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 24, 2020~~March 25, 2021

☐	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.)


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)

~~(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~~	JBSS	The NASDAQ Stock Market LLC (NASDAQ Global Select Market)

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past

90 days. ☒

Yes

☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒

Yes

☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer,”~~filer”, “smaller reporting company” and “emerging growth company” in Rule

12b-2

of the Exchange Act. (Check One)

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 Rule

12b-2

of the Exchange Act). ☐ Yes ☒ No

As of ~~January 21,~~April 22, 2021, ~~8,868,587~~8,870,912 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.

~~Table of Contents~~

JOHN B. SANFILIPPO & SON, INC.

FORM

10-Q

FOR THE QUARTER ENDED ~~DECEMBER 24, 2020~~MARCH 25, 2021

INDEX


	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Comprehensive Income for the Quarter and ~~Twenty-Six~~Thirty-Nine Weeks Ended ~~December 24,~~March 25, 2021 and March 26, 2020 ~~and December 26, 2019~~		3
Consolidated Balance Sheets as of ~~December 24, 2020,~~March 25, 2021, June 25, 2020 and ~~December~~March 26, ~~2019~~2020		4
Consolidated Statements of Stockholders’ Equity for the Quarter and ~~Twenty-Six~~Thirty-Nine Weeks Ended ~~December 24,~~March 25, 2021 and March 26, 2020 ~~and December 26, 2019~~		6
Consolidated Statements of Cash Flows for the ~~Twenty-Six~~Thirty-Nine Weeks Ended ~~December 24,~~March 25, 2021 and March 26, 2020 ~~and December 26, 2019~~		7
Notes to Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3. Quantitative and Qualitative Disclosures About Market Risk		2930
Item 4. Controls and Procedures		2930
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		2930
Item 1A. Risk Factors		2930
Item 5. Other Information		30
Item 6. Exhibits		3031
SIGNATURE		3335

~~Table of Contents~~

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 the Twenty-six Weeks Ended						For the Quarter Ended						For the Thirty-Nine Weeks Ended
	December 24, 2020			December 26, 2019			December 24, 2020			December 26, 2019			March 25, 2021			March 26, 2020			March 25, 2021			March 26, 2020
Net sales	$	233,575		$	246,423		$	443,848		$	464,269		$	207,892		$	211,624		$	651,740		$	675,893
Cost of sales		180,780			196,443			351,721			372,041			161,846			168,819			513,567			540,860

Gross profit		52,795			49,980			92,127			92,228			46,046			42,805			138,173			135,033

Operating expenses:
Selling expenses		17,694			16,103			29,778			30,215			15,090			13,880			44,868			44,095
Administrative expenses		7,305			9,411			15,680			18,485			9,859			9,528			25,539			28,013

Total operating expenses		24,999			25,514			45,458			48,700			24,949			23,408			70,407			72,108

Income from operations		27,796			24,466			46,669			43,528			21,097			19,397			67,766			62,925

Other expense:
Interest expense including $165, $232, $332 and $479 to related parties		376			435			826			956
Interest expense including $162, $172, $494 and $651 to related parties														309			579			1,135			1,535
Rental and miscellaneous expense, net		365			274			797			678			379			308			1,176			986
Other expense		629			567			1,259			1,133			630			566			1,889			1,699

Total other expense, net		1,370			1,276			2,882			2,767			1,318			1,453			4,200			4,220

Income before income taxes		26,426			23,190			43,787			40,761			19,779			17,944			63,566			58,705
Income tax expense		6,541			5,729			11,090			10,374			5,078			4,478			16,168			14,852

Net income	$	19,885		$	17,461		$	32,697		$	30,387		$	14,701		$	13,466		$	47,398		$	43,853
Other comprehensive income:
Amortization of prior service cost and actuarial loss included in net periodic pension cost		414			344			830			687			416			343			1,246			1,030
Income tax expense related to pension adjustments		(103	)		(86	)		(207	)		(172	)		(104	)		(86	)		(311	)		(258	)

Other comprehensive income, net of tax		311			258			623			515			312			257			935			772

Comprehensive income	$	20,196		$	17,719		$	33,320		$	30,902		$	15,013		$	13,723		$	48,333		$	44,625

Net income per common share-basic	$	1.73		$	1.52		$	2.85		$	2.65		$	1.28		$	1.17		$	4.12		$	3.83

Net income per common share-diluted	$	1.72		$	1.52		$	2.83		$	2.64		$	1.27		$	1.17		$	4.10		$	3.80

The accompanying unaudited notes are an integral part of these consolidated financial statements.

