

Goodwill

   9,650    9,650    9,650 

Operating leaseright-of-use assets

   5,170    —      —   
  

 

 

   

 

 

   

 

 

 

TOTAL ASSETS

  $393,222   $391,304   $415,427 
  

 

 

   

 

 

   

 

 

 

   
September 24,

2020
   
June 25,

2020
   
September 26,

2019
 
ASSETS
      
CURRENT ASSETS:
      
Cash
  $743   $1,535   $887 
Accounts receivable, less allowance for doubtful accounts of $371, $391
and
 
$
386
   69,881    56,953    60,474 
Inventories
   150,371    172,068    156,453 
Prepaid expenses and other current assets
   6,353    8,315    5,291 
  
 
 
   
 
 
   
 
 
 
TOTAL CURRENT ASSETS
   227,348    238,871    223,105 
  
 
 
   
 
 
   
 
 
 
PROPERTY, PLANT AND EQUIPMENT:
      
Land
   9,277    9,285    9,285 
Buildings
   110,397    110,294    110,440 
Machinery and equipment
   221,545    218,021    212,403 
Furniture and leasehold improvements
   5,186    5,179    5,130 
Vehicles
   637    682    639 
Construction in progress
   4,370    2,244    2,454 
  
 
 
   
 
 
   
 
 
 
   351,412    345,705    340,351 
Less: Accumulated depreciation
   241,987    239,013    231,944 
  
 
 
   
 
 
   
 
 
 
   109,425    106,692    108,407 
Rental investment property, less accumulated depreciation of $12,220, $12,018
and
 
$
11,413
   16,903    17,105    17,630 
  
 
 
   
 
 
   
 
 
 
TOTAL PROPERTY, PLANT AND EQUIPMENT
   126,328    123,797    126,037 
  
 
 
   
 
 
   
 
 
 
Intangible assets, net
   11,547    12,125    13,954 
Cash surrender value of officers’ life insurance and other assets
   10,697    11,875    9,334 
Deferred income taxes
   6,987    6,788    5,972 
Goodwill
   9,650    9,650    9,650 
Operating lease
right-of-use
assets
   4,201    4,351    5,170 
  
 
 
   
 
 
   
 
 
 
TOTAL ASSETS
  $396,758   $407,457   $393,222 
  
 
 
   
 
 
   
 
 
 
The accompanying unaudited notes are an integral part of these consolidated financial statements.

4

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except share and per share amounts)

   September 26,
2019		  June 27,
2019		  September 27,
2018		 

LIABILITIES & STOCKHOLDERS’ EQUITY

    

CURRENT LIABILITIES:

    

Revolving credit facility borrowings

  $16,042  $—    $51,941 

Current maturities of long-term debt, including related party debt of $4,388, $4,375 and $4,350 and net of unamortized debt issuance costs of $32, $35 and $42

   7,385   7,338   7,212 

Accounts payable

   52,365   42,552   59,848 

Bank overdraft

   1,302   901   1,121 

Accrued payroll and related benefits

   11,546   22,101   10,149 

Other accrued expenses

   15,767   11,014   9,731 
  

 

 

  

 

 

  

 

 

 

TOTAL CURRENT LIABILITIES

   104,407   83,906   140,002 
  

 

 

  

 

 

  

 

 

 

LONG-TERM LIABILITIES:

    

Long-term debt, less current maturities, including related party debt of $10,028, $11,495 and $14,416 and net of unamortized debt issuance costs of $37, $44 and $69

   18,152   20,381   25,537 

Retirement plan

   24,974   24,737   21,501 

Long-term operating lease liabilities, net of current portion

   3,774   —     —   

Other

   7,865   7,725   7,040 
  

 

 

  

 

 

  

 

 

 

TOTAL LONG-TERM LIABILITIES

   54,765   52,843   54,078 
  

 

 

  

 

 

  

 

 

 

TOTAL LIABILITIES

   159,172   136,749   194,080 
  

 

 

  

 

 

  

 

 

 

COMMITMENTS AND CONTINGENCIES

    

STOCKHOLDERS’ EQUITY:

    

Class A Common Stock, convertible to Common Stock on a per share basis, cumulative voting rights of ten votes per share, $.01 par value; 10,000,000 shares authorized, 2,597,426 shares issued and outstanding

   26   26   26 

Common Stock,non-cumulative voting rights of one vote per share, $.01 par value; 17,000,000 shares authorized 8,909,406, 8,909,406 and 8,865,475 shares issued

   89   89   89 

Capital in excess of par value

   122,890   122,257   120,568 

Retained earnings

   117,293   137,712   104,852 

Accumulated other comprehensive loss

   (5,044)   (4,325)   (2,984) 

Treasury stock, at cost; 117,900 shares of Common Stock

   (1,204)   (1,204)   (1,204) 
  

 

 

  

 

 

  

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

   234,050   254,555   221,347 
  

 

 

  

 

 

  

 

 

 

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

  $393,222  $391,304  $415,427 
  

 

 

  

 

 

  

 

 

 

   
September 24,

2020
  
June 25,

2020
  
September 26,

2019
 
LIABILITIES & STOCKHOLDERS’ EQUITY
    
CURRENT LIABILITIES:
    
Revolving credit facility borrowings
  $44,168  $27,008  $16,042 
Current maturities of long-term debt, including related party debt of $595, $585 and $4,388 and net of unamortized debt issuance costs of $22, $25 and $32
   4,372   5,285   7,385 
Accounts payable
   41,441   36,323   52,365 
Bank overdraft
   85   2,041   1,302 
Accrued payroll and related benefits
   11,511   25,641   11,546 
Other accrued expenses
   16,058   15,870   15,767 
  
 
 
  
 
 
  
 
 
 
TOTAL CURRENT LIABILITIES
   117,635   112,168   104,407 
  
 
 
  
 
 
  
 
 
 
LONG-TERM LIABILITIES:
    
Long-term debt, less current maturities, including related party debt of $8,794, $8,947 and $10,028 and net of unamortized debt issuance costs of $15, $19 and $37
   13,780   14,730   18,152 
Retirement plan
   31,860   31,573   24,974 
Long-term operating lease liabilities, net of current portion
   2,807   2,990   3,774 
Other
   7,377   7,758   7,865 
  
 
 
  
 
 
  
 
 
 
TOTAL LONG-TERM LIABILITIES
   55,824   57,051   54,765 
  
 
 
  
 
 
  
 
 
 
TOTAL LIABILITIES
   173,459   169,219   159,172 
  
 
 
  
 
 
  
 
 
 
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
    
Class A Common Stock, convertible to Common Stock on a per share basis, cumulative voting rights of ten votes per share, $.01 par value; 10,000,000 shares authorized, 2,597,426 shares issued and outstanding
   26   26   26 
Common Stock,
non-cumulative
voting rights of one vote per share, $.01 par value; 17,000,000 shares authorized 8,940,111, 8,939,890 and 8,909,406 shares issued
   89   89   89 
Capital in excess of par value
   124,521   123,899   122,890 
Retained earnings
   108,185   124,058   117,293 
Accumulated other comprehensive loss
   (8,318)   (8,630)   (5,044) 
Treasury stock, at cost; 117,900 shares of Common Stock
   (1,204)   (1,204)   (1,204) 
  
 
 
  
 
 
  
 
 
 
TOTAL STOCKHOLDERS’ EQUITY
   223,299   238,238   234,050 
  
 
 
  
 
 
  
 
 
 
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
  $396,758  $407,457  $393,222 
  
 
 
  
 
 
  
 
 
 
The accompanying unaudited notes are an integral part of these consolidated financial statements.

5

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except share and per share amounts)

   Class A Common
Stock		   Common Stock   Capital in
Excess of
Par Value		   Retained
Earnings		  Accumulated
Other
Comprehensive
Loss		  Treasury
Stock		    
   Shares   Amount   Shares   Amount  Total 

Balance, June 27, 2019

   2,597,426   $26    8,909,406   $89   $122,257   $137,712  $(4,325)  $(1,204)  $254,555 

Net income

             12,926     12,926 

Cash dividends ($3.00 per share)

             (34,321)     (34,321) 

Pension liability amortization, net of income tax expense of $86

              257    257 

Impact of adopting ASU2018-02(a)

             976   (976)    —   

Stock-based compensation expense

           633       633 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Balance, September 26, 2019

   2,597,426   $26    8,909,406   $89   $122,890   $117,293  $(5,044)  $(1,204)  $234,050 

   Class A Common
Stock		   Common Stock   Capital in
Excess of
Par Value		   Retained
Earnings		  Accumulated
Other
Comprehensive
Loss		  Treasury
Stock		    
   Shares   Amount   Shares   Amount  Total 

Balance, June 28, 2018

   2,597,426   $26    8,865,475   $89   $119,952   $127,320  $(3,181)  $(1,204)  $243,002 

Net income

             6,606     6,606 

Cash dividends ($2.55 per share)

             (29,074)     (29,074) 

Pension liability amortization, net of income tax expense of $66

              197    197 

Stock-based compensation expense

           616       616 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Balance, September 27, 2018

   2,597,426   $26    8,865,475   $89   $120,568   $104,852  $(2,984)  $(1,204)  $221,347 

(a)

See Note 14 – “Recent Accounting Pronouncements” for additional information.

   
Class A Common
Stock
   
Common Stock
   
Capital in
Excess of
Par Value
  
Retained
Earnings
  
Accumulated
Other
Comprehensive
Loss
  
Treasury
Stock
    
   
Shares
   
Amount
   
Shares
   
Amount
  
Total
 
Balance, June 25, 2020
   2,597,426   $26    8,939,890   $89   $123,899  $124,058  $(8,630)  $(1,204)  $238,238 
Net income
                        12,812         12,812 
Cash dividends ($2.50 per share)
                        (28,685)         (28,685) 
Pension liability amortization, net of income tax expense of $104
                           312      312 
Equity award exercises
           221    —          —      — 
Stock-based compensation expense
                     622            622 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance, September 24, 2020
   2,597,426   $26    8,940,111   $89   $124,521  $108,185  $(8,318)  $(1,204)  $223,299 
                                     
   
Class A Common
Stock
   
Common Stock
   
Capital in
Excess of
Par Value
   
Retained
Earnings
  
Accumulated
Other
Comprehensive
Loss
  
Treasury
Stock
    
   
Shares
   
Amount
   
Shares
   
Amount
  
Total
 
Balance, June 27, 2019
   2,597,426   $26    8,909,406   $89   $122,257   $137,712  $(4,325)  $(1,204)  $254,555 
Net income
             12,926     12,926 
Cash dividends ($3.00 per share)
             (34,321)     (34,321) 
Pension liability amortization, net of income tax expense of $86
              257    257 
Impact of adopting ASU
2018-02
             976   (976)    —   
Stock-based compensation expense
           633       633 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balance, September 26, 2019
   2,597,426   $26    8,909,406   $89   $122,890   $117,293  $(5,044)  $(1,204)  $234,050 
The accompanying unaudited notes are an integral part of these consolidated financial statements.

