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 ~~December 26, 2019~~

September 24, 2020

☐	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~~ (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

☐

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

☐

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~~

☒

Emerging growth company

☐

~~Non-accelerated~~ ~~filer~~

☐

~~Smaller reporting 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 ~~January 23,~~October 22, 2020, ~~8,821,490~~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 ~~DECEMBER 26, 2019~~

SEPTEMBER 24, 2020

INDEX


	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Comprehensive Income for the Quarter ~~andTwenty-Six~~ ~~Weeks~~ Ended ~~December~~September 24, 2020 and September 26, 2019 ~~and December 27, 2018~~		3
Consolidated Balance Sheets as of ~~December~~September 24, 2020, June 25, 2020 and September 26, 2019 ~~June 27, 2019 and December 27, 2018~~		4
Consolidated Statements of Stockholders’ Equity for the Quarter ~~andTwenty-Six~~ ~~Weeks~~ Ended ~~December~~September 24, 2020 and September 26, 2019 ~~and December 27, 2018~~		6
Consolidated Statements of Cash Flows for the~~Twenty-Six~~ ~~Weeks~~ Quarter Ended ~~December~~September 24, 2020 and September 26, 2019 ~~and December 27, 2018~~		7
Notes to Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19 17
Item 3. Quantitative and Qualitative Disclosures About Market Risk		29 27
Item 4. Controls and Procedures		29 27
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		29 27
Item 1A. Risk Factors		29 27
Item 6. Exhibits		29 27
SIGNATURE		35 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 For theTwenty-six Weeks
Ended
   December 26,
2019 December 27,
2018 December 26,
2019 December 27,
2018
Net sales
   $ 246,423 $ 253,317 $ 464,269 $ 457,605
Cost of sales
   196,443 210,434 372,041 381,768


Gross profit
   49,980 42,883 92,228 75,837


Operating expenses:

Selling expenses
   16,103 18,189 30,215 32,260
Administrative expenses
   9,411 8,054 18,485 16,885


Total operating expenses
   25,514 26,243 48,700 49,145


Income from operations
   24,466 16,640 43,528 26,692


Other expense:

Interest expense including $232, $293, $479 and $602 to related parties
   435 798 956 1,677
Rental and miscellaneous expense, net
   274 278 678 567
Other expense
   567 486 1,133 973


Total other expense, net
   1,276 1,562 2,767 3,217


Income before income taxes
   23,190 15,078 40,761 23,475
Income tax expense
   5,729 3,814 10,374 5,605


Net income
   $ 17,461 $ 11,264 $ 30,387 $ 17,870
Other comprehensive income:

Amortization of prior service cost and actuarial loss included in net periodic pension cost
   344 263 687 526
Income tax expense related to pension adjustments
   (86 ) (66 ) (172 ) (132 )


Other comprehensive income, net of tax
   258 197 515 394


Comprehensive income
   $ 17,719 $ 11,461 $ 30,902 $ 18,264


Net income per common share-basic
   $ 1.52 $ 0.99 $ 2.65 $ 1.57


Net income per common share-diluted
   $ 1.52 $ 0.98 $ 2.64 $ 1.56

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.

JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share amounts)

   December 26,
2019    June 27,
2019    December 27,
2018
ASSETS

CURRENT ASSETS:

Cash
   $ 1,393    $ 1,591    $ 2,583
Accounts receivable, less allowance for doubtful accounts of $425, $350 and $342
   52,653    60,971    62,580
Inventories
   172,340    157,024    171,708
Prepaid expenses and other current assets
   5,992    5,754    6,943






TOTAL CURRENT ASSETS
   232,378    225,340    243,814






PROPERTY, PLANT AND EQUIPMENT:

Land
   9,285    9,285    9,285
Buildings
   109,671    109,955    109,380
Machinery and equipment
   212,532    210,962    206,663
Furniture and leasehold improvements
   5,160    5,128    5,039
Vehicles
   682    673    641
Construction in progress
   3,817    1,127    2,563






   341,147    337,130    333,571
Less: Accumulated depreciation
   233,825    228,778    222,976






   107,322    108,352    110,595
Rental investment property, less accumulated depreciation of $11,615, $11,212 and $10,827
   17,508    17,831    18,066






TOTAL PROPERTY, PLANT AND EQUIPMENT
   124,830    126,183    128,661






Intangible assets, net
   13,282    14,626    15,970
Cash surrender value of officers’ life insurance and other assets
   9,124    9,782    8,743
Deferred income taxes
   5,616    5,723    4,591
Goodwill
   9,650    9,650    9,650
Operating leaseright-of-use assets
   4,823    —      —






TOTAL ASSETS
   $ 399,703    $ 391,304    $ 411,429







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.

JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share amounts)

   December 26,
2019 June 27,
2019 December 27,
2018
LIABILITIES & STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Revolving credit facility borrowings
   $ 13,495 $ —   $ 24,541
Current maturities of long-term debt, including related party debt of $565, $4,375 and $4,359 and net of unamortized debt issuance costs of $30, $35 and $40
   7,110 7,338 7,254
Accounts payable
   70,979 42,552 69,732
Bank overdraft
   1,349 901 3,887
Accrued payroll and related benefits
   13,429 22,101 10,293
Other accrued expenses
   11,374 11,014 9,808


TOTAL CURRENT LIABILITIES
   117,736 83,906 125,515


LONG-TERM LIABILITIES:

Long-term debt, less current maturities, including related party debt of $9,244, $11,495 and $13,323 and net of unamortized debt issuance costs of $30, $44 and $60
   16,597 20,381 23,707
Retirement plan
   25,212 24,737 21,713
Long-term operating lease liabilities, net of current portion
   3,456 —   —
Other
   7,786 7,725 7,121


TOTAL LONG-TERM LIABILITIES
   53,051 52,843 52,541


TOTAL LIABILITIES
   170,787 136,749 178,056


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, 8,937,236, 8,909,406 and 8,898,827 shares issued
   89 89 89
Capital in excess of par value
   122,984 122,257 121,133
Retained earnings
   111,807 137,712 116,116
Accumulated other comprehensive loss
   (4,786 ) (4,325 ) (2,787 )
Treasury stock, at cost; 117,900 shares of Common Stock
   (1,204 ) (1,204 ) (1,204 )


TOTAL STOCKHOLDERS’ EQUITY
   228,916 254,555 233,373


TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
   $ 399,703 $ 391,304 $ 411,429



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.

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
Net income
               17,461 17,461
Cash dividends ($2.00 per share)
               (22,947 ) (22,947 )
Pension liability amortization, net of income tax expense of $86
               258 258
Equity award exercises , net of shares withheld for employee taxes
         27,830    —      (761 ) (761 )
Stock-based compensation expense
               855 855










Balance, December 26, 2019
   2,597,426    $ 26    8,937,236    $ 89    $ 122,984 $ 111,807 $ (4,786 ) $ (1,204 ) $ 228,916










   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
Net income
               11,264 11,264
Pension liability amortization, net of income tax expense of $66
               197 197
Equity award exercises , net of shares withheld for employee taxes
         33,352    —      (335 ) (335 )
Stock-based compensation expense
               900 900










Balance, December 27, 2018
   2,597,426    $ 26    8,898,827    $ 89    $ 121,133 $ 116,116 $ (2,787 ) $ (1,204 ) $ 233,373










^(a)
~~See Note 15 – “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.

JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)

   For the Twenty-six Weeks Ended
   December 26,
2019 December 27,
2018
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income
   $ 30,387 $ 17,870
Depreciation and amortization
   9,225 8,535
(Gain) loss on disposition of assets, net
   (33 ) 57
Deferred income tax expense
   107 433
Stock-based compensation expense
   1,488 1,516
Change in assets and liabilities:

Accounts receivable, net
   8,316 3,041
Inventories
   (15,316 ) 2,654
Prepaid expenses and other current assets
   (345 ) (1,659 )
Accounts payable
   28,486 9,655
Accrued expenses
   (8,964 ) 2,833
Income taxes payable
   (640 ) 2,285
Other long-term assets and liabilities
   582 261
Other, net
   992 885


Net cash provided by operating activities
   54,285 48,366


CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and equipment
   (6,465 ) (9,367 )
Proceeds from insurance recoveries
   232 —
Other
   85 44


Net cash used in investing activities
   (6,148 ) (9,323 )


CASH FLOWS FROM FINANCING ACTIVITIES:

Net short-term borrowings (repayments)
   13,495 (6,737 )
Debt issue costs
   (218 ) —
Principal payments on long-term debt
   (4,031 ) (3,588 )
Increase in bank overdraft
   448 1,825
Dividends paid
   (57,268 ) (29,074 )
Taxes paid related to net share settlement of equity awards
   (761 ) (335 )


Net cash used in financing activities
   (48,335 ) (37,909 )


NET (DECREASE) INCREASE IN CASH
   (198 ) 1,134
Cash, beginning of period
   1,591 1,449


Cash, end of period
   $ 1,393 $ 2,583


Supplemental disclosure ofnon-cash 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.

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 ~~2020~~2021 and fiscal ~~2019~~2020 are to the fiscal year ending June ~~25, 2020~~24, 2021 and the fiscal year ended June ~~27, 2019,~~25, 2020, respectively.
References herein to the ~~second~~first quarter of fiscal ~~2020~~2021 and fiscal ~~2019~~2020 are to the quarters ended ~~December~~September 24, 2020 and September 26, 2019, ~~and December 27, 2018,~~ respectively.
~~References herein to the first half or firsttwenty-six~~ ~~weeks of fiscal 2020 and fiscal 2019 are to thetwenty-six~~ ~~weeks ended December 26, 2019 and December 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 ~~three~~3 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, 2019~~25, 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 ~~2019~~2020 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.

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 no~~The contract asset balance at ~~December 26, 2019. Contract asset balances at June 27, 2019~~September 24, 2020 was $57 and ~~December 27, 2018 were $117 and $65, respectively, and are~~is 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    For the Twenty-six Weeks Ended
Distribution Channel
   December 26,
2019    December 27,
2018    December 26,
2019    December 27,
2018
Consumer
   $ 188,086    $ 195,478    $ 345,232    $ 334,922
Commercial Ingredients
   34,247    31,454    71,135    68,656
Contract Packaging
   24,090    26,385    47,902    54,027








Total
   $ 246,423    $ 253,317    $ 464,269    $ 457,605

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 permitted application of the new guidance at the beginning of the period of adoption, with comparative periods continuing to be reported under the previous lease accounting guidance in 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 15 – “Recent Accounting Pronouncements” for additional information.
~~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 lessee arrangements that were classified as operating leases under Topic 840 continue to be classified as operating leases since the adoption of Topic 842, and the pattern of lease expense recognition is 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 ~~5.4~~5.0 years.
~~Topic 842 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 as~~As 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:~~

   December 26,
2019    Affected Line Item in Consolidated Balance Sheet
Assets

Operating leaseright-of-use assets
   $ 4,823    Operating leaseright-of-use assets



Total leaseright-of-use assets
   $ 4,823



Liabilities

Current:

Operating leases
   $ 1,354    Other accrued expenses
Noncurrent:

Operating leases
   3,456    Long-term operating lease liabilities



Total lease liabilities
   $ 4,810

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
December 26, 2019    For the Twenty-six
weeks ended
December 26, 2019
Operating lease costs^(a)
   $ 460    $ 834
Variable lease costs^(b)
   15    31




Total Lease Cost
   $ 475    $ 865





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 Twenty-six
weeks ended
December 26, 2019
Operating cash flows information:

Cash paid for amounts included in measurements for lease liabilities
   $ 770
Non-cash activity:

Right-of-use assets obtained in exchange for new operating lease obligations
   $ 163
   December 26, 2019
Weighted Average Remaining Lease Term (in years)
   3.8
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 ~~December 26, 2019~~September 24, 2020 are as follows:

Fiscal year ending

June 25, 2020 (excluding thetwenty-six weeks ended December 26, 2019)
   $ 792
June 24, 2021
   1,439
June 30, 2022
   1,316
June 29, 2023
   1,065
June 27, 2024
   469
Thereafter
   132


Total lease payment
   5,213
Less imputed interest
   (403 )


Present value of operating lease liabilities
   $ 4,810


~~As of December 26, 2019~~
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 ~~leases totaling $164~~lease of approximately $255 that ~~have~~has not yet commenced and therefore ~~are~~is not reflected in the Consolidated Balance Sheet and tables above. ~~These leases~~The lease will commence in the ~~third~~second quarter of fiscal ~~2020~~2021 with an initial lease ~~terms ranging from 3 to 5~~term of 6 years.
~~Disclosures related to periods prior to adoption~~
~~As the Company has not recast prior year information for its adoption of Topic 842, the following presents its future minimum 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

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 ~~an immaterial amount of~~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
December 26, 2019    For the Twenty-six
weeks ended
December 26, 2019
Lease income related to lease payments
   $ 462    $ 1,005

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 cash 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 thetwenty-six weeks ended December 26, 2019)
   $ 1,082
June 24, 2021
   1,948
June 30, 2022
   1,707
June 29, 2023
   1,737
June 27, 2024
   1,766
Thereafter
   2,512


   $ 10,752
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:

   December 26,
2019    June 27,
2019    December 27,
2018
Raw material and supplies
   $ 81,135    $ 58,927    $ 87,717
Work-in-process and finished goods
   91,205    98,097    83,991






Total
   $ 172,340    $ 157,024    $ 171,708







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:

   December 26,
2019    June 27,
2019    December 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
   (15,438 )    (14,466 )    (13,494 )
Brand names
   (9,527 )    (9,182 )    (8,838 )
Non-compete agreement
   (113 )    (86 )    (58 )






   (25,078 )    (23,734 )    (22,390 )






Net intangible assets
   $ 13,282    $ 14,626    $ 15,970

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 and $1,344~~$578 for the quarter ~~andtwenty-six~~ ~~weeks~~ ended ~~December 26, 2019, respectively.~~September 24, 2020. Amortization expense for the remainder of fiscal ~~2020~~2021 is expected to be approximately ~~$1,157~~$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~~twenty-six~~ ~~weeks~~ quarter ended ~~December 26, 2019.~~
September 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 providing~~dated March 5, 2020 provides for a $117,500 senior secured revolving ~~loan commitment and letter of~~ credit ~~subfacility~~facility (the “Credit Facility”). The Credit Facility is secured by substantially all our assets other than machinery and equipment, real property and fixtures.
At ~~December 26, 2019,~~September 24, 2020, we had ~~$100,830~~$69,972 of available credit under the Credit Facility which reflects borrowings of ~~$13,495~~$44,168 and reduced availability as a result of ~~$3,175~~$3,360 in outstanding letters of credit. As of ~~December 26, 2019,~~September 24, 2020, we were in compliance with all financial covenants under the Credit Facility and Mortgage ~~Facility.~~
Facility
(as defined below).
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    For the Twenty-six Weeks Ended
   December 26,
2019    December 27,
2018    December 26,
2019    December 27,
2018
Weighted average number of shares outstanding – basic
   11,458,524    11,425,566    11,451,542    11,415,787
Effect of dilutive securities:

Stock options and restricted stock units
   66,863    53,865    80,640    69,894








Weighted average number of shares outstanding – diluted
   11,525,387    11,479,431    11,532,182    11,485,681









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 ~~any periods~~either period presented.
Note 8 – Stock-Based Compensation Plans
During the ~~second~~quarter ended September 24, 2020 there was no significant restricted stock unit activity. Compensation expense attributable to stock-based compensation during the first quarter of fiscal 2021 and fiscal 2020 was $622 and $633, respectively. As of September 24, 2020, there ~~were 38,572 restricted stock units (“RSUs”) awarded to employees andnon-employee~~ ~~members of the Board of Directors. The vesting period is generally three years for awards to employees and one year for awards tonon-employee~~ ~~directors.~~
~~There~~ was ~~no stock option activity during the first half of fiscal 2020.~~