~~Table of Contents~~

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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


	December 24, 2020		June 25, 2020		December 26, 2019		March 25, 2021		June 25, 2020		March 26, 2020
ASSETS
CURRENT ASSETS:
Cash	$	1,763	$	1,535	$	1,393	$	1,043	$	1,535	$	993
Accounts receivable, less allowance for doubtful accounts of $325, $391 and $425		60,495		56,953		52,653
Accounts receivable, less allowance for doubtful accounts of $291, $391 and $387								64,502		56,953		68,042
Inventories		155,371		172,068		172,340		151,757		172,068		188,514
Prepaid expenses and other current assets		9,872		8,315		5,992		6,481		8,315		5,249

TOTAL CURRENT ASSETS		227,501		238,871		232,378		223,783		238,871		262,798

PROPERTY, PLANT AND EQUIPMENT:
Land		9,277		9,285		9,285		9,277		9,285		9,285
Buildings		110,611		110,294		109,671		110,739		110,294		110,278
Machinery and equipment		224,458		218,021		212,532		225,583		218,021		215,310
Furniture and leasehold improvements		5,199		5,179		5,160		5,322		5,179		5,170
Vehicles		642		682		682		604		682		682
Construction in progress		6,577		2,244		3,817		9,662		2,244		4,104
								361,187		345,705		344,829
		356,764		345,705		341,147
Less: Accumulated depreciation		244,447		239,013		233,825		247,812		239,013		237,171
								113,375		106,692		107,658
		112,317		106,692		107,322
Rental investment property, less accumulated depreciation of $12,422, $12,018 and $11,615		16,701		17,105		17,508
Rental investment property, less accumulated depreciation of $12,623, $12,018 and $11,816								16,500		17,105		17,306

TOTAL PROPERTY, PLANT AND EQUIPMENT		129,018		123,797		124,830		129,875		123,797		124,964

Intangible assets, net		10,968		12,125		13,282		10,464		12,125		12,704
Cash surrender value of officers’ life insurance and other assets		9,017		11,875		9,124		9,647		11,875		9,967
Deferred income taxes		7,288		6,788		5,616		5,051		6,788		5,973
Goodwill		9,650		9,650		9,650		9,650		9,650		9,650
Operating lease right-of-use assets		4,119		4,351		4,823		3,758		4,351		4,638

TOTAL ASSETS	$	397,561	$	407,457	$	399,703	$	392,228	$	407,457	$	430,694

The accompanying unaudited notes are an integral part of these consolidated financial statements.

~~Table of Contents~~

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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


	December 24, 2020			June 25, 2020			December 26, 2019			March 25, 2021			June 25, 2020			March 26, 2020
LIABILITIES & STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Revolving credit facility borrowings	$	9,169		$	27,008		$	13,495		$	26,005		$	27,008		$	38,175
Current maturities of long-term debt, including related party debt of $605, $585 and $565 and net of unamortized debt issuance costs of $20, $25 and $30		3,780			5,285			7,110
Current maturities of long-term debt, including related party debt of $616, $585 and $574 and net of unamortized debt issuance costs of $17, $25 and $27											3,828			5,285			6,197
Accounts payable		52,140			36,323			70,979			43,684			36,323			54,856
Bank overdraft		1,510			2,041			1,349			1,509			2,041			2,091
Accrued payroll and related benefits		13,470			25,641			13,429			19,224			25,641			21,116
Other accrued expenses		10,907			10,729			11,027			12,422			15,870			12,774
Income taxes payable		7,012			5,141			347