6

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

   For the Quarter Ended 
   September 26,
2019		  September 27,
2018		 

CASH FLOWS FROM OPERATING ACTIVITIES:

   

Net income

  $12,926  $6,606 

Depreciation and amortization

   4,412   4,168 

Loss on disposition of assets, net

   3   23 

Deferred income tax benefit

   (249)   (620) 

Stock-based compensation expense

   633   616 

Change in assets and liabilities:

   

Accounts receivable, net

   497   6,536 

Inventories

   571   (6,669) 

Prepaid expenses and other current assets

   356   1,094 

Accounts payable

   9,655   (1,256) 

Accrued expenses

   (10,969)   2,451 

Income taxes payable

   3,839   2,446 

Other long-term assets and liabilities

   300   (132) 

Other, net

   494   412 
  

 

 

  

 

 

 

Net cash provided by operating activities

   22,468   15,675 
  

 

 

  

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

   

Purchases of property, plant and equipment

   (3,118)   (4,754) 

Other

   16   (14) 
  

 

 

  

 

 

 

Net cash used in investing activities

   (3,102)   (4,768) 
  

 

 

  

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

   

Net short-term borrowings

   16,042   20,663 

Principal payments on long-term debt

   (2,192)   (1,789) 

Increase (Decrease) in bank overdraft

   401   (941) 

Dividends paid

   (34,321)   (29,074) 
  

 

 

  

 

 

 

Net cash used in financing activities

   (20,070)   (11,141) 
  

 

 

  

 

 

 

NET DECREASE IN CASH

   (704)   (234) 

Cash, beginning of period

   1,591   1,449 
  

 

 

  

 

 

 

Cash, end of period

  $887  $1,215 
  

 

 

  

 

 

 

Supplemental disclosure ofnon-cash investing activities:

   

Right-of-use assets recognized at ASUNo. 2016-02 transition, see Note 3

  $5,361  $—   

   
For the Quarter Ended
 
   
September 24,
2020
   
September 26,
2019
 
CASH FLOWS FROM OPERATING ACTIVITIES:
    
Net income
  $12,812   $12,926 
Depreciation and amortization
   4,368    4,412 
(Gain) loss on disposition of assets, net
   (241)    3 
Deferred income tax benefit
   (199)    (249) 
Stock-based compensation expense
   622    633 
Change in assets and liabilities:
    
Accounts receivable, net
   (12,928)    497 
Inventories
   21,697    571 
Prepaid expenses and other current assets
   1,962    356 
Accounts payable
   5,661    9,655 
Accrued expenses
   (13,970)    (10,969) 
Income taxes payable
   28    3,839 
Other long-term assets and liabilities
   166    300 
Other, net
   599    494 
  
 
 
   
 
 
 
Net cash provided by operating activities
   20,577    22,468 
CASH FLOWS FROM INVESTING ACTIVITIES:
    
Purchases of property, plant and equipment
   (6,298)    (3,118) 
Other
   280    16 
  
 
 
   
 
 
 
Net cash used in investing activities
   (6,018)    (3,102) 
  
 
 
   
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
    
Net short-term borrowings
   17,160    16,042 
Principal payments on long-term debt
   (1,870)    (2,192) 
(Decrease) increase in bank overdraft
   (1,956)    401 
Dividends paid
   (28,685)    (34,321) 
  
 
 
   
 
 
 
Net cash used in financing activities
   (15,351)    (20,070) 
NET DECREASE IN CASH
   (792)    (704) 
Cash, beginning of period
   1,535    1,591 
  
 
 
   
 
 
 
Cash, end of period
  $743   $887 
  
 
 
   
 
 
 
Supplemental disclosure of
non-cash
activities:
    
Right-of-use
assets recognized at ASU
No. 2016-02
transition
  $—   $5,361 
The accompanying unaudited notes are an integral part of these consolidated financial statements.

7


JOHN B. SANFILIPPO & SON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands, except where noted and per share data)

Note 1 – Basis of Presentation and Description of Business

As used herein, unless the context otherwise indicates, the terms “we”, “us”, “our” or “Company” collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiary, JBSS Ventures, LLC. Our fiscal year ends on the final Thursday of June each year, and typically consists of
fifty-two
weeks (four thirteen-week quarters). Additional information on the comparability of the periods presented is as follows:

References herein to fiscal 20202021 and fiscal 20192020 are to the fiscal year ending June 25, 202024, 2021 and the fiscal year ended June 27, 2019,25, 2020, respectively.

References herein to the first quarter of fiscal 20202021 and fiscal 20192020 are to the quarters ended September 24, 2020 and September 26, 2019, and September 27, 2018, respectively.

We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds, and other nuts in the United States. These nuts are sold under a variety of private brands and under the
Fisher, Orchard Valley Harvest,
Squirrel Brand, Southern Style Nuts
and
Sunshine Country
brand names. We also market and distribute, and in most cases, manufacture or process, a diverse product line of food and snack products, including peanut butter, almond butter, cashew butter, candy and confections, snacks and trail mixes, snack bites, sunflower kernels, dried fruit, corn snacks, chickpea snacks, sesame sticks and other sesame snack products under private brands and brand names. Our products are sold through three3 primary distribution channels to significant buyers of nuts, including food retailers in the consumer channel, commercial ingredient users and contract packaging customers.

The accompanying unaudited financial statements fairly present the consolidated statements of comprehensive income, consolidated balance sheets, consolidated statements of stockholders’ equity and consolidated statements of cash flows, and reflect all adjustments, consisting only of normal recurring adjustments which are necessary for the fair statement of the results of the interim periods. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

The interim results of operations are not necessarily indicative of the results to be expected for a full year. The balance sheet data as of June 27, 201925, 2020 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). Accordingly, these unaudited financial statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 20192020 Annual Report on Form
10-K
for the fiscal year ended June 27, 2019.

25, 2020.

Note 2 – Revenue Recognition

We recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. For each customer contract, a five-step process is followed in which we identify the contract, identify performance obligations, determine the transaction price, allocate the contract transaction price to the performance obligations, and recognize the revenue when (or as) the performance obligation is transferred to the customer.

When Performance Obligations Are Satisfied

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations are primarily for the delivery of raw and processed recipe and snack nuts, nut butters and trail mixes.

Our customer contracts do not include more than one performance obligation. If a contract were to contain more than one performance obligation, we are required to allocate the contract’s transaction price to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by directly observable data.

8

Revenue recognition is generally completed at a point in time when product control is transferred to the customer. For approximately 99%virtually all of our revenues, control transfers to the customer when the product is shipped or delivered to the customer based upon applicable shipping terms, as the customer can then direct the use and obtain substantially all of the remaining benefits from the asset at that point in time. Therefore for 99% of our revenues, the timing of our revenue recognition requires little judgment.

Variable Consideration

Some of our products are sold through specific incentive programs consisting of promotional allowances, volume and customer rebates,
in-store
display incentives and marketing allowances, among others, to consumer and some commercial ingredient customers. The ultimate cost of these programs is dependent on certain factors such as actual purchase volumes or customer activities and is dependent on significant management estimate and judgment. The Company accounts for these programs as variable consideration and recognizes a reduction in revenue (and a corresponding reduction in the transaction price) in the same period as the underlying program based upon the terms of the specific arrangements.

Trade promotions, consisting primarily of customer pricing allowances, merchandising funds and consumer coupons, are also offered through various programs to customers and consumers. A provision for estimated trade promotions is recorded as a reduction of revenue (and a reduction in the transaction price) in the same period when the sale is recognized. Revenues are also recorded net of expected customer deductions which are provided for based upon past experiences. Evaluating these estimates requires management judgment.

We generally use the most likely amount method to determine the variable consideration. We believe there will not be significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. The Company reviews and updates its estimates and related accruals of variable consideration and trade promotions at least quarterly based on the terms of the agreements and historical experience. Any uncertainties in the ultimate resolution of variable consideration due to factors outside of the Company’s influence are typically resolved within a short timeframe, therefore, no additional constraint on the variable consideration is required.

Contract Balances

Contract assets or liabilities result from transactions with revenue recorded over time. If the measure of remaining rights exceeds the measure of the remaining performance obligations the Company records a contract asset. Conversely, if the measure of the remaining performance obligations exceeds the measure of the remaining rights, the Company records a contract liability. There was noThe contract asset balance at September 26, 2019. Contract asset balances at June 27, 201924, 2020 was $57 and September 27, 2018 were $117 and $196, respectively, and areis recorded in the caption “Prepaid expenses and other current assets” on the Consolidated Balance Sheets. There was 0 contract asset balance at June 25, 2020 or September 26, 2019. The Company generally does not have material deferred revenue or contract liability balances arising from transactions with customers.

Disaggregation of Revenue

Revenue disaggregated by sales channel is as follows:

   For the Quarter Ended 

Distribution Channel

  September 26,
2019		   September 27,
2018		 

Consumer

  $157,146   $139,444 

Commercial Ingredients

   36,888    37,202 

Contract Packaging

   23,812    27,642 
  

 

 

   

 

 

 

Total

  $217,846   $204,288 
  

 

 

   

 

 

 

   
For the Quarter Ended
 
Distribution Channel
  
September 24,

2020
   
September 26,

2019
 
Consumer
  $166,757   $157,146 
Commercial Ingredients
   22,811    36,888 
Contract Packaging
   20,705    23,812 
  
 
 
   
 
 
 
Total
  $210,273   $217,846 
  
 
 
   
 
 
 
9
Note 3—Leases

On June 28, 2019 we adopted ASUNo. 2016-02,Leases (“Topic 842”)using the alternative transition method under ASUNo. 2018-11, which permits application of the new guidance at the beginning of the period of adoption, with comparative periods continuing to be reported under Topic 840. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. We did not elect the practical expedients regarding hindsight or land easements. See Note 143 – “Recent Accounting Pronouncements” for additional information.

9

Leases

Upon adoption of the new standard, we recognized operating leaseright-of-use assets and liabilities on our Consolidated Balance Sheet of $5,361 and $5,320 respectively. We utilized a portfolio approach to establish discount rates for leases that are similar. Discount rates ranging from 4.2% to 5.8% were used when determining the present value of future lease payments. All of our existing lessee arrangements currently classified as operating leases will continue to be classified as operating leases, and the pattern of lease expense recognition will be unchanged. The adoption of Topic 842 did not materially impact our consolidated net earnings and had no impact on cash flows.

Description of Leases

We lease equipment used in the transportation of goods in our warehouses, as well as a limited number of automobiles and a small warehouse near our Bainbridge, Georgia facility. Our leases generally do not contain
non-lease
components and do not contain any explicit guarantees of residual value. Our leases for warehouse transportation equipment generally require the equipment to be returned to the lessor in good working order.

We determine if an arrangement is a lease at inception and analyze the lease to determine if it is operating or finance. Operating lease
right-of-use
assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease
right-of-use
assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental collateralized borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Implicit rates are used when readily determinable. None of our leases currently contain options to extend the term. In the event of an option to extend the term of a lease, the lease term used in measuring the liability would include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the respective lease term. Our leases have remaining terms of up to 65.0 years.

ASUNo. 2016-02 allows for the election as an

It is our accounting policy to not apply lease recognition requirements to short term leases, defined as leases with an initial term of 12 months or less. We have elected to use this policy, and asAs such, leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheet. We have also made the policy election to not separate lease and
non-lease
components for all leases.