~~The following is a summary of RSU activity for the first half of fiscal 2020:~~

Restricted Stock Units
   Shares    Weighted
Average Grant
Date Fair Value
Outstanding at June 27, 2019
   188,992    $ 46.79
Activity:

Granted
   38,572    91.47
Vested^(a)
   (36,179 )    60.56
Forfeited
   (7,439 )    63.62




Outstanding at December 26, 2019
   183,946    $ 52.77




^(a)
~~The number of RSUs vested includes shares that were withheld on behalf of employees to satisfy statutory tax withholding requirements.~~
~~At December 26, 2019, there were 58,541 RSUs outstanding that were vested but deferred.~~
~~The following table summarizes compensation expense charged to earnings for all equity compensation plans for the periods presented:~~

   For the Quarter Ended    For the Twenty-six Weeks Ended
   December 26,
2019    December 27,
2018    December 26,
2019    December 27,
2018
Stock-based compensation expense
   $ 855    $ 900    $ 1,488    $ 1,516
~~As of December 26, 2019, there was $5,255~~$2,685 of total unrecognized compensation ~~expense~~cost related to
non-vested, ~~RSUs~~
share-based compensation arrangements granted under our stock-based compensation plans. We expect to recognize that cost over a weighted average period of ~~1.7 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    For the Twenty-six Weeks Ended
   December 26,
2019    December 27,
2018    December 26,
2019    December 27,
2018
Service cost
   $ 178    $ 153    $ 356    $ 305
Interest cost
   223    223    446    447
Amortization of prior service cost
   240    240    479    479
Amortization of loss
   104    23    208    47








Net periodic benefit cost
   $ 745    $ 639    $ 1,489    $ 1,278

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.

Note 10 – Accumulated Other Comprehensive Loss
The table below sets forth the changes to accumulated other comprehensive loss (“AOCL”) for the~~twenty-six~~ ~~weeks~~ quarter ended ~~December~~September 24, 2020 and September 26, ~~2019 and December 27, 2018.~~2019.
These changes are all related to our defined benefit pension plan.

Changes to AOCL^(a)    For the Twenty-Six Weeks Ended
   December 26,
2019    December 27,
2018
Balance at beginning of period
   $ (4,325 )    $ (3,181 )
Other comprehensive income before reclassifications
   —      —
Amounts reclassified from accumulated other comprehensive loss
   687    526
Tax effect
   (172 )    (132 )




Net current-period other comprehensive income
   515    394
Impact of adopting ASU2018-02^(b)
   (976 )    —




Balance at end of period
   $ (4,786 )    $ (2,787 )




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 15 – “Recent Accounting Pronouncements” for additional information.~~
The reclassifications out of AOCL for the quarter ~~andtwenty-six~~ ~~weeks~~ ended ~~December~~September 24, 2020 and September 26, 2019 ~~and December 27, 2018~~ were as ~~follows:~~

   Affected line
item in
the Consolidated
Statements of
Comprehensive
Income
   For the Quarter Ended For the Twenty-six Weeks Ended
Reclassifications from AOCL to earnings^(c)    December 26,
2019 December 27,
2018 December 26,
2019 December 27,
2018
Amortization of defined benefit pension items:

Unrecognized prior service cost
   $ (240 ) $ (240 ) $ (479 ) $ (479 ) Other expense
Unrecognized net loss
   (104 ) (23 ) (208 ) (47 ) Other expense


Total before tax
   (344 ) (263 ) (687 ) (526 )
Tax effect
   86 66 172 132 Income tax expense


Amortization of defined pension items, net of tax
   $ (258 ) $ (197 ) $ (515 ) $ (394 )


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, ~~that~~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.

Note 12 – Fair Value of Financial Instruments
~~Authoritative guidance issued by the~~
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:

   December 26,
2019    June 27,
2019    December 27,
2018
Carrying value of long-term debt:
   $ 23,767    $ 27,798    $ 31,061
Fair value of long-term debt:
   24,164    27,720    30,176

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~~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 was considered a related party. Late 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 not reflected as related party debt on our Consolidated Balance Sheet as of ~~December 26, 2019. Interest~~September 24, 2020. There was no related party interest paid onto this former executive officer during the ~~Promissory Note for the~~current first quarter, and~~twenty-six~~ ~~weeks ended December 26, 2019~~ interest paid while the former executive officer was ~~still~~ a related party was ~~$57 and $127, respectively, and is reflected as related party interest on our Consolidated Statements of Comprehensive Income.~~

~~Note 14 – Garysburg, North Carolina Facility~~

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. We have contracted with a third party to roast and salt our inshell peanuts to meet our current production requirements. We do not expect any negative impact on our customer service levels or a material adverse impact on our operating or financial results$70 for the ~~2020 fiscal year.~~

After evaluating our options with regard to our peanut production operations, the Company is considering strategic alternatives for this facility and currently plans to permanently cease all operations at the Garysburg facility once we have finished shelling the current crop of peanuts at this facility, which is estimated to take approximately sixteen months. We have ceased roasting operations in the current second quarter ~~which resulted in a partial reduction in the workforce at this facility, and recognized an immaterial amount of separation costs in the second quarter of fiscal 2020.~~

~~We have adequate property damage and business interruption insurance, subject to applicable deductibles. To date, approximately $1,500 inclean-up~~ costs and damage to capital assets has been incurred. Insurance claims have been filed under our property damage and business interruption policies, and an advance payment of $1,500 was received from the insurance carrier in our current second quarter. Insurance proceeds received for damage to capital equipment were recorded as investing activities on the Consolidated Statements of Cash Flows.

ended September 26, 2019.

Note 1514 – 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 are required. ASU~~No. 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 became effective for the Company beginning in fiscal year 2020. Under ASU~~No. 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 July~~August 2018, the FASB issued ASU
No. ~~2018-11~~2018-15
“~~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 recognize~~Implementation 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 with~~Cloud 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, Leases~~~~” 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 from lessees, certain lessor costs, and recognition of variable payments for contracts with lease and~~non-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 compliance with Topic 842. We have also updated our accounting policies and internal controls that are impacted by the new guidance. We adopted ASU~~No. 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 the~~use-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, during the first quarter of fiscal 2020. 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 and~~non-lease~~ ~~components for all of our leases. Refer to Note 3 – “Leases” for additional information regarding the Company’s leases.~~
Service Contract

~~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 allow a reclassification from accumulated other comprehensive income (loss) (“AOCL”) to retained earnings for stranded tax effects resulting from 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 ASU~~No. 2018-02~~ ~~in the first quarter of fiscal 2020 and reclassified $976 from AOCL to retained earnings. Refer to Note 10 – “Accumulated Other Comprehensive Loss” for additional detail. ASU2018-02~~ ~~was not applied retrospectively. No other income tax effects related to the application of the Tax Cuts and Jobs Act were reclassified from AOCL to retained earnings.~~

~~The following recent accounting pronouncements have not yet been adopted:~~

~~In December 2019, the FASB issued ASUNo. 2019-12~~ “~~Income Taxes (Topic 740)~~

”. The amendments in this Update ~~simplify~~align the ~~accounting~~requirements for ~~income taxes by removing certain exceptions, providing updated~~capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain
internal-use
software (and hosting arrangements that include an internal use software license). ASU
No. 2018-15
was adopted using the prospective method in the first quarter of fiscal 2021 and ~~specifications in certain areas and by making minor codification improvements.~~did not have a material impact on our Consolidated Financial Statements.
In August 2018, the FASB issued ASU
No. 2018-14
“
Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic
715-20):
Disclosure Framework – Changes to the Disclosure 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 ~~effective~~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 first quarter of fiscal 2021 and had 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 ~~public~~Goodwill Impairment”.
The amendments in this Update eliminate the need for entities to 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 ~~entities~~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 ~~years beginning after December 15, 2020, including interim periods within that fiscal year. Early adoption is permitted. This~~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 ~~effective for~~to provide financial statement users with more decision-useful information about the ~~Company beginning~~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 ~~2022. We do~~2021 and did not ~~expect this~~have a material impact on our Consolidated Financial Statements.
There are no recent accounting ~~Update~~pronouncements that have been issued and not yet adopted that are expected to have a material impact on our Consolidated Financial Statements.