TOTAL CURRENT LIABILITIES		97,988			112,168			117,736			106,672			112,168			135,209

LONG-TERM LIABILITIES:
Long-term debt, less current maturities, including related party debt of $8,639, $8,947 and $9,244 and net of unamortized debt issuance costs of $10, $19 and $30		12,817			14,730			16,597
Long-term debt, less current maturities, including related party debt of $8,481, $8,947 and $9,097 and net of unamortized debt issuance costs of $7, $19 and $24											11,842			14,730			15,670
Retirement plan		32,146			31,573			25,212			32,433			31,573			25,449
Long-term operating lease liabilities, net of current portion		2,704			2,990			3,456			2,359			2,990			3,259
Other		7,899			7,758			7,786			8,019			7,758			7,839

TOTAL LONG-TERM LIABILITIES		55,566			57,051			53,051			54,653			57,051			52,217

TOTAL LIABILITIES		153,554			169,219			170,787			161,325			169,219			187,426

COMMITMENTS AND CONTINGENCIES		0			0			0			0			0			0
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, 8,983,588, 8,939,890 and 8,937,236 shares issued		90			89			89
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, 8,988,812, 8,939,890 and 8,939,390 shares issued											90			89			89
Capital in excess of par value		125,032			123,899			122,984			125,693			123,899			123,613
Retained earnings		128,070			124,058			111,807			113,993			124,058			125,273
Accumulated other comprehensive loss		(8,007	)		(8,630	)		(4,786	)		(7,695	)		(8,630	)		(4,529	)
Treasury stock, at cost; 117,900 shares of Common Stock		(1,204	)		(1,204	)		(1,204	)		(1,204	)		(1,204	)		(1,204	)

TOTAL STOCKHOLDERS’ EQUITY		244,007			238,238			228,916			230,903			238,238			243,268

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	397,561		$	407,457		$	399,703		$	392,228		$	407,457		$	430,694

The accompanying unaudited notes

are

an integral part of these consolidated financial statements.

~~Table of Contents~~

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								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				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				2,597,426			$	26				8,939,890			$	89		$	123,899			$	124,058			$	(8,630		)		$	(1,204		)		$	238,238
Net income													12,812											12,812																							12,812														12,812
Cash dividends ($2.50 per share)													(28,685	)										(28,685	)																						(28,685		)												(28,685		)
Pension liability amortization, net of income tax expense of $104																312								312																											312										312
Equity award exercises						221		0		0														0												221				—			—																		—
Stock-based compensation expense										622														622																			622																		622

Balance, September 24, 2020		2,597,426	$	26		8,940,111	$	89	$	124,521		$	108,185		$	(8,318	)		$	(1,204	)		$	223,299				2,597,426			$	26				8,940,111			$	89		$	124,521			$	108,185			$	(8,318		)		$	(1,204		)		$	223,299
Net income													19,885											19,885																							19,885														19,885
Pension liability amortization, net of income tax expense of $103																311								311																											311										311
Equity award exercises, net of shares withheld for employee taxes						43,477		1		(487	)													(486	)
Equity award exercises , net of shares withheld for employee taxes																																				43,477				1			(487		)																(486		)
Stock-based compensation expense										998														998																			998																		998

Balance, December 24, 2020		2,597,426	$	26		8,983,588	$	90	$	125,032		$	128,070		$	(8,007	)		$	(1,204	)		$	244,007				2,597,426			$	26				8,983,588			$	90		$	125,032			$	128,070			$	(8,007		)		$	(1,204		)		$	244,007
Net income																																															14,701														14,701
Cash dividends ($2.50 per share)																																															(28,778		)												(28,778		)
Pension liability amortization, net of income tax expense of $104																																																			312										312
Equity award exercises , net of shares withheld for employee taxes																																				5,224				—			(49		)																(49		)
Stock-based compensation expense																																											710																		710

Balance, March 25, 2021																												2,597,426			$	26				8,988,812			$	90		$	125,693			$	113,993			$	(7,695		)		$	(1,204		)		$	230,903


	Class A Common Stock				Common Stock				Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss				Treasury Stock								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				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				2,597,426			$	26				8,909,406			$	89		$	122,257		$	137,712		$	(4,325	)		$	(1,204	)		$	254,555
Net income													12,926											12,926																						12,926											12,926
Cash dividends ($3.00 per share)													(34,321	)										(34,321	)																					(34,321	)										(34,321	)
Pension liability amortization, net of income tax expense of $86																257								257																									257								257
Impact of adopting ASU 2018-02													976			(976	)							0																						976			(976	)							0
Stock-based compensation expense										633														633																			633														633