The following table provides supplemental information related to operating leaseright-of-use assets and liabilities:

   September 26,
2019		   Affected Line Item in Condensed Consolidated
Balance Sheet

Assets

    

Operating leaseright-of-use assets

  $5,170   Operating leaseright-of-use assets
  

 

 

   

Total leaseright-of-use assets

  $5,170   
  

 

 

   

Liabilities

    

Current:

    

Operating leases

  $1,390   Other accrued expenses

Noncurrent:

    

Operating leases

   3,774   Long-term operating lease liabilities
  

 

 

   

Total lease liabilities

  $5,164   
  

 

 

   

10

li

a
b
ilities
:
   
September 24,

2020
   
June 25,

2020
   
September 26,
2019
   
Affected Line Item in Consolidated
Balance Sheet
Assets
         
Operating lease
right-of-use
assets
  $4,201   $4,351   $ 5,170   
Operating lease right-of-use assets
  
 
 
   
 
 
   
 
 
 
    
Total lease
right-of-use
assets
  $4,201   $4,351   $ 5,170    
  
 
 
   
 
 
   
 
 
 
    
               
Liabilities
         
Current:
         
Operating leases
  $1,405   $1,376   $ 1,390   
Other accrued expenses
Noncurrent:
         
Operating leases
   2,807    2,990     3,774   
Long-term operating lease liabilities
  
 
 
   
 
 
   
 
 
 
    
Total lease liabilities
  $4,212   $4,366   $ 5,164    
  
 
 
   
 
 
   
 
 
 
    
The following tables summarize the Company’s total lease costs and other information arising from operating lease transactions:

   For the
Quarter ended
September 26,
2019		 

Operating lease costs(a)

  $374 

Variable lease costs(b)

   16 
  

 

 

 

Total Lease Cost

  $390 
  

 

 

 

   
For the
Quarter ended
September 24, 2020
   
For the
Quarter ended
September 26, 2019
 
Operating lease costs
(a)
  $473   $374 
Variable lease costs
(b)
   20    16 
  
 
 
   
 
 
 
Total Lease Cost
  $493   $390 
  
 
 
   
 
 
 
(a)

Includes short-term leases which are immaterial.

(b)

Variable lease costs consist of sales tax.

10
Supplemental cash flow and other information related to leases was as follows:

   For the
Quarter ended
September 26,
2019		 

Operating cash flows information:

  

Cash paid for amounts included in measurements for lease liabilities

  $365 

Non-cash activity:

  

Right-of-use assets obtained in exchange for new operating lease obligations

  $152 

For the
Quarter ended
September 26,
2019

Weighted Average Remaining Lease Term (in years)

4.0

Weighted Average Discount Rate

4.5% 

   
For the
Quarter ended
September 24,
2020
   
For the
Quarter ended
September 26,
2019
 
Operating cash flows information:
    
Cash paid for amounts included in measurements for lease liabilities
  $406   $365 
         
Non-cash
activity:
    
Right-of-use
assets obtained in exchange for new operating lease obligations
  $206   $152 
   
September 24,
2020
  
June 25,

2020
  
September 26,
2019
 
Weighted Average Remaining Lease Term (in years)
   3.2   3.4   4.0 
Weighted Average Discount Rate
   4.3%   4.4%   4.5% 
Maturities of operating lease liabilities as of September 26, 201924, 2020 are as follows:

Fiscal year ending

  

June 25, 2020 (excluding the quarter ended September 26, 2019)

  $1,206 

June 24, 2021

   1,439 

June 30, 2022

   1,312 

June 29, 2023

   1,064 

June 27, 2024

   469 

Thereafter

   132 
  

 

 

 

Total lease payment

   5,622 

Less imputed interest

   (458) 
  

 

 

 

Present value of operating lease liabilities

  $5,164 
  

 

 

 

Disclosures related to periods prior to adoption

As

Fiscal year ending
    
June 24, 2021 (excluding the quarter ended September 24, 2020)
  $1,183 
June 30, 2022
   1,426 
June 29, 2023
   1,173 
June 27, 2024
   535 
June 26, 2025
   177 
Thereafter
   5 
  
 
 
 
Total lease payment
   4,499 
Less imputed interest
   (287) 
  
 
 
 
Present value of operating lease liabilities
  $4,212 
  
 
 
 
At September 24, 2020, the Company has one additional operating lease of approximately $255 that has not recast prior year information for its adoptionyet commenced and therefore is not reflected in the Consolidated Balance Sheet and tables above. The lease will commence in the second quarter of Topic 842, the following presents its future minimumfiscal 2021 with an initial lease payments for operating leases under Topic 840 on June 27, 2019:

Fiscal year ending

June 25, 2020

$ 1,715

June 24, 2021

1,540

June 30, 2022

1,392

June 29, 2023

1,109

June 27, 2024

464

Thereafter

133

$6,353

11

term of 6 years.

Lessor Accounting

We lease office space in our four-story office building located in Elgin, Illinois. As a lessor, we retain substantially all of the risks and benefits of ownership of the investment property and under Topic 842 we continue to account for all of our leases as operating leases. Lease agreements may include options to renew. We accrue fixed lease income on a
straight-line
basis over the terms of the leases. There is generally no variable lease consideration and an immaterial amount of
non-lease
components such as recurring utility and storage fees. Leases between related parties are immaterial.

Leasing revenue is as follows:

   For the
Quarter Ended
September 26,
2019		 

Gross leasing revenue from operating leases

  $543 

   
For the

Quarter Ended
September 24, 2020
   
For the

Quarter Ended
September 26, 2019
 
Lease income related to lease payments
  $451   $543 
11
The future minimum, undiscounted fixed lease considerationcash flows under
non-cancelable
tenant operating leases for each of the next five years and thereafter is presented below and is materially consistent with our previous accounting under Topic 840.

Fiscal year ending

June 25, 2020 (excluding the quarter ended September 26, 2019)

$ 1,641

June 24, 2021

1,949

June 30, 2022

1,717

June 29, 2023

1,737

June 27, 2024

1,756

Thereafter

2,467

$ 11,267

below.

Fiscal year ending
    
June 24, 2021 (excluding the quarter ended September 24, 2020)
  $1,472 
June 30, 2022
   1,708 
June 29, 2023
   1,737 
June 27, 2024
   1,766 
June 26, 2025
   1,228 
Thereafter
   1,284 
  
 
 
 
Total
  $9,195 
Note 4 – Inventories

Inventories consist of the following:

   September 26,
2019		   June 27,
2019		   September 27,
2018		 

Raw material and supplies

  $48,989   $58,927   $55,681 

Work-in-process and finished goods

   107,464    98,097    125,350 
  

 

 

   

 

 

   

 

 

 

Total

  $156,453   $157,024   $181,031 
  

 

 

   

 

 

   

 

 

 

12

   
September 24,

2020
   
June 25,

2020
   
September 26,

2019
 
Raw material and supplies
  $46,518   $69,276   $48,989 
Work-in-process
and finished goods
   103,853    102,792    107,464 
  
 
 
   
 
 
   
 
 
 
Total
  $150,371   $172,068   $156,453 
  
 
 
   
 
 
   
 
 
 

Note 5 – Goodwill and Intangible Assets

Identifiable intangible assets that are subject to amortization consist of the following:

   September 26,
2019		   June 27,
2019		   September 27,
2018		 

Customer relationships

  $21,100   $21,100   $21,100 

Brand names

   16,990    16,990    16,990 

Non-compete agreement

   270    270    270 
  

 

 

   

 

 

   

 

 

 
   38,360    38,360    38,360 

Less accumulated amortization:

      

Customer relationships

   (14,952)    (14,466)    (12,838) 

Brand names

   (9,355)    (9,182)    (8,665) 

Non-compete agreement

   (99)    (86)    (45) 
  

 

 

   

 

 

   

 

 

 
   (24,406)    (23,734)    (21,548) 
  

 

 

   

 

 

   

 

 

 

Net intangible assets

  $13,954   $14,626   $16,812 
  

 

 

   

 

 

   

 

 

 

   
September 24,
2020
   
June 25, 
2020
   
September 26,
2019
 
Customer relationships
  $21,100   $21,100   $21,100 
Brand names
   16,990    16,990    16,990 
Non-compete
agreement
   270    270    270 
  
 
 
   
 
 
   
 
 
 
   38,360    38,360    38,360 
Less accumulated amortization:
      
Customer relationships
   (16,615)    (16,223)    (14,952) 
Brand names
   (10,045)    (9,873)    (9,355) 
Non-compete
agreement
   (153)    (139)    (99) 
  
 
 
   
 
 
   
 
 
 
   (26,813)    (26,235)    (24,406) 
  
 
 
   
 
 
   
 
 
 
Net intangible assets
  $11,547   $12,125   $13,954 
  
 
 
   
 
 
   
 
 
 
Customer relationships are being amortized on an accelerated basis. The brand names remaining to be amortized consist of the
Squirrel Brand
and
Southern Style Nuts
brand names.

Total amortization expense related to intangible assets, which is a component of Administrative expense, was $672$578 for the quarter ended September 26, 2019.24, 2020. Amortization expense for the remainder of fiscal 20202021 is expected to be approximately $1,829,$1,587, and expected amortization expense for the next five fiscal years is as follows:

Fiscal year ending

    

June 24, 2021

  $2,165 

June 30, 2022

   1,896 

June 29, 2023

   1,657 

June 27, 2024

   1,414 

June 26, 2025

   1,156 

Fiscal year ending
    
June 30, 2022
  $1,896 
June 29, 2023
   1,657 
June 27, 2024
   1,414 
June 26, 2025
   1,156 
June 25, 2026
   861 
Our net goodwill of $9,650 relates entirely to the Squirrel Brand acquisition (the “Acquisition”) completed in the second quarter of fiscal 2018. There was no change in the carrying amount of goodwill during the quarter ended September 26, 2019.

24, 2020.

12
Note 6 – Credit Facility

On February 7, 2008, we entered into a

Our Amended and Restated Credit Agreement with a bank group providingdated March 5, 2020 provides for a $117,500 senior secured revolving loan commitment and letter of credit subfacilityfacility (the “Credit Facility”). The Credit Facility is secured by substantially all our assets other than machinery and equipment, real property and fixtures.

At September 26, 2019,24, 2020, we had $97,508$69,972 of available credit under the Credit Facility which reflects borrowings of $16,042$44,168 and reduced availability as a result of $3,950$3,360 in outstanding letters of credit. As of September 26, 2019,24, 2020, we were in compliance with all financial covenants under the Credit Facility and Mortgage Facility
 (as defined below).

13

Note 7 – Earnings Per Common Share

The following table presents the reconciliation of the weighted average shares outstanding used in computing basic and diluted earnings per share:

   For the Quarter Ended 
   September 26,
2019		   September 27,
2018		 

Weighted average number of shares outstanding – basic

   11,444,560    11,406,009 

Effect of dilutive securities:

    

Stock options and restricted stock units

   94,416    85,922 
  

 

 

   

 

 

 

Weighted average number of shares outstanding – diluted

   11,538,976    11,491,931 
  

 

 

   

 

 

 

   
For the Quarter Ended
 
   
September 24,

2020
   
September 26,

2019
 
Weighted average number of shares outstanding – basic
   11,477,287    11,444,560 
Effect of dilutive securities:
    
Stock options and restricted stock units
   73,300    94,416 
  
 
 
   
 
 
 
Weighted average number of shares outstanding – diluted
   11,550,587    11,538,976 
  
 
 
   
 
 
 
There were no anti-dilutive awards excluded from the computation of diluted earnings per share for either period presented.

Note 8 – Stock-Based Compensation Plans

During the quarter ended September 26, 201924, 2020 there was no significant stock option or restricted stock unit activity.

Compensation expense attributable to stock-based compensation during the first quarter of fiscal 20202021 and fiscal 20192020 was $633$622 and $616,$633, respectively. As of September 26, 2019,24, 2020, there was $3,011$2,685 of total unrecognized compensation cost related to

non-vested,
share-based compensation arrangements granted under our stock-based compensation plans. We expect to recognize that cost over a weighted average period of 1.2 years.

1.0 year.