~~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 ~~2020~~2021 and fiscal ~~2019~~2020 are to the fiscal year ending June ~~25, 2020~~24, 2021 and the fiscal year ended June ~~27, 2019,~~25, 2020, respectively.
References herein to the ~~second~~first quarter of fiscal ~~2020~~2021 and fiscal ~~2019~~2020 are to the quarters ended ~~December~~September 24, 2020 and September 26, 2019, ~~and December 27, 2018,~~ respectively.
~~References herein to the first half or firsttwenty-six~~ ~~weeks of fiscal 2020 and fiscal 2019 are to thetwenty-six~~ ~~weeks ended December 26, 2019 and December 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 existing~~across key ~~customers in each distribution channel and expanding our offerings into alternative distribution channels.~~customers. We ~~are executing~~plan to execute on our Strategic Plan to grow our branded business by ~~continuing to expand distribution of our~~~~Orchard Valley Harvest~~reaching new consumers via product and~~Southern Style Nutsproducts, growing our consumer distribution channel with private brand products and~~ pack innovation, expanding distribution across current and alternative channels and focusing on new ways to buy, with an emphasis on increasing our sales via
e-commerce
platforms and retailers. In addition, we intend to invest in our people and facilities in order to research, develop, market and sell new ~~foodservice customers.~~
product offerings in fiscal 2021.
We face a number of challenges in the future which include, among others, ~~potential~~changes in commodity acquisition ~~cost volatility for almonds and increasing commodity~~ costs, ~~for walnuts,~~ 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 ~~recently~~in fiscal 2020 and the first quarter of fiscal 2021 due to this increased competition for market share. We also face changing industry trends ~~resulting~~as 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 ~~consolidation~~customers. However, if conditions deteriorate in the future and ~~Internet price competition~~consumers 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 ~~nut~~the majority of our office employees, staggered shifts and~~nut-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 ~~maintain~~redirect our ~~current level of~~ promotional and advertising activity ~~for~~with respect to our~~Orchard Valley Harvest~~ brands to focus on more digital and~~Fishersnack brands.~~
e-commerce
platforms to match consumer behavior. We continue to see ~~significant domestic sales~~ strong
e-commerce
and ~~volume growth in~~grocery performance across our
Orchard Valley Harvest ~~brand~~
and
Fisher
recipe brands and expect that there will ~~continue~~be additional opportunities to ~~focus on this portion of our branded business as well as our~~~~Squirrel Brand~~connect these brands to consumers’ desires for more functional snacking and~~Southern 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 ~~issues~~compliance 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.

QUARTERLY HIGHLIGHTS
Our net sales of ~~$246.4~~$210.3 million for the ~~second~~first quarter of fiscal ~~2020~~2021 decreased ~~2.7%~~3.5% from our net sales of ~~$253.3~~$217.8 million for the ~~second~~first quarter of fiscal ~~2019. Net sales for the firsttwenty-six~~ ~~weeks of fiscal 2020 increased by $6.7 million, or 1.5%, to $464.3 million from net sales of $457.6 million for the firsttwenty-six~~ ~~weeks of fiscal 2019.~~
2020.
Sales volume, measured as pounds sold to customers, ~~increased 4.8% for~~decreased 3.5% compared to the ~~second~~first quarter of fiscal ~~2020 compared to the second quarter of fiscal 2019. Sales volume for the firsttwenty-six~~ ~~weeks of fiscal 2020 increased 6.8% compared to the firsttwenty-six~~ ~~weeks of fiscal 2019.~~
2020.
Gross profit ~~increased by $7.1~~decreased $2.9 million, and our gross profit margin, as a percentage of net sales, ~~increased~~decreased to ~~20.3%~~18.7% for the ~~second~~first quarter of fiscal ~~2020~~2021 compared to ~~16.9%~~19.4% for the ~~second~~first quarter of fiscal ~~2019. Gross profit increased by $16.4 million and our gross profit margin increased to 19.9% from 16.6% for the firsttwenty-six~~ ~~weeks of fiscal 2020 compared to the firsttwenty-six~~ ~~weeks of fiscal 2019.~~
2020.
Total operating expenses for the ~~second~~first quarter of fiscal ~~2020~~2021 decreased ~~by $0.7~~$2.7 million, or ~~2.8%~~11.8%, compared to the ~~second~~first quarter of fiscal ~~2019.~~2020. As a percentage of net sales, total operating expenses in the ~~second~~first quarter of fiscal ~~2020 was unchanged at 10.4% compared~~2021 decreased to 9.7% from 10.6% for the ~~second~~first quarter of fiscal ~~2019. For the first half of fiscal 2020, total operating expenses decreased by $0.4 million, to 10.5% of net sales compared to 10.7% for the first half of fiscal 2019.~~
2020.
The total value of inventories on hand at the end of the ~~second~~first quarter of fiscal ~~2020 increased by $0.6~~2021 decreased $6.1 million, or ~~0.4%~~3.9%, in comparison to the total value of inventories on hand at the end of the ~~second~~first quarter of fiscal ~~2019.~~
2020.
We ~~have seen~~expect acquisition costs for walnuts ~~increase~~and almonds to decrease in the ~~2019~~2020 crop year (which falls into our current ~~2020~~2021 fiscal year). We also ~~continue to see declining~~expect acquisition costs to decline or remain stable for ~~pecans. We completed procurement of~~all other major tree nuts. While we began to procure inshell walnuts during the first ~~half~~quarter of fiscal ~~2020. During~~2021, the total payments due to our walnut growers will not be determined until the second and/or third ~~quarter, we~~quarters of fiscal 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 ~~final liability~~payments will be determined during the second and/or third ~~quarter~~quarters of fiscal ~~2020~~2021 and will be recognized in our financial results at that time.

RESULTS OF OPERATIONS
Net Sales
Our net sales decreased ~~2.7%~~3.5% to ~~$246.4~~$210.3 million in the ~~second~~first quarter of fiscal ~~2020~~2021 compared to net sales of ~~$253.3~~$217.8 million for the ~~second~~first quarter of fiscal 2019. The decrease in net sales was primarily attributable to lower selling prices, which resulted from a shift in sales volume from higher priced pecans and walnuts to lower priced trail and snack mixes, peanuts and cashews. Lower selling prices for pecans and cashews, which were due to lower commodity acquisition costs, also contributed to the overall reduction in selling prices. The decline in net sales from lower selling prices was largely offset by a 4.8% increase in sales2020. Sales volume, which is defined as pounds sold to ~~customers.~~
~~For the firsttwenty-six~~ weeks of fiscal 2020 our net sales were $464.3 million, an increase of $6.7 million, or 1.5%, compared to the same period of fiscal 2019. The increase in net sales was due to a 6.8% increase in sales volume and was largely offset by lower selling prices resulting primarily for the same reasons citedcustomers, decreased 3.5% in the quarterly comparison.
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 For the Twenty-six Weeks Ended
Product Type
   December 26,
2019 December 27,
2018 December 26,
2019 December 27,
2018
Peanuts
   15.8 % 15.7 % 16.8 % 17.2 %
Pecans
   16.2 20.5 13.0 16.5
Cashews & Mixed Nuts
   22.7 22.1 22.7 22.3
Walnuts
   8.7 10.5 7.9 10.3
Almonds
   13.2 11.8 14.8 12.8
Trail & Snack Mixes
   18.3 14.5 19.3 15.6
Other
   5.1 4.9 5.5 5.3


Total
   100.0 % 100.0 % 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
   December 26,
2019    December 27,
2018    Change    Percent
Change
Consumer⁽¹⁾
   $ 188,086    $ 195,478    $ (7,392 )    (3.8 )%
Commercial Ingredients
   34,247    31,454    2,793    8.9
Contract Packaging
   24,090    26,385    (2,295 )    (8.7 )








Total
   $ 246,423    $ 253,317    $ (6,894 )    (2.7 )%









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 ~~33%~~25% and ~~45%~~28% of total consumer channel sales during ~~each of~~ the ~~second~~first quarter of fiscal ~~2020~~2021 and fiscal ~~2019,~~2020, respectively.
Fisher
branded products were approximately ~~76%~~65% and ~~79%~~64% of branded sales during the ~~second~~first quarter of fiscal ~~2020~~2021 and fiscal ~~2019,~~2020, respectively, with branded produce ~~and~~~~Squirrel Brand~~products accounting for ~~most~~the majority of the remaining branded product sales.