Balance, September 26, 2019		2,597,426	$	26		8,909,406	$	89	$	122,890		$	117,293		$	(5,044	)		$	(1,204	)		$	234,050				2,597,426			$	26				8,909,406			$	89		$	122,890		$	117,293		$	(5,044	)		$	(1,204	)		$	234,050
Net income													17,461											17,461																						17,461											17,461
Cash dividends ($2.00 per share)													(22,947	)										(22,947	)																					(22,947	)										(22,947	)
Pension liability amortization, net of income tax expense of $86																258								258																									258								258
Equity award exercises, net of shares withheld for employee taxes						27,830		0		(761	)													(761	)
Equity award exercises , net of shares withheld for employee taxes																																				27,830				—			(761	)													(761	)
Stock-based compensation expense										855														855																			855														855

Balance, December 26, 2019		2,597,426	$	26		8,937,236	$	89	$	122,984		$	111,807		$	(4,786	)		$	(1,204	)		$	228,916				2,597,426			$	26				8,937,236			$	89		$	122,984		$	111,807		$	(4,786	)		$	(1,204	)		$	228,916
Net income																																														13,466											13,466
Pension liability amortization, net of income tax expense of $86																																																	257								257
Equity award exercises , net of shares withheld for employee taxes																																				2,154				—			(73	)													(73	)
Stock-based compensation expense																																											702														702

Balance, March 26, 2020																												2,597,426			$	26				8,939,390			$	89		$	123,613		$	125,273		$	(4,529	)		$	(1,204	)		$	243,268

The accompanying unaudited notes are an integral part of these consolidated financial statements.

~~Table of Contents~~

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


	For the Twenty-six Weeks Ended						For the Thirty-Nine Weeks Ended
	December 24, 2020		��	December 26, 2019			March 25, 2021			March 26, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	32,697		$	30,387		$	47,398		$	43,853
Depreciation and amortization		9,089			9,225			13,665			13,521
Gain on disposition of assets, net		(2,530	)		(33	)		(2,733	)		(899	)
Deferred income tax (benefit) expense		(500	)		107
Deferred income tax expense (benefit)								1,737			(250	)
Stock-based compensation expense		1,620			1,488			2,330			2,190
Change in assets and liabilities:
Accounts receivable, net		(1,247	)		8,316			(7,553	)		(6,196	)
Inventories		16,697			(15,316	)		20,311			(31,490	)
Prepaid expenses and other current assets		(1,557	)		(345	)		1,834			398
Accounts payable		16,244			28,486			7,498			12,080
Accrued expenses		(11,993	)		(8,964	)		(6,138	)		(1,576	)
Income taxes payable		1,871			(640	)		(3,727	)		1,039
Other long-term assets and liabilities		344			582			605			806
Other, net		1,200			992			1,799			1,486

Net cash provided by operating activities		61,935			54,285			77,026			34,962

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(11,121	)		(6,465	)		(15,769	)		(10,560	)
Proceeds from insurance recoveries		0			232			2,506			232
Other		387			85			(357	)		(205	)

Net cash used in investing activities		(10,734	)		(6,148	)		(13,620	)		(10,533	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term (repayments) borrowings		(17,839	)		13,495			(1,003	)		38,175
Debt issue costs		0			(218	)		—			(410	)
Principal payments on long-term debt		(3,432	)		(4,031	)		(4,365	)		(5,880	)
(Decrease) increase in bank overdraft		(531	)		448			(532	)		1,190
Dividends paid		(28,685	)		(57,268	)		(57,463	)		(57,268	)
Taxes paid related to net share settlement of equity awards		(486	)		(761	)		(535	)		(834	)

Net cash used in financing activities		(50,973	)		(48,335	)		(63,898	)		(25,027	)

NET INCREASE (DECREASE) IN CASH		228			(198	)
NET DECREASE IN CASH								(492	)		(598	)
Cash, beginning of period		1,535			1,591			1,535			1,591

Cash, end of period	$	1,763		$	1,393		$	1,043		$	993

Supplemental disclosure of non-cash activities:
Right-of-use assets recognized at ASU No. 2016-02 transition	$	0		$	5,361			—		$	5,361

The accompanying unaudited notes are an integral part of these consolidated financial statements.