Note 9 – Retirement Plan

The Supplemental Employee Retirement Plan is an unfunded,
non-qualified
deferred compensation plan that will provide eligible participants with monthly benefits upon retirement, disability or death, subject to certain conditions. The monthly benefit is based upon each participant’s earnings and his or her number of years of service. The components of net periodic benefit cost are as follows:

   For the Quarter Ended 
   September 26,
2019		   September 27,
2018		 

Service cost

  $178   $152 

Interest cost

   223    224 

Amortization of prior service cost

   239    239 

Amortization of loss

   104    24 
  

 

 

   

 

 

 

Net periodic benefit cost

  $744   $639 
  

 

 

   

 

 

 

   
For the Quarter Ended
 
   
September 24,

2020
   
September 26,

2019
 
Service cost
  $236   $178 
Interest cost
   214    223 
Amortization of prior service cost
   120    239 
Amortization of loss
   296    104 
  
 
 
   
 
 
 
Net periodic benefit cost
  $866   $744 
  
 
 
   
 
 
 
The components of net periodic benefit cost other than the service cost component are included in the line item “Other expense” in the Consolidated Statements of Comprehensive Income.

14

13

Note 10 – Accumulated Other Comprehensive Loss

The table below sets forth the changes to accumulated other comprehensive loss (“AOCL”) for the quarter ended September 26, 201924, 2020 and September 27, 2018.26, 2019.
These changes are all related to our defined benefit pension plan.

Changes to AOCL(a)  For the Quarter Ended 
  September 26,
2019		   September 27,
2018		 

Balance at beginning of period

  $(4,325)   $(3,181) 

Other comprehensive income before reclassifications

   —      —   

Amounts reclassified from accumulated other comprehensive loss

   343    263 

Tax effect

   (86)    (66) 
  

 

 

   

 

 

 

Net current-period other comprehensive income

   257    197 

Impact of adopting ASU2018-02(b)

   (976)    —   
  

 

 

   

 

 

 

Balance at end of period

  $(5,044)   $(2,984) 
  

 

 

   

 

 

 

Changes to AOCL
(a)
  
For the Quarter Ended
 
  
September 24,
2020
   
September 26,
2019
 
Balance at beginning of period
  $(8,630)   $(4,325) 
Other comprehensive income before reclassifications
   0    —   
Amounts reclassified from accumulated other comprehensive loss
   416    343 
Tax effect
   (104)    (86) 
  
 
 
   
 
 
 
Net current-period other comprehensive income
   312    257 
Impact of adopting ASU
2018-02
   —    (976) 
  
 
 
   
 
 
 
Balance at end of period
  $(8,318)   $(5,044) 
  
 
 
   
 
 
 
(a)

Amounts in parenthesis indicate debits/expense.

(b)

See Note 14 – “Recent Accounting Pronouncements” for additional information.

The reclassifications out of AOCL for the quarter ended September 24, 2020 and September 26, 2019 and September 27, 2018 were as follows:

Reclassifications from AOCL to earnings(c)  For the Quarter Ended   Affected line item in the
Consolidated Statements of
Comprehensive Income		 
  September 26,
2019		   September 27,
2018		 

Amortization of defined benefit pension items:

      

Unrecognized prior service cost

  $(239)   $(239)    Other expense 

Unrecognized net loss

   (104)    (24)    Other expense 
  

 

 

   

 

 

   

Total before tax

   (343)    (263)   

Tax effect

   86    66    Income tax expense 
  

 

 

   

 

 

   

Amortization of defined pension items, net of tax

  $(257)   $(197)   
  

 

 

   

 

 

   

f
o
llows:
Reclassifications from AOCL to earnings
(b)
  
For the Quarter Ended
   
Affected line item in the
Consolidated
 
Statements of
Comprehensive Income
 
  
 
 
 
  
September 24,
2020
   
September 26,
2019
 
Amortization of defined benefit pension items:
      
Unrecognized prior service cost
  $(120)   $(239)    Other expense 
Unrecognized net loss
   (296)    (104)    Other expense 
  
 
 
   
 
 
   
Total before tax
   (416)    (343)   
Tax effect
   104    86    Income tax expense 
  
 
 
   
 
 
   
Amortization of defined pension items, net of tax
  $(312)   $(257)   
  
 
 
   
 
 
   
(c)
(b)

Amounts in parenthesis indicate debits to expense. See Note 9 – “Retirement Plan” above for additional details.

Note 11 – Commitments and Contingent Liabilities

Liabilitie

s
We are currently a party to various legal proceedings in the ordinary course of business. While management presently believes that the ultimate outcomes of these proceedings, individually and in the aggregate, will not materially affect our Company’s financial position, results of operations or cash flows, legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur. Unfavorable outcomes could include substantial monetary damages in excess of any appropriate accruals, which management has established. Were such unfavorable final outcomes to occur, there exists the possibility of a material adverse effect on our financial position, results of operations and cash flows.

15

14

Note 12 – Fair Value of Financial Instruments

The Financial Accounting Standards Board (“FASB”) defines fair value as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels:

Level 1
–
Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities.
Level 2
–
Observable inputs other than quoted prices in active markets. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3
–
Unobservable inputs for which there is little or no market data available.

The carrying values of cash, trade accounts receivable and accounts payable approximate their fair values at each balance sheet date because of the short-term maturities and nature of these balances.

The carrying value of our revolving credit facility borrowings approximates fair value at each balance sheet date because interest rates on this instrument approximate current market rates (Level 2 criteria), and 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 following table summarizes the carrying value and fair value estimate of our current and long-term debt, excluding unamortized debt issuance costs:

   September 26,
2019		   
June 27,
2019		   September 27,
2018		 

Carrying value of long-term debt:

  $25,606   $27,798   $32,860 

Fair value of long-term debt:

   25,710    27,720    31,600 

   
September 24,

2020
   
June 25,

2020
   
September 26,

2019
 
Carrying value of long-term debt:
  $18,189   $20,059   $25,606 
Fair value of long-term debt:
   18,489    20,186    25,710 
The estimated fair value of our long-term debt was determined using a market approach based upon Level 2 observable inputs, which estimates fair value based on interest rates currently offered on loans with similar terms to borrowers of similar credit quality or broker quotes. In addition, there have been no significant changes in the underlying assets securing our long-term debt.

Note 13 – Related Party Transaction

In connection with the acquisition of the Squirrel Brand business in the second quarter of fiscal 2018, we incurred $11,500 of unsecured debt
pursuant to a promissory note (the “Promissory Note”)
to the principal owner and seller of the Squirrel Brand business, who was subsequently appointed as an executive officer of the Company and iswas considered a related party. The interest rateLate in the second quarter of fiscal 2020, the employment of this executive officer with the Company ceased. He is no longer considered a related party, and therefore the outstanding balance on the Promissory Note is 5.5% per annumnot reflected as related party debt on our Consolidated Balance Sheet as of September 24, 2020. There was no related party interest paid to this former executive officer during the current first quarter, and interest paid while the outstanding balance at September 26, 2019former executive officer was $4,472. Interest paid on the Promissory Notea related party was $70 for the quarter ended September 26, 2019 was $70.

2019.
15

Note 14 – Recent Accounting Pronouncements

The following recent accounting pronouncements have been adopted in the current fiscal year:

In February 2016, the FASB issued ASUNo. 2016-02 “Leases (Topic 842)”. The primary goal of this Update is to require the lessee to recognize all lease commitments, both operating and finance, by initially recording a lease asset and liability on the balance sheet at the lease commencement date. Additionally, enhanced qualitative and quantitative disclosures will be required. ASUNo. 2016-02 is effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. This new guidance is effective for the Company beginning in fiscal year 2020. Under ASUNo. 2016-02 the guidance was to be adopted using a modified retrospective approach, with elective reliefs, with application of the new guidance for all periods presented. In JulyAugust 2018, the FASB issued ASU
No. 2018-112018-15
“Leases (Topic 842)
Intangibles – Goodwill and Other –
Internal-Use
Software (Subtopic
350-40): Targeted Improvements” which provides
Customer’s Accounting for another transition method by allowing entities to initially apply the new leases standard at the adoption date and recognizeImplementation Costs Incurred in a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The amendments in this Update also provide lessors withCloud Computing Arrangement that is a practical expedient, by class of underlying asset, to not separatenon-lease components from the associated lease component, similar to the expedient provided for lessees. In July 2018, the FASB also issued ASUNo. 2018-10 “Codification Improvements to Topic 842, LeasesService Contract
” which affects narrow aspects of the guidance issued in ASUNo. 2016-02. In December 2018, the FASB issued ASUNo. 2018-20 “Leases (Topic 842) – Narrow Scope Improvements for Lessors” which provides specific guidance for lessors on the issues of sales taxes and other similar taxes collected

16

from lessees, certain lessor costs, and recognition of variable payments for contracts with lease andnon-lease components. In March 2019, the FASB issued ASUNo. 2019-01 “Leases (Topic 842) – Codification Improvements” which clarifies transition disclosure requirements for annual and interim periods after the date of adoption of ASUNo. 2016-02.

We have implemented processes and information technology tools to assist in our ongoing lease data analysis. We have also updated our accounting policies and internal controls that are impacted by the new guidance. We adopted ASUNo. 2016-02 utilizing the modified retrospective transition method and did not recast comparative periods in transition to the new standard. In addition, the new standard provides a number of optional practical expedients in transition. We elected the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We did not elect theuse-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us. The adoption of this standard resulted in the recognition of operating leaseright-of-use assets and liabilities on our Consolidated Balance Sheet of $5,361 and $5,320 respectively. The new standard also provides practical expedients for an entity’s initial and ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. We also elected the practical expedient to not separate lease andnon-lease components for all of our leases. Refer to Note 3 – Leases for additional information regarding the Company’s leases.

In February 2018, the FASB issued ASUNo. 2018-02“Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. The amendments in this Update allowalign the requirements for capitalizing implementation costs incurred in a reclassification from accumulated other comprehensive income (loss) (“AOCL”)hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to retained earnings for stranded tax effects resulting fromdevelop or obtain

internal-use
software (and hosting arrangements that include an internal use software license). ASU
No. 2018-15
was adopted using the Tax Cuts and Jobs Act of 2017. The amendments in this Update also require certain disclosures about stranded tax effects. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company adopted ASU2018-02prospective method in the first quarter of fiscal 20202021 and reclassified $976 from AOCL to retained earnings. Refer to Note 10did not have a material impact on our Consolidated Financial Statements.
In August 2018, the FASB issued ASU
No. 2018-14
“
Compensation – Accumulated Other Comprehensive Loss for additional detail. ASU2018-02 was not applied retrospectively. No other income tax effects relatedRetirement Benefits – Defined Benefit Plans – General (Subtopic
715-20):
Disclosure Framework – Changes to the applicationDisclosure Requirements for Defined Benefit Plans
”. The amendments in this Update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendments in this Update remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. ASU
No. 2018-14
was adopted on a retrospective basis to all periods presented in the Tax Cutsfirst quarter of fiscal 2021 and Jobs Act were reclassified from AOCLhad no impact on our quarterly Consolidated Financial Statements.
In January 2017, the FASB issued ASU
No. 2017-04
“Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”.
The amendments in this Update eliminate the need for entities to retained earnings.

calculate the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination, commonly referred to as “Step 2”. Under this amendment, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value. ASU

No. 2017-04
was adopted in the first quarter of fiscal 2021 and did not have a material impact on our Consolidated Financial Statements.
In June 2016, the FASB issued ASU
No. 2016-13
“
Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
”. The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU
No. 2016-13
was adopted using a modified retrospective transition method in the first quarter of fiscal 2021 and did not have a material impact on our Consolidated Financial Statements.
There are no recent accounting pronouncements that have been issued and not yet adopted that are expected to have a material impact on our Consolidated Financial Statements.