~~The following table shows a comparison of net sales by distribution channel (dollars in thousands):~~

   For theTwenty-six Weeks Ended
Distribution Channel
   December 26,
2019    December 27,
2018    Change    Percent
Change
Consumer⁽¹⁾
   $ 345,232    $ 334,922    $ 10,310    3.1 %
Commercial Ingredients
   71,135    68,656    2,479    3.6
Contract Packaging
   47,902    54,027    (6,125 )    (11.3 )








Total
   $ 464,269    $ 457,605    $ 6,664    1.5 %








~~(1)~~
~~Sales of branded products were approximately 31% and 43% of total consumer sales during the firsttwenty-six~~ ~~weeks of fiscal 2020 and fiscal 2019, respectively.~~~~Fisher~~ ~~branded products were approximately 71% and 75% of branded sales during the firsttwenty-six~~ ~~weeks of fiscal 2020 and fiscal 2019, respectively, with branded produce and~~~~Squirrel Brand~~~~products accounting for most of the remaining branded product sales.~~
Net sales in the consumer distribution channel ~~decreased $7.4~~increased $9.6 million, or ~~3.8%~~6.1%, and sales volume increased ~~4.2%~~3.8% in the ~~second~~first quarter of fiscal ~~2020~~2021 compared to the ~~second~~first quarter of fiscal ~~2019.~~2020. The sales volume increase was driven by increased sales of private brand ~~snack nuts and~~ trail and snack mixes, ~~from distribution gains with new~~mixed nuts, cashews and peanuts at existing ~~private brand 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 ~~decreased 6.4%, primarily as a result of reduced~~increased 12.6% due to increased promotional activity ~~for inshell peanuts. Sales volume of~~~~Fisher~~ ~~recipe nuts decreased 29.8% from lost holiday display distribution at a major customer in favor of their private brand recipe nuts. Sales volumeof~~ ~~Orchard Valley Harvest~~ ~~products increased 6.5% due to~~and distribution gains at new and existing customers ~~and the introduction of new products.~~for our
Oven Roasted Never Fried
product line. Sales volume of~~Southern Style Nuts~~ ~~increased 42.9% due to increased promotional activity.~~
~~In the firsttwenty-six~~ weeks of fiscal 2020, net sales in the consumer distribution channel increased $10.3 million, or 3.1%, and sales volume increased 10.0% compared to the same period of fiscal 2019. The sales volume increase occurred for ~~the same reason cited in the quarterly comparison. Increased sales for our~~~~Orchard Valley Harvest~~ ~~and~~~~Southern Style Nut~~~~brands also contributed to the sales volume increase in the consumer distribution channel. Sales volume for~~
Fisher
recipe nuts decreased ~~30.0% in the year to date comparison~~14.1% as a result of lost distribution at some customers, which was offset in part by increased sales with Internet retailers and increased sales with other existing customers in the grocery sector. Sales volume
of
Orchard Valley Harvest
produce products decreased 16.1% due to some lost distribution at one customer and reduced foot traffic at a major customer in ~~favor~~the
non-food
sector as a result of ~~their private brand recipe nuts.~~
COVID-19.
Sales volume for
Southern Style Nuts
decreased 8.4% as a result of lower promotional activity at several customers, which was offset in part by distribution gains with new grocery customers and increased sales with Internet retailers.

Net sales in the commercial ingredients distribution channel ~~increased by 8.9%~~decreased 38.2% in dollars and ~~14.5%~~27.7% in sales volume in the ~~second~~first quarter of fiscal ~~2020~~2021 compared to the ~~second~~first quarter of fiscal ~~2019. In the firsttwenty-six~~ ~~weeks of fiscal 2020, net sales in the commercial ingredients distribution channel increased by 3.6% in dollars and 6.3%~~2020. The decline in sales volume ~~compared~~was due to ~~the same period of fiscal 2019. The~~a 40.9% decrease in sales volume ~~increase, for~~in our foodservice business which resulted from a decline in air travel and nationwide restrictions on occupancy rates in and closures of restaurants, both ~~the quarterly andtwenty-six~~ ~~week period, was primarily due~~of which were attributable to ~~distribution gains with new food service customers and increased sales of peanut crushing stock to peanut oil processors.~~
COVID-19.
Net sales in the contract packaging distribution channel decreased ~~by 8.7%~~13.0% in dollars and ~~2.5%~~12.2% in sales volume in the ~~second~~first quarter of fiscal ~~2020~~2021 compared to the ~~second~~first quarter of fiscal ~~2019.~~2020. The decline in sales volume was primarily ~~came from~~attributable to the unfavorable impact of lower convenience store foot traffic on one customer’s business as a ~~reduction in promotional and merchandising activity by some customers in this channel. In~~result of
COVID-19,
as well as the loss of peanut butter business with another customer due to the temporary peanut supply shortage cited above.
Gross Profit
Gross profit decreased $2.9 million, or 6.9%, to $39.3 million for the first~~twenty-six~~ ~~weeks~~ quarter of fiscal ~~2020, net sales in the contract packaging distribution channel decreased by 11.3% in dollars and 7.9% in sales volume~~2021 compared to the first~~twenty-six~~ weeks of fiscal 2019. The decline in sales volume occurred for the same reason cited in the quarterly comparison, as well as from a reduction in unit ounce weights implemented by a major contract packaging customer.
~~Gross Profit~~
~~Gross profit increased by $7.1 million, or 16.5%, to $50.0 million for the second~~ quarter of fiscal ~~2020 compared to the second quarter of fiscal 2019.~~2020. Our gross profit margin, as a percentage of net sales, ~~increased~~decreased to ~~20.3%~~18.7% for the ~~second~~first quarter of fiscal ~~2020~~2021 compared to ~~16.9%~~19.4% for the ~~second~~first quarter of fiscal ~~2019.~~2020. The ~~increases~~decreases in gross profit and gross profit margin were mainly attributable to the sales volume ~~increase~~decrease discussed ~~above, as well as manufacturing efficiencies, reduced manufacturing spending and lower commodity acquisition costs for pecans and cashews.~~
above.

~~Gross profit increased by $16.4 million, or 21.6%, to $92.2 million for the firsttwenty-six~~ ~~weeks of fiscal 2020 compared to the firsttwenty-six~~ ~~weeks of fiscal 2019. Our gross profit margin increased to 19.9% for the firsttwenty-six~~ ~~weeks of fiscal 2020 compared to 16.6% for the firsttwenty-six~~ ~~weeks of fiscal 2019. The increases in gross profit and gross profit margin in the year to date comparison occurred primarily for the same reasons cited in the quarterly comparison.~~

Operating Expenses

Total operating expenses for the ~~second~~first quarter of fiscal 2021 decreased $2.7 million to $20.5 million. Operating expenses for the first quarter of fiscal 2021 decreased to 9.7% of net sales from 10.6% of net sales for the first quarter of fiscal 2020 ~~decreased by $0.7 million, or 2.8%,~~due primarily to ~~$25.5 million. As a percentage of net sales, operating expenses remain unchanged at 10.4% for the second quarter of fiscal 2020 compared to the second quarter of fiscal 2019.~~
reductions in advertising, compensation and consulting expenses.