~~Table of Contents~~

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 2021 and fiscal 2020 are to the fiscal year ending June 24, 2021 and the fiscal year ended June 25, 2020, respectively.

References herein to the ~~second~~third quarter of fiscal 2021 and fiscal 2020 are to the quarters ended ~~December 24,~~March 25, 2021 and March 26, 2020, ~~and December 26, 2019,~~ respectively.

References herein to the first ~~half~~three quarters or first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 and fiscal 2020 are to the

~~twenty-six~~

thirty-nine weeks ended ~~December 24,~~March 25, 2021 and March 26, 2020, ~~and December 26, 2019,~~ 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~~our

Fisher

Orchard Valley Harvest

Squirrel Brand

Southern Style Nuts

and

Sunshine Country

brand ~~names.~~names and under a variety of private brands. 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 our brand names and under private ~~brands and brand names.~~brands. Our products are sold through 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 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 2020 Annual Report on Form

10-K

for the fiscal year ended June 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.

~~Table of Contents~~

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 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, 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.~~judgment when determining estimates. 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 0 contract asset balance for any periods presented. 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				For the Quarter Ended				For the Thirty-Nine Weeks Ended
Distribution Channel	December 24, 2020		December 26, 2019		December 24, 2020		December 26, 2019		March 25, 2021		March 26, 2020		March 25, 2021		March 26, 2020
Consumer	$	192,029	$	188,086	$	358,786	$	345,232	$	169,415	$	158,616	$	528,201	$	503,848
Commercial Ingredients		20,536		34,247		43,347		71,135		21,052		30,312		64,399		101,447
Contract Packaging		21,010		24,090		41,715		47,902		17,425		22,696		59,140		70,598

Total	$	233,575	$	246,423	$	443,848	$	464,269	$	207,892	$	211,624	$	651,740	$	675,893

~~Table of Contents~~

Note 3 – Leases

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 ~~5.5~~5.3 years.

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. 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 lease

right-of-use

assets and liabilities:


	December 24, 2020		June 25, 2020		December 26, 2019		Affected Line Item in Consolidated Balance Sheet	March 25, 2021		June 25, 2020		March 26, 2020		Affected Line Item in Consolidated Balance Sheet
Assets
Operating lease right-of-use assets	$	4,119	$	4,351	$	4,823	Operating lease right-of-use assets	$	3,758	$	4,351	$	4,638	Operating lease right-of-use assets

Total lease right-of-use assets	$	4,119	$	4,351	$	4,823		$	3,758	$	4,351	$	4,638

Liabilities
Current:
Operating leases	$	1,429	$	1,376	$	1,354	Other accrued expenses	$	1,449	$	1,376	$	1,374	Other accrued expenses
Noncurrent:
Operating leases		2,704		2,990		3,456	Long-term operating lease liabilities		2,359		2,990		3,259	Long-term operating lease liabilities

Total lease liabilities	$	4,133	$	4,366	$	4,810		$	3,808	$	4,366	$	4,633
								��

The following tables summarize the Company’s total lease costs and other information arising from operating lease transactions:


	For the Quarter Ended				For the Twenty-six Weeks Ended				For the Quarter Ended				For the Thirty-nine Weeks Ended
	December 24, 2020		December 26, 2019		December 24, 2020		December 26, 2019		March 25, 2021		March 26, 2020		March 25, 2021		March 26, 2020
Operating lease costs (a)	$	477	$	460	$	950	$	834	$	437	$	432	$	1,387	$	1,266
Variable lease costs (b)		17		15		37		31		17		16		54		47

Total Lease Cost	$	494	$	475	$	987	$	865	$	454	$	448	$	1,441	$	1,313

(a)	Includes short-term leases which are immaterial.

(b)	Variable lease costs consist of sales tax.