Note 15 – Subsequent Events

On October 7, 2019 we experienced a fire at our peanut processing facility located in Garysburg, North Carolina. No personnel were injured, and there was no damage to our peanut shelling and inventory storage areas. The fire occurred in our roasting room where all of the roasting equipment was destroyed. The fire also damaged some equipment in our packaging room and a portion of the roof. Due to order lead times for roasting equipment, we do not expect to have roasting capability for inshell peanuts for approximately one year. We have already secured supply of inshell roasted peanuts to meet our near term production requirements, and we will package those peanuts in our other facilities. We are currently evaluating our options with regard to our peanut production operations, which include (among other things) complete restoration of these damaged equipment or outsourcing our roasted inshell peanut requirements. We have adequate property damage and business interruption insurance (subject to applicable deductibles) and do not expect this event to have a material effect on our financial performance for the 2020 fiscal year.

On October 29, 2019, our Board of Directors declared a special cash dividend of $2.00 per share on all issued and outstanding shares of Common Stock and Class A Stock of the Company (the “October 2019 Dividend”). The October 2019 Dividend will be paid on December 10, 2019 to stockholders of record as of the close of business on November 26, 2019.

17

16

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW

The following discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and the Notes to Consolidated Financial Statements.

Our fiscal year ends on the final Thursday of June each year, and typically consists of
fifty-two
weeks (four thirteen-week quarters). Additional information on the comparability of the periods presented is as follows:

References herein to fiscal 20202021 and fiscal 20192020 are to the fiscal year ending June 25, 202024, 2021 and the fiscal year ended June 27, 2019,25, 2020, respectively.

References herein to the first quarter of fiscal 20202021 and fiscal 20192020 are to the quarters ended September 24, 2020 and September 26, 2019, and September 27, 2018, respectively.

As used herein, unless the context otherwise indicates, the terms “we”, “us”, “our” or “Company” collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiary, JBSS Ventures, LLC. Our Company’s Credit Facility and Mortgage Facility, as defined below, are sometimes collectively referred to as “our financing arrangements.”

We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States. These nuts are sold under a variety of private brands and under the
Fisher, Orchard Valley Harvest,
Squirrel Brand, Southern Style Nuts
and
Sunshine Country
brand names. We also market and distribute, and in most cases, manufacture or process, a diverse product line of food and snack products, including peanut butter, almond butter, cashew butter, candy and confections, snacks and trail mixes, snack bites, sunflower kernels, dried fruit, corn snacks, chickpea snacks, sesame sticks and other sesame snack products under private brands and brand names. We distribute our products in the consumer, commercial ingredients and contract packaging distribution channels.

The Company’s long-term objective to drive profitable growth, as identified in our strategic plan (the “Strategic Plan”),Strategic Plan, includes continuing to grow
Fisher,
 Orchard Valley Harvest, Squirrel Brand
and
Southern Style Nuts
 into leading nut brands by focusing on consumers demanding quality nuts in the snacking, recipe, trail and snack mix and produce categories, providing integrated nut solutions to grow
non-branded
business at existingacross key customers in each distribution channel and expanding our offerings into alternative distribution channels.customers. We are executingplan to execute on our Strategic Plan to grow our branded business by continuingreaching new consumers via product and pack innovation, expanding distribution across current and alternative channels and focusing on new ways to expand distribution ofbuy, with an emphasis on increasing ourOrchard Valley HarvestandSouthern Style Nutsproducts sales via
e-commerce
platforms and growingretailers. In addition, we intend to invest in our consumer distribution channel with private brand products.

people and facilities in order to research, develop, market and sell new product offerings in fiscal 2021.

We face a number of challenges in the future which include, among others, potentialchanges in commodity acquisition cost volatility for almonds and walnuts,costs, as well as intensified competition on pricing and for market share from both private brand and name brand nut products. Our
Fisher
recipe nut sales have been negatively impacted in fiscal 2020 and the first quarter of fiscal 2021 due to this increased competition for market share. We also face changing industry trends resultingas consumer preferences shift to shopping in smaller store formats like grocery and online. With restaurant closures and other limitations due to the impact of
COVID-19,
consumers are also doing more cooking and baking at home, which has had a positive impact on certain aspects of our consumer business but a negative impact on our foodservice business.
We will continue to face challenges in our fiscal 2021 as result of the
COVID-19
pandemic and the uncertainty of future local, state and federal restrictions aimed to mitigate and control the pandemic. As many of these restrictions were loosened near the conclusion of our fiscal 2020, we saw a gradual (albeit limited) increase in demand from our foodservice, restaurant, convenience store and
non-essential
retail consolidationcustomers. However, if conditions deteriorate in the future and Internet price competitionconsumers are limited in their ability to purchase meals outside their homes, we believe demand will decrease (or demand will continue to be suppressed) from our foodservice, restaurant, convenience store and
non-essential
retail customers and the collectability of accounts receivables from these customers could be impacted. Also, in our first quarter of fiscal 2021, we began to see signs of a shortage in capacity in the transportation industry, which our transportation service providers believe is due to driver concerns regarding health and safety from increasing
COVID-19
cases and social unrest seen in certain large cities within the country. We believe this shortage in transportation capacity may continue in fiscal 2021 and may lead to increased transportation costs and potential disruptions in service to our customers and from our suppliers.
17
The Company’s
COVID-19
crisis team, which was created in the third quarter of fiscal 2020, continues to meet on a regular basis to discuss risks faced by the Company and mitigation strategies. We continue to follow recommendations made by state and federal regulators and health agencies to ensure the safety and health of our employees as those recommendations change and evolve. We have implemented (among other things) a temporary work from home option for nutthe majority of our office employees, staggered shifts andnut-related products.

breaks, installed partitions on production lines and office space where social distancing could not be consistently maintained and installed thermal scanners to measure temperature for all employees upon arrival. We update and enhance these measures as new guidance is provided. In addition, we have extended personal time off for those who are in self quarantine or ill.

We have worked closely with our domestic and global suppliers to source and maintain a consistent supply of raw materials, ingredients and packaging. To date, none of our manufacturing facilities have been significantly impacted by this pandemic. We have contingency plans in place to help reduce the negative impact if one or more of our manufacturing facilities encounters a partial or full shut down.
We will continue to focus on seeking profitable business opportunities to maximize the utilization of our production capacity at our primary manufacturing, processing and distribution facility located in Elgin, Illinois (the “Elgin Site”) and evaluate facility expansion to meet customer demand.Illinois. We expect to maintainredirect our current level of promotional and advertising activity forwith respect to ourOrchard Valley Harvest brands to focus on more digital andFishersnack brands.
e-commerce
platforms to match consumer behavior. We continue to see significant domestic sales strong
e-commerce
and volume growth ingrocery performance across our
Orchard Valley Harvest brand
and
Fisher
recipe brands and expect that there will continuebe additional opportunities to focus on this portion of our branded business as well as ourSquirrel Brandconnect these brands to consumers’ desires for more functional snacking andSouthern Style Nuts brands. baking and cooking ideas, respectively. We will continue to face the ongoing challenges specific to our business, such as food safety and regulatory issuescompliance and the maintenance and growth of our customer base for branded and private label products. See the information referenced in Part II,I, Item 1A — “Risk Factors” of this report for additional information about our risks, challenges and uncertainties.

18

QUARTERLY HIGHLIGHTS

Our net sales of $210.3 million for the first quarter of fiscal 2021 decreased 3.5% from our net sales of $217.8 million for the first quarter of fiscal 2020 increased 6.6% from our net sales of $204.3 million for the first quarter of fiscal 2019.

2020.

Sales volume, measured as pounds sold to customers, increased 9.1%decreased 3.5% compared to the first quarter of fiscal 2019.

2020.

Gross profit increased by $9.3decreased $2.9 million, and our gross profit margin, as a percentage of net sales, increaseddecreased to 18.7% for the first quarter of fiscal 2021 compared to 19.4% for the first quarter of fiscal 2020 compared to 16.1% for the first quarter of fiscal 2019.

2020.

Total operating expenses for the first quarter of fiscal 2020 increased by $0.32021 decreased $2.7 million, or 1.2%11.8%, compared to the first quarter of fiscal 2019.2020. As a percentage of net sales, total operating expenses in the first quarter of fiscal 20202021 decreased to 10.6%9.7% from 11.2%10.6% for the first quarter of fiscal 2019.

2020.

The total value of inventories on hand at the end of the first quarter of fiscal 20202021 decreased by $24.6$6.1 million, or 13.6%3.9%, in comparison to the total value of inventories on hand at the end of the first quarter of fiscal 2019.

2020.

We have seenexpect acquisition costs for walnuts beginand almonds to increasedecrease in the 20192020 crop year (which falls into our current 20202021 fiscal year). We also continue to see decliningexpect acquisition costs to decline or remain stable for cashews.all other major tree nuts. While we began to procure inshell walnuts during the first quarter of fiscal 2020,2021, the total payments due to our walnut growers will not be determined until the second and/or third quarters of fiscal 2020.2021. We will determine the final prices to be paid to the walnut growers based upon current market prices and other factors such as crop size and export demand. We have estimated the liability to our walnut growers and our walnut inventory costs using currently available information. Any difference between our estimated liability and the actual payments will be determined during the second and/or third quarters of fiscal 20202021 and will be recognized in our financial results at that time.

19

RESULTS OF OPERATIONS

Net Sales

Our net sales increased 6.6%decreased 3.5% to $217.8$210.3 million in the first quarter of fiscal 20202021 compared to net sales of $204.3$217.8 million for the first quarter of fiscal 2019.2020. Sales volume, which is defined as pounds sold to customers, increased 9.1%decreased 3.5% in the quarterly comparison. The weighted average sales price per pound decreased approximately 2.3% primarily due to lower selling prices for cashews, pecans and walnuts as a result of lower commodity acquisition costs.

The following table summarizes sales by product type as a percentage of total gross sales. The information is based upon gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product type.

   For the Quarter Ended 

Product Type

  September 26,
2019		  September 27,
2018		 

Peanuts

   18.0%   19.2% 

Pecans

   9.4   11.6 

Cashews & Mixed Nuts

   22.7   22.6 

Walnuts

   7.0   10.1 

Almonds

   16.6   14.1 

Trail & Snack Mixes

   20.5   17.1 

Other

   5.8   5.3 
  

 

 

  

 

 

 

Total

   100.0%   100.0% 
  

 

 

  

 

 

 

   
For the Quarter Ended
 
Product Type
  
September 24,

2020
  
September 26,

2019
 
Peanuts
   19.5%   18.0% 
Pecans
   8.6   9.4 
Cashews & Mixed Nuts
   23.7   22.7 
Walnuts
   6.6   7.0 
Almonds
   12.7   16.6 
Trail & Snack Mixes
   22.8   20.5 
Other
   6.1   5.8 
  
 
 
  
 
 
 
Total
   100.0%   100.0% 
  
 
 
  
 
 
 
The following table shows a comparison of net sales by distribution channel (dollars in thousands):

   For the Quarter Ended 

Distribution Channel

  September 26,
2019		   September 27,
2018		   Change   Percent
Change		 

Consumer(1)

  $157,146   $139,444   $17,702    12.7% 

Commercial Ingredients

   36,888    37,202    (314)    (0.8) 

Contract Packaging

   23,812    27,642    (3,830)    (13.9) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $217,846   $204,288   $13,558    6.6% 
  

 

 

   

 

 

   

 

 

   

 

 

 

   
For the Quarter Ended
 
Distribution Channel
  
September 24,

2020
   
Percentage
of Total
  
September 26,

2019
   
Percentage
of Total
  
$

Change
  
Percent

Change
 
Consumer
(1)
  $166,757    79.3%  $157,146    72.2%  $9,611   6.1% 
Commercial Ingredients
   22,811    10.9   36,888    16.9   (14,077)   (38.2) 
Contract Packaging
   20,705    9.8   23,812    10.9   (3,107)   (13.0) 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Total
  $210,273    100.0%  $217,846    100.0%  $(7,573)   (3.5)% 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
(1)

Sales of branded products were approximately 28%25% and 39%28% of total consumer channel sales during the first quarter of fiscal 20202021 and fiscal 2019,2020, respectively.
Fisher
branded products were approximately 64%65% and 70%64% of branded sales during the first quarter of fiscal 20202021 and fiscal 2019,2020, respectively, with branded produce andSquirrel Brandproducts accounting for the majority of the remaining branded product sales.