Selling expenses for the ~~second~~first quarter of fiscal ~~2020~~2021 were ~~$16.1~~$12.1 million, a decrease of ~~$2.1~~$2.0 million, or ~~11.5%~~14.4%, from the ~~second~~first quarter of fiscal ~~2019.~~2020. The decrease was driven primarily by a ~~$2.5~~$1.1 million decrease in advertising expense ~~primarily~~due to a reduction in radio advertising campaigns and sports sponsorships, a $0.7 million decrease in compensation related ~~to TV and magazine advertising~~expenses and a ~~$0.9~~$0.5 million decrease in freight ~~expense. Partially offsetting these decreases were~~expense due to a ~~$0.7 million increase~~reduction in ~~payroll related and incentive compensation expense and a $0.4 million increase in commission expense.~~
sales pounds shipped.

Administrative expenses for the ~~second~~first quarter of fiscal ~~2020~~2021 were $9.4 million compared to $8.1 million for the second quarter of fiscal 2019. The increase was primarily due to a $1.0 million increase in compensation related expenses, primarily incentive compensation, a $0.2 million increase in building repairs and maintenance expense.
~~Total operating expenses for the firsttwenty-six~~ weeks of fiscal 2020 decreased by $0.4 million, or 0.9%, to $48.7 million. Operating expenses decreased to 10.5% of net sales for the first half of fiscal 2020 compared to 10.7% of net sales for the first half of fiscal 2019.
~~Selling expenses for the firsttwenty-six~~ ~~weeks of fiscal 2020 were $30.2~~$8.4 million, a decrease of ~~$2.0~~$0.7 million, or ~~6.3%~~7.7%, from the ~~amount recorded for the~~ first~~twenty-six~~ ~~weeks~~ quarter of fiscal ~~2019.~~2020. The decrease was driven primarily by a ~~$2.9~~$0.3 million decrease in ~~advertising expense~~consulting fees and a ~~$1.3~~$0.3 million decrease ~~in freight expense. These decreases were partially offset by a $1.4 million increase in payroll related and incentive compensation expense and a $0.5 million increase in commission expense.~~
~~Administrative expenses for the firsttwenty-six~~ ~~weeks of fiscal 2020 were $18.5 million, an increase of $1.6 million, or 9.5%, compared to the same period of fiscal 2019. The increase was primarily due to $1.5 million increase~~ in compensation related expenses, primarily incentive ~~compensation, and a $0.3 million increase in building repairs and maintenance expense.~~
compensation.

Income from Operations

Due to the factors discussed above, income from operations ~~was $24.5~~decreased to $18.9 million, or ~~9.9%~~9.0% of net sales, for the ~~second~~first quarter of fiscal ~~2020 compared to $16.6~~2021 from $19.1 million, or ~~6.6%~~8.8% of net sales, for the ~~second~~first quarter of fiscal ~~2019.~~
~~Due to the factors discussed above, income from operations was $43.5 million, or 9.4% of net sales, for the firsttwenty-six~~ ~~weeks of fiscal 2020 compared to $26.7 million, or 5.8% of net sales, for the firsttwenty-six~~ ~~weeks of fiscal 2019.~~
2020.

Interest Expense

Interest expense was ~~$0.4~~$0.5 million for both the ~~second~~first quarter of fiscal ~~2020 compared to $0.8 million in the second quarter of~~2021 and fiscal 2019. Interest expense for the first two quarters of fiscal 2020 was $1.0 million compared to $1.7 million for the first two quarters of 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 ~~$0.3~~$0.4 million for both the ~~second~~first quarter of ~~both~~ fiscal ~~2020~~2021 and fiscal ~~2019. Net rental and miscellaneous expense was $0.7 million for the firsttwenty-six~~ ~~weeks of fiscal 2020 compared to $0.6 million for the firsttwenty-six~~ ~~weeks of fiscal 2019.~~
2020.

Other Expense

Other expense consists of pension related expenses other than the service cost component and was $0.6 million for both the ~~second~~first quarter of fiscal ~~2020 compared to $0.5 million for the second quarter of~~2021 and fiscal ~~2019. Other expense was $1.1 million for the firsttwenty-six~~ ~~weeks of fiscal 2020 compared to $1.0 million for the firsttwenty-six~~ ~~weeks of fiscal 2019.~~
2020.

Income Tax Expense

Income tax expense was ~~$5.7~~$4.5 million, or ~~24.7% of income before income taxes (the “Effective Tax Rate”), for the second quarter of fiscal 2020 compared to $3.8 million, or 25.3%~~26.2% of income before income taxes for the ~~second~~first quarter of fiscal ~~2019. For the firsttwenty-six~~ ~~weeks of fiscal 2020, income tax expense was $10.4~~2021 compared to $4.6 million, or ~~25.5% of income before income taxes, compared to $5.6 million, or 23.9%~~26.4% of income before income taxes, for the ~~comparable period last year. The Effective Tax Rate in the comparativetwenty-six~~ ~~week period was reduced due to a change in the rate that our deferred tax assets are measured due to the impact~~first quarter of ~~Tax Reform. This change increased our net deferred tax assets and reduced income tax expense in the comparative twenty-six week period.~~
fiscal 2020.

Net Income

Net income was ~~$17.5~~$12.8 million, or ~~$1.52~~$1.12 per common share basic and $1.11 per share diluted, for the ~~second~~first quarter of fiscal ~~2020,~~2021, compared to ~~$11.3~~$12.9 million, or ~~$0.99~~$1.13 per common share basic and ~~$0.98 per common share diluted, for the second quarter of fiscal 2019.~~
~~Net income was $30.4 million, or $2.65 per common share basic and $2.64~~$1.12 per share diluted, for the first~~twenty-six~~ ~~weeks~~ quarter of fiscal ~~2020, compared to net income of $17.9 million, or $1.57 per common share basic and $1.56 per share diluted, for the firsttwenty-six~~ ~~weeks of fiscal 2019.~~
2020.

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 ~~historically~~ allowed us to devote more funds to promote our products ~~and invest in our brands~~ (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 ~~seven~~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 ~~half~~quarter of fiscal ~~2020~~2021 and ~~2019,~~2020, respectively (dollars in thousands):

   December 26,
2019 December 27,
2018 $ Change
Operating activities
   $ 54,285 $ 48,366 $ 5,919
Investing activities
   (6,148 ) (9,323 ) 3,175
Financing activities
   (48,335 ) (37,909 ) (10,426 )


Net increase in cash
   $ (198 ) $ 1,134 $ (1,332 )