~~Table of Contents~~

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


	For the Twenty-six Weeks Ended				For the Thirty-nine Weeks Ended
	December 24, 2020		December 26, 2019		March 25, 2021		March 26, 2020
Operating cash flows information:
Cash paid for amounts included in measurements for lease liabilities	$	810	$	770	$	1,171	$	1,163
Non-cash activity:
Right-of-use assets obtained in exchange for new operating lease obligations	$	490	$	163	$	490	$	326


	December 24, 2020			June 25, 2020			December 26, 2019			March 25, 2021			June 25, 2020			March 26, 2020
Weighted Average Remaining Lease Term (in years)		3.1			3.4			3.8			3.0			3.4			3.6
Weighted Average Discount Rate		4.3	%		4.4	%		4.5	%		4.3	%		4.4	%		4.4	%

Maturities of operating lease liabilities as of ~~December 24, 2020~~March 25, 2021 are as follows:

Fiscal year ending

June 24, 2021 (excluding the
twenty-six
weeks ended December 24, 2020)
   $ 801
June 30, 2022
   1,489
June 29, 2023
   1,236
June 27, 2024
   593
June 26, 2025
   231
June 25, 2026
   59
Thereafter
   0

Total lease payment
   4,409
Less imputed interest
   (276 )

Present value of operating lease liabilities
   $ 4,133

At December 24, 2020, the Company has one additional operating lease of approximately $83 that has not yet commenced and therefore is not reflected in the Consolidated Balance Sheet and tables above. The lease is scheduled

~~commence in the third quarter of fiscal 2021 with an initial lease term of 5 years.~~


Fiscal year ending
June 24, 2021 (excluding the thirty-nine weeks ended March 25, 2021)	$	438
June 30, 2022		1,486
June 29, 2023		1,236
June 27, 2024		593
June 26, 2025		231
June 25, 2026		59
Thereafter		0

Total lease payment		4,043
Less imputed interest		(235	)

Present value of operating lease liabilities	$	3,808

Lessor Accounting

We lease office space in our four-story office building located in Elgin, Illinois. As a lessor, we retain substantially all of the risks and benefits of ownership of the investment property and under Topic 842 we continue to account for all of our leases as operating leases. Lease agreements may include options to renew. We accrue fixed lease income on a

straight-line

basis over the terms of the leases. There is generally no variable lease consideration and an immaterial amount of

non-lease

components such as recurring utility and storage fees. Leases between related parties are immaterial.

Leasing revenue is as follows:

For the Quarter ended

For the Twenty-six weeks ended


December 24,
2020

December 26,
2019

December 24,
2020

December 26,
2019

Lease income related to lease payments
   $ 452    $ 462    $ 903    $ 1,005


	For the Quarter ended				For the Thirty-nine weeks ended
	March 25, 2021		March 26, 2020		March 25, 2021		March 26, 2020
Lease income related to lease payments	$	451	$	510	$	1,354	$	1,515

~~Table of Contents~~

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.


Fiscal year ending
June 24, 2021 (excluding the twenty-six weeks ended December 24, 2020)	$	983
June 24, 2021 (excluding the thirty-nine weeks ended March 25, 2021)			$	499
June 30, 2022		1,708		1,747
June 29, 2023		1,737		1,790
June 27, 2024		1,766		1,818
June 26, 2025		1,228		1,228
June 25, 2026		670		670
Thereafter		614		614

	$8,706		$	8,366

Note 4 – Inventories

Inventories consist of the following:


	December 24, 2020		June 25, 2020		December 26, 2019				March 25, 2021		June 25, 2020		March 26, 2020
Raw material and supplies	$	66,793	$	69,276	$	$		81,135	$	73,068	$	69,276	$	87,120
Work-in-process and finished goods		88,578		102,792		91,205				78,689		102,792		101,394

Total	$	155,371	$	172,068			$	172,340	$	151,757	$	172,068	$	188,514

Note 5 – Goodwill and Intangible Assets

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


	December 24, 2020			June 25, 2020			December 26, 2019			March 25, 2021			June 25, 2020			March 26, 2020
Customer relationships	$	21,100		$	21,100		$	21,100		$	21,100		$	21,100		$	21,100
Brand names		16,990			16,990			16,990			16,990			16,990			16,990
Non-compete agreement		270			270			270			270			270			270