Net sales in the consumer distribution channel increased $17.7$9.6 million, or 12.7%6.1%, and sales volume increased 17.4%3.8% in the first quarter of fiscal 20202021 compared to the first quarter of fiscal 2019.2020. The sales volume increase was driven by increased sales of private brand trail and snack mixes, mixed nuts, cashews and trail mixes from distribution gains withpeanuts at existing and new customers.customers, which was partially offset by a decline in peanut butter sales volume due to a temporary peanut supply shortage during the current quarter. Sales volume for
Fisher
snack nuts increased 12.6% due to increased promotional activity and distribution gains at new and existing customers for our
Oven Roasted Never Fried
product line. Sales volume for
Fisher
recipe nuts decreased 8.0%, primarily14.1% as a result of lost airlinedistribution at some customers, which was offset in part by increased sales with Internet retailers and club business.increased sales with other existing customers in the grocery sector. Sales volume forFisher recipe nuts
of
Orchard Valley Harvest
produce products decreased 30.3% mainly16.1% due to some lost distribution for some items due to the continued expansion of private brand recipe nut offeringsat one customer and reduced foot traffic at a major customer. customer in the
non-food
sector as a result of
COVID-19.
Sales volumeof Orchard Valley Harvest produce products increased 12.4% due to increased sales with existing customers. The 40.3% sales volume increase offor
Southern Style Nuts
decreased 8.4% as a result of lower promotional activity at several customers, which was due tooffset in part by distribution gains with new grocery customers.

customers and increased sales with Internet retailers.

20
Net sales and sales volume in the commercial ingredients distribution channel were relatively unchangeddecreased 38.2% in dollars and 27.7% in sales volume in the first quarter of fiscal 20202021 compared to the first quarter of fiscal 2019.

20

2020. The decline in sales volume was due to a 40.9% decrease in sales volume in our foodservice business which resulted from a decline in air travel and nationwide restrictions on occupancy rates in and closures of restaurants, both of which were attributable to
COVID-19.

Net sales in the contract packaging distribution channel decreased by 13.9%13.0% in dollars and 13.0%12.2% in sales volume in the first quarter of fiscal 20202021 compared to the first quarter of fiscal 2019.2020. The decline in sales volume mainly came fromwas primarily attributable to the reduction in unit ounce weights implemented byunfavorable impact of lower convenience store foot traffic on one customer’s business as a contract packagingresult of

COVID-19,
as well as the loss of peanut butter business with another customer for its entire product line and reduced promotional activity by another costumer.

due to the temporary peanut supply shortage cited above.

Gross Profit

Gross profit increased by $9.3decreased $2.9 million, or 28.2%6.9%, to $42.2$39.3 million for the first quarter of fiscal 20202021 compared to the first quarter of fiscal 2019.2020. Our gross profit margin, as a percentage of net sales, increaseddecreased to 18.7% for the first quarter of fiscal 2021 compared to 19.4% for the first quarter of fiscal 2020 compared to 16.1% for the first quarter of fiscal 2019.2020. The increasesdecreases in gross profit and gross profit margin were mainly attributable to the sales volume increasedecrease discussed above, as well as lower commodity acquisition costs for cashews, pecans and walnuts.

above.

Operating Expenses

Total operating expenses for the first quarter of fiscal 2020 increased by $0.32021 decreased $2.7 million to $23.2$20.5 million. Operating expenses for the first quarter of fiscal 20202021 decreased to 10.6%9.7% of net sales from 11.2%10.6% of net sales for the first quarter of fiscal 20192020 due primarily to a higher net sales base.

reductions in advertising, compensation and consulting expenses.

Selling expenses for the first quarter of fiscal 2021 were $14.1$12.1 million, for both periods presented. An increasea decrease of $0.7$2.0 million, in payroll related and incentive compensation expenseor 14.4%, from the first quarter of fiscal 2020. The decrease was offsetdriven primarily by a decrease in transportation costs of $0.5$1.1 million due to decreasing costs per shipped pound and a decrease in advertising expense of $0.3 million due to a reduction in radio advertising campaigns and sports sponsorships, a $0.7 million decrease in radio advertising.

compensation related expenses and a $0.5 million decrease in freight expense due to a reduction in sales pounds shipped.

Administrative expenses for the first quarter of fiscal 20202021 were $9.1$8.4 million, an increasea decrease of $0.2$0.7 million, or 2.8%7.7%, from the first quarter of fiscal 2019.2020. The increasedecrease was driven primarily by a $0.5$0.3 million increasedecrease in payrollconsulting fees and a $0.3 million decrease in compensation related andexpenses, primarily incentive compensation expense, which was offset by a decrease of $0.2 million in amortization expense related to the intangible assets acquired in the Acquisition.

compensation.

Income from Operations

Due to the factors discussed above, income from operations increaseddecreased to $18.9 million, or 9.0% of net sales, for the first quarter of fiscal 2021 from $19.1 million, or 8.8% of net sales, for the first quarter of fiscal 2020 from $10.1 million, or 4.9% of net sales, for the first quarter of fiscal 2019.

2020.

Interest Expense

Interest expense was $0.5 million for both the first quarter of fiscal 2020 compared to $0.9 million in the first quarter of2021 and fiscal 2019. The decrease in interest expense was due to lower average debt levels.

2020.

Rental and Miscellaneous Expense, Net

Net rental and miscellaneous expense was $0.4 million for both the first quarter of fiscal 2020 compared to $0.3 million for the first quarter of2021 and fiscal 2019.

2020.

Other Expense

Other expense consists of pension related expenses other than the service cost component. Other expensecomponent and was $0.6 million for both the first quarter of fiscal 2020 compared to $0.5 million for the first quarter of2021 and fiscal 2019.

21

2020.

Income Tax Expense

Income tax expense was $4.6$4.5 million, or 26.4% of income before income taxes (“Effective Tax Rate”), for the first quarter of fiscal 2020 compared to $1.8 million, or 21.3%26.2% of income before income taxes for the first quarter of fiscal 2019. The effective tax rate was lower in2021 compared to $4.6 million, or 26.4% of income before income taxes, for the first quarter of fiscal 2019 primarily due to an2020.
Net Income
Net income tax benefit recognizedwas $12.8 million, or $1.12 per common share basic and $1.11 per share diluted, for an increase in the deferred state tax rate caused by the Tax Cuts and Jobs Act of 2017. The decrease in the federal tax rate reduced the federal benefit impacting our state tax rate. This income tax benefit reduced our first quarter of fiscal 2019 effective tax rate approximately 5.8%.

Net Income

Net income was2021, compared to $12.9 million, or $1.13 per common share basic and $1.12 per share diluted, for the first quarter of fiscal 2020, compared to $6.6 million, or $0.58 per common share basic and $0.57 per share diluted, for the first quarter of fiscal 2019.

2020.

21
LIQUIDITY AND CAPITAL RESOURCES

General

The primary uses of cash are to fund our current operations, fulfill contractual obligations, pursue our Strategic Plan through growing our branded and private label nut programs and repay indebtedness. Also, various uncertainties could result in additional uses of cash. The primary sources of cash are results of operations and availability under our Credit Agreement, dated February 7, 2008 and subsequently amended most recently in November 2017 (as amended, the “Credit Facility”), that provides a revolving loan commitment and letter of credit subfacility.Facility. We anticipate that expected net cash flow generated from operations and amounts available pursuant to the Credit Facility will be sufficient to fund our operations for the next twelve months. Our available credit under our Credit Facility has allowed us to devote more funds to promote our products (especially our
Fisher
and
Orchard Valley Harvest
brands), consummate strategic business acquisitions such as the fiscal 2018 acquisition of the Squirrel Brand business, reinvest in the Company through capital expenditures, develop new products, pay cash dividends the past eight years and explore other growth strategies outlined in our Strategic Plan.

Cash flows from operating activities have historically been driven by net income but are also significantly influenced by inventory requirements, which can change based upon fluctuations in both quantities and market prices of the various nuts and nut products we buy and sell. Current market trends in nut prices and crop estimates also impact nut procurement.

The following table sets forth certain cash flow information for the first quarter of fiscal 20202021 and 2019,2020, respectively (dollars in thousands):

   September 26,
2019		   September 27,
2018		   $ Change 

Operating activities

  $22,468   $15,675   $6,793 

Investing activities

   (3,102)    (4,768)    1,666 

Financing activities

   (20,070)    (11,141)    (8,929) 
  

 

 

   

 

 

   

 

 

 

Net decrease in cash

  $(704)   $(234)   $(470) 
  

 

 

   

 

 

   

 

 

 

   
September 24,
2020
   
September 26,
2019
   
$
Change
 
Operating activities
  $20,577   $22,468   $(1,891) 
Investing activities
   (6,018)    (3,102)    (2,916) 
Financing activities
   (15,351)    (20,070)    4,719 
  
 
 
   
 
 
   
 
 
 
Net decrease in cash
  $(792)   $(704)   $(88) 
  
 
 
   
 
 
   
 
 
 
Operating Activities
Net cash provided by operating activities was $20.6 million for the first quarter of fiscal 2021 compared to $22.5 million for the first quarter of fiscal 2020.
Net accounts receivable were $69.9 million at September 24, 2020, an increase of $12.9 million, or 22.7%, from the balance at June 25, 2020, and an increase of $9.4 million, or 15.6%, from the balance at September 26, 2019. The increase in net accounts receivable at September 24, 2020 compared to $15.7 millionboth June 25, 2020 and September 26, 2019 was primarily due to extended terms that were temporarily granted to customers whose businesses were negatively impacted by the
COVID-19
pandemic. An increase in net sales for the first quarter of fiscal 2019. The increase in operating cash flow was due primarily2021 compared to a $6.3 millionnet sales for the fourth quarter of fiscal 2020 also contributed to the increase in net income driven by increased sales and improved profitability.

accounts receivable at September 24, 2020 compared to June 25, 2020.

Total inventories were $156.5$150.4 million at September 26, 2019,24, 2020, a decrease of $0.6$21.7 million, or 0.4%12.6%, from the inventory balance at June 27, 2019,25, 2020, and a decrease of $24.6$6.1 million, or 13.6%3.9%, from the inventory balance at September 27, 2018.26, 2019. The decrease in inventory at September 24, 2020 compared to June 25, 2020 was primarily due to lower quantities of tree nuts and peanuts on hand, which were partially offset by increased quantities of finished goods inventory. The decrease in inventories at September 26, 201924, 2020 compared to September 27, 201826, 2019 was primarily attributabledue to lower quantities of farmer stock peanuts and shelled pecans and walnuts on hand. Lower acquisition costs for pecans,almonds and cashews and walnutsalso contributed to the decline in addition to lower quantities on hand for finished goods.

total inventory value.

Raw nut and dried fruit input stocks, some of which are classified as work in process, increased by 2.9decreased 10.6 million pounds, or 6.5%22.5%, at September 26, 201924, 2020 compared to September 27, 2018. The increase was attributable mainly to increased quantities of inshell peanuts on hand, which was partially offset by decreases in the quantity on hand of

22

most other major nut types.26, 2019. The weighted average cost per pound of raw nut and dried fruit input stocks on hand at the end of the first quarter of fiscal 2020 decreased 25.9%2021 increased 7.8% compared to the end of the first quarter of fiscal 20192020 due to lower acquisition costs for pecans, cashews and walnuts and a shift in product mix from lower priced farmer stock peanuts to peanuts.

higher priced inshell pecans.