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 ~~$54.3~~$20.6 million for the first~~twenty-six~~ ~~weeks~~ quarter of fiscal ~~2020~~2021 compared to ~~$48.4~~$22.5 million for the ~~comparative period~~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 ~~operating cash flow~~net accounts receivable at September 24, 2020 compared to both June 25, 2020 and September 26, 2019 was primarily due ~~primarily~~ to ~~a $12.5 million~~extended terms that were temporarily granted to customers whose businesses were negatively impacted by the
COVID-19
pandemic. An increase in net ~~income driven by increased~~ sales ~~and improved profitability, which was partially offset due to an increased use~~for the first quarter of ~~working capital for inventory~~fiscal 2021 compared to net sales for the ~~firsttwenty-six~~ ~~weeks~~fourth quarter of fiscal ~~2019.~~
2020 also contributed to the increase in net accounts receivable at September 24, 2020 compared to June 25, 2020.
Total inventories were ~~$172.3~~$150.4 million at ~~December 26, 2019, an increase~~September 24, 2020, a decrease of ~~$15.3~~$21.7 million, or ~~9.8%~~12.6%, from the inventory balance at June ~~27, 2019,~~25, 2020, and ~~an increase~~a decrease of ~~$0.6~~$6.1 million, or ~~0.4%~~3.9%, from the inventory balance at ~~December 27, 2018.~~September 26, 2019. The ~~increase~~decrease in inventory at ~~December 26, 2019~~September 24, 2020 compared to June ~~27,~~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 24, 2020 compared to September 26, 2019 was primarily due to ~~greater~~lower quantities of farmer stock peanuts and shelled pecans and walnuts on ~~hand at a higher acquisition cost, which was partially offset by lower~~hand. Lower acquisition costs for ~~pecans.~~
almonds and cashews also contributed to the decline in total inventory value.
Raw nut and dried fruit input stocks, some of which are classified as work in process, decreased ~~by 9.8~~10.6 million pounds, or ~~11.8%~~22.5%, at ~~December 26, 2019~~September 24, 2020 compared to ~~December 27, 2018 due to lower quantities of peanuts and pecans on hand.~~September 26, 2019. The weighted average cost per pound of raw nut and dried fruit input stocks on hand at the end of the ~~second~~first quarter of fiscal ~~2020~~2021 increased ~~7.1%~~7.8% compared to the end of the ~~second~~first quarter of fiscal ~~2019 primarily~~2020 due to a shift in product mix from lower priced farmer stock peanuts to higher ~~acquisition cost for walnuts, which was offset in part by lower acquisition costs for pecans, cashews and peanuts.~~
priced inshell pecans.
Investing Activities
Cash used in investing activities, primarily all for capital expenditures, was ~~$6.1~~$6.0 million during the first~~twenty-six~~ ~~weeks~~ quarter of fiscal ~~2020~~2021 compared to ~~$9.3~~$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 ~~2020~~2021 to be approximately ~~$17~~$23.0 million. The projected increase in capital expenditures from our previous expenditure level is due to ~~$20 million.~~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 ~~$48.3~~$15.4 million during the first~~twenty-six~~ ~~weeks~~ quarter of fiscal ~~2020~~2021 compared to ~~$37.9~~$20.1 million for the same period last year. WeThe dividends paid ~~$57.3~~in fiscal 2021 to date were approximately $5.6 million ~~of dividends in the first half of fiscal 2020 compared to $29.1 million during~~less than the same period ~~last year.~~of fiscal 2020. Net short-term borrowings under our Credit Facility were ~~$13.5~~$17.2 million during the first ~~half~~quarter of fiscal ~~2020~~2021 compared to net ~~repayments~~borrowings of ~~$6.7~~$16.0 million for the first ~~half~~quarter of fiscal ~~2019. The increase in short term borrowings under our Credit Facility was due to higher dividends paid in fiscal 2020 and was partially offset by an increased operating cash flows.~~
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,~~vacant. Approximately 29% of ~~which approximately 29%~~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 ~~Facility~~Agreement (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 Consent~~an Amended and ~~Ninth Amendment to~~Restated Credit Agreement (the “Amended and Restated Credit Agreement”) which amended and restated our Credit Agreement dated as of February 7, 2008 (the ~~“Ninth Amendment”~~“Former Credit Agreement”) ~~which provided lender consent to incur unsecured debt in connection~~. The Amended and Restated Credit Agreement provides for a $117.5 million senior secured revolving credit facility with ~~our acquisition~~the 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 the~~Restated 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 ~~December 26, 2019,~~September 24, 2020, the weighted average interest rate for the Credit Facility was ~~3.8%~~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 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 ~~December 26, 2019,~~September 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 ~~December 26, 2019,~~September 24, 2020, we had ~~$100.8~~$70.0 million of available credit under the Credit Facility. If this entire amount were borrowed at ~~December 26, 2019,~~September 24, 2020, we would still be in compliance with all restrictive covenants under the Credit Facility.
We are currently updating the Credit Facility agreement and expect the term to extend another five years. The legal costs incurred to date have been capitalized and will be amortized over the length of the new agreement.

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 A~~the 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 ~~December 26, 2019,~~September 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 ~~December 26, 2019, $9.8~~September 24, 2020, $9.4 million of the debt obligation was outstanding.

Squirrel Brand Seller-Financed Note

In November 2017 we completed the ~~Acquisition.~~Squirrel Brand acquisition. The ~~Acquisition~~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 was considered a related party until the employment of this executive officer with the Company ceased ~~late in the second quarter of~~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 ~~December 26, 2019,~~September 24, 2020, the principal amount of ~~$3.5~~$0.6 million of the Promissory Note was outstanding.

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 1514 – “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~~
pronouncements.

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, 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 ~~inability~~ability 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 ~~December 26, 2019.~~September 24, 2020. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~December 26, 2019,~~September 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 ~~December 26, 2019~~September 24, 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, 2019~~25, 2020 during the ~~second~~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.

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


~~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 2020 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

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 2020 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 2020 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 Form~~8-K~~ ~~filed on February 8, 2008)~~


~~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 to~~restated 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 Form~~10-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 Form~~8-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 Form~~10-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 Form~~8-K~~ ~~filed on February 4, 2013)~~

~~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 Form~~8-K~~ ~~filed on December 17, 2013)~~


~~Exhibit~~ ~~No.~~		~~Description~~

~~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 Form~~8-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 ~~99.2~~10.1 to the Form 8-K filed on ~~July 7, 2016)~~

~~10.25~~		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 Form~~8-K~~ ~~filed on July~~March 11, ~~2017)~~2020) https://www.sec.gov/Archives/edgar/data/880117/000119312520070312/d767975dex101.htm

~~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 Form~~8-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 Form~~8-K~~ ~~filed on October 3, 2014)~~

*~~10.28~~10.13		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

*~~10.29~~10.14		Separation Agreement, dated as of December 10, 2019, by and between the Company and J. Brent Meyer ~~(filed herewith)~~(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

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


~~Exhibit~~ ~~No.~~		~~Description~~

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

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

*	Indicates a management contract or compensatory plan or arrangement.

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 ~~January 30,~~October 28, 2020.
JOHN B. SANFILIPPO & SON, INC.
By
/s/ MICHAEL J. VALENTINE
Michael J. Valentine
Chief Financial Officer, Group President and Secretary
35


	For the Quarter Ended						For theTwenty-six Weeks Ended
	December 26, 2019			December 27, 2018			December 26, 2019			December 27, 2018
Net sales	$	246,423		$	253,317		$	464,269		$	457,605
Cost of sales		196,443			210,434			372,041			381,768

Gross profit		49,980			42,883			92,228			75,837

Operating expenses:
Selling expenses		16,103			18,189			30,215			32,260
Administrative expenses		9,411			8,054			18,485			16,885

Total operating expenses		25,514			26,243			48,700			49,145

Income from operations		24,466			16,640			43,528			26,692

Other expense:
Interest expense including $232, $293, $479 and $602 to related parties		435			798			956			1,677
Rental and miscellaneous expense, net		274			278			678			567
Other expense		567			486			1,133			973

Total other expense, net		1,276			1,562			2,767			3,217

Income before income taxes		23,190			15,078			40,761			23,475
Income tax expense		5,729			3,814			10,374			5,605

Net income	$	17,461		$	11,264		$	30,387		$	17,870
Other comprehensive income:
Amortization of prior service cost and actuarial loss included in net periodic pension cost		344			263			687			526
Income tax expense related to pension adjustments		(86	)		(66	)		(172	)		(132	)

Other comprehensive income, net of tax		258			197			515			394

Comprehensive income	$	17,719		$	11,461		$	30,902		$	18,264

Net income per common share-basic	$	1.52		$	0.99		$	2.65		$	1.57

Net income per common share-diluted	$	1.52		$	0.98		$	2.64		$	1.56


	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


	December 26, 2019		June 27, 2019		December 27, 2018
ASSETS
CURRENT ASSETS:
Cash	$	1,393	$	1,591	$	2,583
Accounts receivable, less allowance for doubtful accounts of $425, $350 and $342		52,653		60,971		62,580
Inventories		172,340		157,024		171,708
Prepaid expenses and other current assets		5,992		5,754		6,943

TOTAL CURRENT ASSETS		232,378		225,340		243,814

PROPERTY, PLANT AND EQUIPMENT:
Land		9,285		9,285		9,285
Buildings		109,671		109,955		109,380
Machinery and equipment		212,532		210,962		206,663
Furniture and leasehold improvements		5,160		5,128		5,039
Vehicles		682		673		641
Construction in progress		3,817		1,127		2,563