Investing Activities
Cash used in investing activities, primarily all for capital expenditures, was $3.1$6.0 million during the first quarter of fiscal 20202021 compared to $4.8$3.1 million for the same period last year. We expect total capital expenditures for new equipment, facility upgrades, and food safety enhancements for fiscal 20202021 to be approximately $15.0$23.0 million. The projected increase in capital expenditures from our previous expenditure level is due to a strategic investment for a new product line. Absent any material acquisitions or other significant investments, we believe that cash on hand, combined with cash provided by operations and borrowings available under the Credit Facility, will be sufficient to meet the cash requirements for planned capital expenditures.

22
Financing Activities
Cash used in financing activities was $20.1$15.4 million during the first quarter of fiscal 20202021 compared to $11.1$20.1 million for the same period last year. The dividends paid in fiscal 2021 to date were approximately $5.6 million less than the same period of fiscal 2020. Net short-term borrowings under our Credit Facility were $16.0$17.2 million during the first quarter of fiscal 20202021 compared to net borrowings of $20.7$16.0 million for the first quarter of fiscal 2019. The decrease in short term borrowings under our Credit Facility was primarily due to an increase in net income and operating cash flows. The dividends paid in fiscal 2020 to date were approximately $5.2 million more than the same period of fiscal 2019.

2020.

Real Estate Matters

In August 2008, we completed the consolidation of our Chicago-based facilities into the Elgin Site. The Elgin Site includes both an office building and a warehouse. We are currently attempting to find additional tenants for the available space in the office building at the Elgin Site. Until additional tenant(s) are found, we will not receive the benefit of rental income associated with such space. Approximately 63%67% of the rentable area in the office building is currently vacant. Approximately 29% of the rentable area has not been
built-out.
There can be no assurance that we will be able to lease the unoccupied space and further capital expenditures will likely be necessary to lease the remaining space.

Financing Arrangements

On February 7, 2008, we entered into the Former Credit FacilityAgreement (as defined below) with a bank group (the “Bank Lenders”) providing a $117.5 million revolving loan commitment and letter of credit subfacility. Also on February 7, 2008, we entered into a Loan Agreement with an insurance company (the “Mortgage Lender”) providing us with two term loans, one in the amount of $36.0 million (“Tranche A”) and the other in the amount of $9.0 million (“Tranche B”), for an aggregate amount of $45.0 million (the “Mortgage Facility”).

On November 29, 2017,March 5, 2020, we entered into the Consentan Amended and Ninth Amendment toRestated Credit Agreement (the “Amended and Restated Credit Agreement”) which amended and restated our Credit Agreement which provided lender consent to incur unsecured debt in connectiondated as of February 7, 2008 (the “Former Credit Agreement”). The Amended and Restated Credit Agreement provides for a $117.5 million senior secured revolving credit facility with our acquisitionthe same borrowing capacity, interest rates and applicable margin as the Former Credit Agreement and extends the term of the assets of the Squirrel Brand business,Former Credit Agreement from July 7, 2021 to March 5, 2025.
The Amended and for the acquisition of the Squirrel Brand business to constitute a “Permitted Acquisition” under the terms of theRestated Credit Facility. The Ninth Amendment also modified our collateral reporting requirements.

The Credit Facility as most recently amended in November 2017, is secured by substantially all of our assets other than machinery and equipment, real property, and fixtures and matures on July 7, 2021.March 5, 2025. The Mortgage Facility is secured by mortgages on essentially all of our owned real property located in Elgin, Illinois, Gustine, California and Garysburg, North Carolina (the “Encumbered Properties”).

Credit Facility

At our election, borrowings under the Credit Facility currently accrue interest at either (i) a rate determined pursuant to the administrative agent’s prime rate plus an applicable margin determined by reference to the amount of loans which may be advanced under the borrowing base calculation, ranging from 0.25% to 0.75% or (ii) a rate based upon the London interbank offered rate (“LIBOR”) plus an applicable margin based upon the borrowing base calculation, ranging from 1.25% to 1.75%.

At September 26, 2019,24, 2020, the weighted average interest rate for the Credit Facility was 4.7%1.7%. The terms of the Credit Facility contain covenants that, among other things, require us to restrict investments, indebtedness, acquisitions and certain sales of assets and limit annual cash dividends or distributions, transactions with affiliates, redemptions of capital stock and prepayment of indebtedness (if such prepayment, among other things, is of a subordinate debt). If loan availability under the borrowing base calculation falls below $25.0 million, we will be required to maintain a

23

specified fixed charge coverage ratio, tested on a monthly basis, until loan availability equals or exceeds $25.0 million for three consecutive months. All cash received from customers is required to be applied against the Credit Facility. The Bank Lenders have the option to accelerate and demand immediate repayment of our obligations under the Credit Facility in the event of default on the payments required under the Credit Facility, a change in control in the ownership of the Company,

non-compliance
with the financial covenant or upon the occurrence of other defaults by us under the Credit Facility (including a default under the Mortgage Facility). As of September 26, 2019,24, 2020, we were in compliance with all covenants under the Credit Facility and we currently expect to be in compliance with the financial covenant in the Credit Facility for the foreseeable future. At September 26, 2019,24, 2020, we had $97.5$70.0 million of available credit under the Credit Facility. If this entire amount were borrowed at September 26, 2019,24, 2020, we would still be in compliance with all restrictive covenants under the Credit Facility.

23
Mortgage Facility

The Mortgage Facility matures on March 1, 2023. On March 1, 2018 the interest rate on the Mortgage Facility was fixed at 4.25% per annum for the remainder of the term.annum. Monthly principal payments on Tranche Athe Mortgage Facility in the amount of $0.2$0.3 million commenced on June 1, 2008. Monthly principal payments on Tranche B in the amount of $0.1 million commenced on June 1, 2008.

The terms of the Mortgage Facility contain covenants that require us to maintain a specified net worth of $110.0 million and maintain the Encumbered Properties. The Mortgage Lender is entitled to require immediate repayment of our obligations under the Mortgage Facility in the event we default in the payments required under the Mortgage Facility,
non-compliance
with the covenants or upon the occurrence of certain other defaults by us under the Mortgage Facility. As of September 26, 2019,24, 2020, we were in compliance with all covenants under the Mortgage Facility.

Facility and a total principal amount of $8.2 million was outstanding.

Selma Property

In September 2006, we sold our Selma, Texas properties (the “Selma Properties”) to two related party partnerships for $14.3 million and are leasing them back. The selling price was determined by an independent appraiser to be the fair market value which also approximated our carrying value. The lease for the Selma Properties has a
ten-year
term at a fair market value rent with three five-year renewal options. In September 2015, we exercised two of the five-year renewal options which extended the lease term to September 2026. The lease extension also reduced the monthly lease payment on the Selma Properties, beginning in September 2016, to reflect then current market conditions. One five-year renewal option remains. Also, we have an option to purchase the Selma Properties from the owner at 95% (100% in certain circumstances) of the then fair market value, but not less than the original $14.3 million purchase price. The provisions of the arrangement are not eligible for sale-leaseback accounting, and the $14.3 million was recorded as a debt obligation. No gain or loss was recorded on the Selma Properties transaction. As of September 26, 2019, $9.924, 2020, $9.4 million of the debt obligation was outstanding.

Squirrel Brand Seller-Financed Note

In November 2017 we completed the Squirrel Brand acquisition. The acquisition was financed by a combination of cash (drawn under the Credit Facility) and a three-year seller-financed note for $11.5 million (“Promissory Note”). The principal owner and seller of the Squirrel Brand business was subsequently appointed as an executive officer of the Company and iswas considered a related party.party until the employment of this executive officer with the Company ceased during fiscal 2020. The Promissory Note is unsecured, bears interest at 5.5% per annum and is payable in equal monthly principal payments of $0.3 million, plus interest, which began in January 2018. Upon an event of default, as defined in the Promissory Note, the interest rate increases to 7.5% until such event of default is cured. We can
pre-pay
the Promissory Note at any time during the three-year period without penalty. At September 26, 2019,24, 2020, the principal amount of $4.5$0.6 million of the Promissory Note was outstanding.

24

Critical Accounting Policies and Estimates

For information regarding our Critical Accounting Policies and Estimates, see the “Critical Accounting Policies and Estimates” section of “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form
10-K
for the fiscal year ended June 27, 2019.

25, 2020.

Recent Accounting Pronouncements

Refer to Note 14 – “Recent Accounting Pronouncements” of the Notes to Consolidated Financial Statements, contained in Part I, Item 1 of this form
10-Q,
for a discussion of recently issued and adopted accounting pronouncements.

25

FORWARD LOOKING STATEMENTS

Some of the statements in this report are forward-looking (including statements concerning our expectations regarding market risk and the impact of the purchasing decisions of major customers). These forward-looking statements may be generally identified by the use of forward-looking words and phrases such as “will”, “intends”, “may”, “believes”, “anticipates”, “should” and “expects” and are based on the Company’s current expectations or beliefs concerning future events and involve risks and uncertainties. Consequently, the Company’s actual results could differ materially. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors that affect the subject of these statements, except where expressly required to do so by law. Among the factors that could cause results to differ materially from current expectations are: (i) the risks associated with our vertically integrated model with respect to pecans, peanuts and walnuts; (ii) sales activity for the Company’s products, such as a decline in sales (of branded products, private label products or otherwise) to one or more key customers, or to customers generally, in some or all channels, a change in product mix to lower price products, a decline in sales of private brand products or changing consumer preferences, including a shift from higher margin products to lower margin products; (iii) changes in the availability and costs of raw materials and the impact of fixed price commitments with customers; (iv) the ability to pass on price increases to customers if commodity costs rise and the potential for a negative impact on demand for, and sales of, our products from price increases; (v) the ability to measure and estimate bulk inventory, fluctuations in the value and quantity of the Company’s nut inventories due to fluctuations in the market prices of nuts and bulk inventory estimation adjustments, respectively; (vi) the Company’s ability to appropriately respond to, or lessen the negative impact of, competitive and pricing pressures;pressures, including competition in the recipe nut category; (vii) losses associated with product recalls, product contamination, food labeling or other food safety issues, or the potential for lost sales or product liability if customers lose confidence in the safety of the Company’s products or in nuts or nut products in general, or are harmed as a result of using the Company’s products; (viii) the ability of the Company to control expenses, such as transportation, compensation, medical and administrative expense; (ix) the potential negative impact of government regulations and laws and regulations pertaining to food safety, such as the Food Safety Modernization Act; (x) uncertainty in economic conditions, including the potential for economic downturn; downturn, particularly in light of the outbreak of
COVID-19;
(xi) the timing and occurrence (or nonoccurrence) of other transactions and events which may be subject to circumstances beyond the Company’s control; (xii) the adverse effect of labor unrest or disputes, litigation and/or legal settlements, including potential unfavorable outcomes exceeding any amounts accrued; (xiii) losses due to significant disruptions at any of our production or processing facilities;facilities or employee unavailability due to illness or quarantine; (xiv) the inabilityability to implement our Strategic Plan, including growing our branded and private brand product sales and expanding into alternative sales channels; (xv) technology disruptions or failures;failures, including disruptions due to employees working remotely; (xvi) the inability to protect the Company’s brand value, intellectual property or avoid intellectual property disputes; and (xvii) the Company’s ability to manage successfully the price gap between its private brand products and those of its branded competitors.

competitors; and (xviii) the ability of the Company to respond to or manage the outbreak of

COVID-19
or other infectious diseases and the various implications thereof.
26

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in our assessment of our sensitivity to market risk since our presentation set forth in Part I—I – Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form
10-K
for the fiscal year ended June 27, 2019.

25, 2020.

Item 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule
13a-15(e))
as of September 26, 2019.24, 2020. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 26, 2019,24, 2020, the Company’s disclosure controls and procedures were effective.

In connection with the evaluation by our management, including our Chief Executive Officer and Chief Financial Officer, there were no changes in our internal control over financial reporting (as defined in Exchange Act Rule
13a-15(f))
during the quarter ended September 26, 201924, 2020 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II—II – OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of legal proceedings, see Note 11 – “Commitments and Contingent Liabilities” in Part I, Item 1 of this Form
10-Q.

Item 1A. Risk Factors

In addition to the other information set forth in this report on Form
10-Q,
you should also consider the factors, risks and uncertainties which could materially affect our Company’s business, financial condition or future results as discussed in Part I, Item 1A – “Risk Factors” of our Annual Report on Form
10-K
for the fiscal year ended June 27, 2019.25, 2020. There were no significant changes to the risk factors identified on the Form
10-K
for the fiscal year ended June 27, 201925, 2020 during the first quarter of fiscal 2020.

2021.

See Part I, Item 2 —– “Management’s Discussion and Analysis of Financial Condition and Results of Operations —– Liquidity and Capital Resources” in this Form
10-Q,
and see Part II, Item 7 —– “Management’s Discussion and Analysis of Financial Condition and Results of Operations —– Liquidity and Capital Resources” in the Company’s Annual Report on Form
10-K
for the fiscal year ended June 27, 2019.

25, 2020.

Item 6. Exhibits

The exhibits filed herewith are listed in the exhibit index below.

27

EXHIBIT INDEX

(Pursuant to Item 601 of Regulation
S-K)

Exhibit


No.

  

Description

    3.1

  
Restated Certificate of Incorporation of the Company (incorporated by reference from Exhibit 3.1 to the Form
10-Q
for the quarter ended March 24, 2005)
https://www.sec.gov/Archives/edgar/data/880117/000088011705000010/exhibit3.txt

    3.2

  
Amended and Restated Bylaws of the Company (incorporated by reference from Exhibit 3.2 to the Form
10-K
for the fiscal year ended June 25, 2015)
https://www.sec.gov/Archives/edgar/data/880117/000119312515298303/d110976dex32.htm

*10.1

  1998 Equity Incentive Plan (incorporated by reference from Exhibit 10 to the Form10-Q for the quarter ended September 24, 1998)

*10.2

First Amendment to the 1998 Equity Incentive Plan (incorporated by reference from Exhibit 10.35 to the Form10-Q for the quarter ended December 28, 2000)

*10.3

Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number Two among Michael J. Valentine, as trustee of the Valentine Life Insurance Trust, Mathias Valentine, Mary Valentine and the Company, dated December 31, 2003 (incorporated by reference from Exhibit 10.35 to the Form
10-Q
for the quarter ended December 25, 2003)
https://www.sec.gov/Archives/edgar/data/880117/000095013404000734/c82327exv10w35.txt

*10.4

10.2		  
Amendment, dated February 12, 2004, to Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number Two among Michael J. Valentine, as trustee of the Valentine Life Insurance Trust, Mathias Valentine, Mary Valentine and the Company, dated December 31, 2003 (incorporated by reference from Exhibit 10.47 to the Form
10-Q
for the quarter ended March 25, 2004)
https://www.sec.gov/Archives/edgar/data/880117/000088011704000018/exhibit1047.txt

*10.5

10.3		  
Restated Supplemental Retirement Plan (incorporated by reference from Exhibit 10.16 to the Form
10-K
for the fiscal year ended June 28, 2007)
https://www.sec.gov/Archives/edgar/data/880117/000095013707014005/c18246exv10w16.htm

*10.6

10.4		  2008 Equity Incentive Plan, as amended (incorporated by reference from Exhibit 10.24 to the Form10-K for the fiscal year ended June 28, 2012)

*10.7

Form of Indemnification Agreement (incorporated by reference from Exhibit 10.01 to the Form
8-K
filed on May 5, 2009)
https://www.sec.gov/Archives/edgar/data/880117/000095013709003593/c51080exv10w01.htm

*10.8

10.5		  
2014 Omnibus Incentive Plan (incorporated by reference from Exhibit 4.1 to the Registration Statement on Form
S-8
filed on October 28, 2014)
https://www.sec.gov/Archives/edgar/data/880117/000119312514385024/d810070dex41.htm

28

Exhibit

    No.    

Description

*10.9

10.6		  
Amendment No. 1 to the 2014 Omnibus Incentive Plan (incorporated by reference from Exhibit 10.12 to the Form
10-K
for the year ended June 30, 2016)
https://www.sec.gov/Archives/edgar/data/880117/000119312516689942/d217852dex1012.htm

*10.10

10.7		  
Form of
Non-Employee
Director Restricted Stock Unit Award Agreement
(non-deferral)
under 2014 Omnibus Plan (fiscal 2017, 2018, 2019 and 20192020 awards cycle) (incorporated by reference from Exhibit 10.38 to the Form
10-Q
for the quarter ended December 24, 2015)
https://www.sec.gov/Archives/edgar/data/880117/000119312516441870/d119129dex1038.htm
28
Exhibit

No
Description

*10.11

10.8		  
Form of
Non-Employee
Director Restricted Stock Unit Award Agreement (deferral) under 2014 Omnibus Plan (fiscal 2017, 2018, 2019 and 20192020 awards cycle) (incorporated by reference from Exhibit 10.39 to the Form
10-Q
for the quarter ended December 24, 2015)
https://www.sec.gov/Archives/edgar/data/880117/000119312516441870/d119129dex1039.htm

*10.12

10.9		  Form of Employee Restricted Stock Unit Award Agreement under 2014 Omnibus Plan (fiscal 2017 awards cycle) (incorporated by reference from Exhibit 10.19 to the Form
10-Q
for the quarter ended December 29, 2016)https://www.sec.gov/Archives/edgar/data/880117/000119312517027474/d323255dex1019.htm

*10.13

10.10		  
Form of Employee Restricted Stock Unit Award Agreement under 2014 Omnibus Plan (fiscal 2018, 2019 and 20192020 awards cycle) (incorporated by reference from Exhibit 10.20 to the Form
10-Q
for the quarter ended December 28, 2017)
https://www.sec.gov/Archives/edgar/data/880117/000119312518032207/d516665dex1020.htm

*10.14

10.11		  
Amended and Restated Sanfilippo Value Added Plan, dated August 20, 2015 (incorporated by reference from Exhibit 10.11 to the Form
10-K
for the year ended June 25, 2015)
https://www.sec.gov/Archives/edgar/data/880117/000119312515298303/d110976dex1011.htm

  10.15

  10.12		  Credit Agreement, dated as of February  7, 2008, by
Amended and among the Company, the financial institutions named therein as lenders, Wells Fargo Foothill, LLC (“WFF”), as the arranger and administrative agent for the lenders, and Wachovia Capital Finance Corporation (Central), in its capacity as documentation agent (incorporated by reference from Exhibit 10.1 to the Form8-K filed on February 8, 2008)

29

Exhibit

    No.    

Description

  10.16

Security Agreement, dated as of February  7, 2008, by the Company in favor of WFF, as administrative agent for the Lenders (incorporated by reference from Exhibit 10.2 to the Form8-K filed on February 8, 2008)

  10.17

Loan Agreement, dated as of February  7, 2008, by and between the Company and Transamerica Financial Life Insurance Company (“TFLIC”) (incorporated by reference from Exhibit 10.3 to the Form8-K filed on February 8, 2008)

  10.18

First Amendment torestated Credit Agreement dated as of March 8, 2010, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and administrative agent and Burdale Financial Limited, as a lender (incorporated by reference from Exhibit 10.19 to the Form10-K filed on August 23, 2017)

  10.19

Second Amendment to Credit Agreement, dated as of July  15, 2011, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender (incorporated by reference from Exhibit 10.1 to the Form8-K filed on July 18, 2011)

  10.20

Third Amendment to Credit Agreement, dated as of October  31, 2011, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender (incorporated by reference from Exhibit 10.34 to the Form10-Q for the quarter ended September 29, 2011)

  10.21

Consent and Fourth Amendment to Credit Agreement, dated as of January  22, 2013, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender (incorporated by reference from Exhibit 99.1 to the Form8-K filed on February 4, 2013)

30

Exhibit

    No.    

Description

  10.22

Consent and Fifth Amendment to Credit Agreement, dated as of December  16, 2013, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender (incorporated by reference from Exhibit 99.1 to the Form8-K filed on December 17, 2013)

  10.23

Sixth Amendment to Credit Agreement, dated as of September  30, 2014, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, as lender. (incorporated by reference from Exhibit 10.1 to the Form8-K filed on October 3, 2014)

  10.24

Seventh Amendment to Credit Agreement, dated as of July 7, 2016,5, 2020, by and among John B. Sanfilippo & Son, Inc., Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and the administrative agent, and Southwest Georgia Farm Credit, ACA, as a lender. (incorporated by reference from Exhibit 99.210.1 to the Form
8-K
filed on July 7, 2016)March 11, 2020)
https://www.sec.gov/Archives/edgar/data/880117/000119312520070312/d767975dex101.htm

  10.25

*10.13		  Eighth Amendment to Credit Agreement, dated as of July 7, 2017, by and among John B. Sanfilippo  & Son, Inc., Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and the administrative agent, and Southwest Georgia Farm Credit, ACA, as a lender. (incorporated by reference from Exhibit 99.1 to the Form8-K filed on July 11, 2017)

  10.26

Consent and Ninth Amendment to Credit Agreement dated as of November 29, 2017, by and among John B. Sanfilippo  & Son, Inc., Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and the administrative agent, and Southwest Georgia Farm Credit, ACA, as a lender. (incorporated by reference from Exhibit 99.1 to the Form8-K filed on November 30, 2017)

  10.27

First Amendment to Security Agreement, dated as of September  30, 2014, by the Company in favor of Wells Fargo Capital Finance, LLC (f/k/a WFF), as administrative agent for the lenders. (incorporated by reference from Exhibit 10.2 to the Form8-K filed on October  3, 2014)

*10.28

Employment agreement, dated as of November 30, 2017, by and between the Company and J. Brent Meyer (incorporated by reference from Exhibit 10.36 to the Form
10-Q
for the quarter ended December 28, 2017)
https://www.sec.gov/Archives/edgar/data/880117/000119312518032207/d516665dex1036.htm

*10.14

Separation Agreement, dated as of December 10, 2019, by and between the Company and J. Brent Meyer (incorporated by reference from Exhibit 10.29 to the Form
10-Q
for the quarter ended December 26, 2019)
https://www.sec.gov/Archives/edgar/data/880117/000119312520019640/d874511dex1029.htm
  31.1

  Certification of Jeffrey T. Sanfilippo pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended

31

29

Exhibit


    No.    

  

Description

  31.2

  Certification of Michael J. Valentine pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended

  32.1

  Certification of Jeffrey T. Sanfilippo pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended

  32.2

  Certification of Michael J. Valentine pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended

101.INS

  XBRL Instance Document

101.SCH

  XBRL Taxonomy Extension Schema Document

101.CAL

  XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

  XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

  XBRL Taxonomy Extension Label Linkbase Document

101.PRE

  XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

*

Indicates a management contract or compensatory plan or arrangement.

30
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 on October 30, 2019.

28, 2020.
JOHN B. SANFILIPPO & SON, INC.
By
 /s/ MICHAEL J. VALENTINE
 Michael J. Valentine
 Chief Financial Officer, Group President and Secretary

32

31