		341,147		337,130		333,571
Less: Accumulated depreciation		233,825		228,778		222,976

		107,322		108,352		110,595
Rental investment property, less accumulated depreciation of $11,615, $11,212 and $10,827		17,508		17,831		18,066

TOTAL PROPERTY, PLANT AND EQUIPMENT		124,830		126,183		128,661

Intangible assets, net		13,282		14,626		15,970
Cash surrender value of officers’ life insurance and other assets		9,124		9,782		8,743
Deferred income taxes		5,616		5,723		4,591
Goodwill		9,650		9,650		9,650
Operating leaseright-of-use assets		4,823		—		—

TOTAL ASSETS	$	399,703	$	391,304	$	411,429


	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


	Class A Common Stock				Common Stock				Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock
	Shares		Amount		Shares		Amount		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			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
Net income													17,461									17,461
Cash dividends ($2.00 per share)													(22,947	)								(22,947	)
Pension liability amortization, net of income tax expense of $86																258						258
Equity award exercises , net of shares withheld for employee taxes						27,830		—		(761	)											(761	)
Stock-based compensation expense										855												855

Balance, December 26, 2019		2,597,426	$	26		8,937,236	$	89	$	122,984		$	111,807		$	(4,786	)	$	(1,204	)	$	228,916


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


	For the Twenty-six Weeks Ended
	December 26, 2019			December 27, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	30,387		$	17,870
Depreciation and amortization		9,225			8,535
(Gain) loss on disposition of assets, net		(33	)		57
Deferred income tax expense		107			433
Stock-based compensation expense		1,488			1,516
Change in assets and liabilities:
Accounts receivable, net		8,316			3,041
Inventories		(15,316	)		2,654
Prepaid expenses and other current assets		(345	)		(1,659	)
Accounts payable		28,486			9,655
Accrued expenses		(8,964	)		2,833
Income taxes payable		(640	)		2,285
Other long-term assets and liabilities		582			261
Other, net		992			885

Net cash provided by operating activities		54,285			48,366

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(6,465	)		(9,367	)
Proceeds from insurance recoveries		232			—
Other		85			44

Net cash used in investing activities		(6,148	)		(9,323	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings (repayments)		13,495			(6,737	)
Debt issue costs		(218	)		—
Principal payments on long-term debt		(4,031	)		(3,588	)
Increase in bank overdraft		448			1,825
Dividends paid		(57,268	)		(29,074	)
Taxes paid related to net share settlement of equity awards		(761	)		(335	)

Net cash used in financing activities		(48,335	)		(37,909	)

NET (DECREASE) INCREASE IN CASH		(198	)		1,134
Cash, beginning of period		1,591			1,449

Cash, end of period	$	1,393		$	2,583

Supplemental disclosure ofnon-cash activities:
Right-of-use assets recognized at ASUNo. 2016-02 transition, see Note 3	$	5,361		$	—


	For the Quarter Ended				For the Twenty-six Weeks Ended
Distribution Channel	December 26, 2019		December 27, 2018		December 26, 2019		December 27, 2018
Consumer	$	188,086	$	195,478	$	345,232	$	334,922
Commercial Ingredients		34,247		31,454		71,135		68,656
Contract Packaging		24,090		26,385		47,902		54,027

Total	$	246,423	$	253,317	$	464,269	$	457,605


	December 26, 2019		Affected Line Item in Consolidated Balance Sheet
Assets
Operating leaseright-of-use assets	$	4,823	Operating leaseright-of-use assets

Total leaseright-of-use assets	$	4,823

Liabilities
Current:
Operating leases	$	1,354	Other accrued expenses
Noncurrent:
Operating leases		3,456	Long-term operating lease liabilities

Total lease liabilities	$	4,810


	For the Quarter ended December 26, 2019		For the Twenty-six weeks ended December 26, 2019
Operating lease costs^(a)	$	460	$	834
Variable lease costs^(b)		15		31

Total Lease Cost	$	475	$	865


	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


	For the Twenty-six weeks ended December 26, 2019
Operating cash flows information:
Cash paid for amounts included in measurements for lease liabilities	$	770
Non-cash activity:
Right-of-use assets obtained in exchange for new operating lease obligations	$	163

	December 26, 2019
Weighted Average Remaining Lease Term (in years)		3.8
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


Fiscal year ending
June 25, 2020 (excluding thetwenty-six weeks ended December 26, 2019)	$	792
June 24, 2021		1,439
June 30, 2022		1,316
June 29, 2023		1,065
June 27, 2024		469
Thereafter		132

Total lease payment		5,213
Less imputed interest		(403	)

Present value of operating lease liabilities	$	4,810


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


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


	For the Quarter ended December 26, 2019		For the Twenty-six weeks ended December 26, 2019
Lease income related to lease payments	$	462	$	1,005


	For the Quarter Ended September 24, 2020		For the Quarter Ended September 26, 2019
Lease income related to lease payments	$	451	$	543


Fiscal year ending
June 25, 2020 (excluding thetwenty-six weeks ended December 26, 2019)	$	1,082
June 24, 2021		1,948
June 30, 2022		1,707
June 29, 2023		1,737
June 27, 2024		1,766
Thereafter		2,512

	$	10,752


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


	December 26, 2019			June 27, 2019			December 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		(15,438	)		(14,466	)		(13,494	)
Brand names		(9,527	)		(9,182	)		(8,838	)
Non-compete agreement		(113	)		(86	)		(58	)

		(25,078	)		(23,734	)		(22,390	)

Net intangible assets	$	13,282		$	14,626		$	15,970


	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


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


Restricted Stock Units	Shares			Weighted Average Grant Date Fair Value
Outstanding at June 27, 2019		188,992		$	46.79
Activity:
Granted		38,572			91.47
Vested^(a)		(36,179	)		60.56
Forfeited		(7,439	)		63.62

Outstanding at December 26, 2019		183,946		$	52.77


Changes to AOCL^(a)	For the Twenty-Six Weeks Ended
Changes to AOCL^(a)	December 26, 2019			December 27, 2018
Balance at beginning of period	$	(4,325	)	$	(3,181	)
Other comprehensive income before reclassifications		—			—
Amounts reclassified from accumulated other comprehensive loss		687			526
Tax effect		(172	)		(132	)

Net current-period other comprehensive income		515			394
Impact of adopting ASU2018-02^(b)		(976	)		—

Balance at end of period	$	(4,786	)	$	(2,787	)


Changes to AOCL (a)	For the Quarter Ended
Changes to AOCL (a)	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	)


													Affected line item in the Consolidated Statements of Comprehensive Income
	For the Quarter Ended						For the Twenty-six Weeks Ended
Reclassifications from AOCL to earnings^(c)	December 26, 2019			December 27, 2018			December 26, 2019			December 27, 2018
Amortization of defined benefit pension items:
Unrecognized prior service cost	$	(240	)	$	(240	)	$	(479	)	$	(479	)		Other expense
Unrecognized net loss		(104	)		(23	)		(208	)		(47	)		Other expense

Total before tax		(344	)		(263	)		(687	)		(526	)
Tax effect		86			66			172			132			Income tax expense

Amortization of defined pension items, net of tax	$	(258	)	$	(197	)	$	(515	)	$	(394	)


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	)


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.


	For the Quarter Ended						For the Twenty-six Weeks Ended
Product Type	December 26, 2019			December 27, 2018			December 26, 2019			December 27, 2018
Peanuts		15.8	%		15.7	%		16.8	%		17.2	%
Pecans		16.2			20.5			13.0			16.5
Cashews & Mixed Nuts		22.7			22.1			22.7			22.3
Walnuts		8.7			10.5			7.9			10.3
Almonds		13.2			11.8			14.8			12.8
Trail & Snack Mixes		18.3			14.5			19.3			15.6
Other		5.1			4.9			5.5			5.3

Total		100.0	%		100.0	%		100.0	%		100.0	%