		38,360			38,360			38,360			38,360			38,360			38,360
Less accumulated amortization:
Customer relationships		(17,008	)		(16,223	)		(15,438	)		(17,326	)		(16,223	)		(15,830	)
Brand names		(10,217	)		(9,873	)		(9,527	)		(10,390	)		(9,873	)		(9,700	)
Non-compete agreement		(167	)		(139	)		(113	)		(180	)		(139	)		(126	)

		(27,392)			(26,235)			(25,078)			(27,896	)		(26,235	)		(25,656	)

Net intangible assets	$	10,968		$	12,125		$	13,282		$	10,464		$	12,125		$	12,704

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~~recorded within Administrative expense, was ~~$579~~$504 and ~~$1,157~~$1,661 for the quarter and

~~twenty-six~~

thirty-nine weeks ended ~~December 24, 2020,~~March 25, 2021, respectively. Amortization expense for the remainder of fiscal 2021 is expected to be approximately ~~$1,008~~$504 and expected amortization expense the next five fiscal years is as follows:


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

~~Table of Contents~~

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~~

thirty-nine weeks ended ~~December 24, 2020.~~March 25, 2021.

Note 6 – Credit Facility

Our Amended and Restated Credit Agreement dated March 5, 2020 provides for a $117,500 senior secured revolving credit 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 24, 2020,~~March 25, 2021, we had ~~$105,146~~$88,310 of available credit under the Credit Facility which reflects borrowings of ~~$9,169~~$26,005 and reduced availability as a result of $3,185 in outstanding letters of credit. As of ~~December 24, 2020,~~March 25, 2021, we were in compliance with all financial covenants under the Credit Facility and Mortgage 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				For the Quarter Ended				For the Thirty-Nine Weeks Ended
	December 24, 2020		December 26, 2019		December 24, 2020		December 26, 2019		March 25, 2021		March 26, 2020		March 25, 2021		March 26, 2020
Weighted average number of shares outstanding – basic		11,493,759		11,458,524		11,485,523		11,451,542		11,515,465		11,475,874		11,495,504		11,459,653
Effect of dilutive securities:
Restricted stock units		39,767		66,863		56,534		80,640
Stock options and restricted stock units										58,552		63,767		57,206		75,015

Weighted average number of shares outstanding – diluted		11,533,526		11,525,387		11,542,057		11,532,182		11,574,017		11,539,641		11,552,710		11,534,668

~~There were no~~The following table presents a summary of anti-dilutive awards excluded from the computation of diluted earnings per ~~share for any periods presented.~~share:


	For the Quarter Ended				For the Thirty-Nine Weeks Ended
	March 25, 2021		March 26, 2020		March 25, 2021		March 26, 2020
Weighted average number of anti-dilutive awards:		0		28,040		0		9,347
Weighted average exercise price per award:	$	0	$	90.26	$	0	$	90.26

Note 8 – Stock-Based Compensation Plans

~~During the second quarter of fiscal 2021, there were 54,966 restricted stock units (“RSUs”) awarded to employees and~~

~~non-employee~~

~~members of the Board of Directors. The vesting period is generally three years for awards to employees and one year for awards to~~

~~non-employee~~

~~directors.~~

~~There were 0 stock option grants or other option activity during the first half of fiscal 2021.~~

The following is a summary of ~~RSU~~restricted stock unit (“RSU”) activity for the first ~~half~~thirty-nine weeks of fiscal 2021:


Restricted Stock Units	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Outstanding at June 25, 2020		166,879		$	51.62		166,879		$	51.62
Activity:
Granted		54,966			68.97		54,966			68.97
Vested (a)		(50,602	)		47.76		(55,826	)		48.46
Forfeited		(1,064	)		68.66		(2,356	)		70.58

Outstanding at December 24, 2020		170,179		$	58.27
Outstanding at March 25, 2021							163,663		$	58.25

(a)	The number of RSUs vested includes shares that were withheld on behalf of employees to satisfy the statutory income tax withholding requirements.

~~At December 24, 2020, there were 52,351 RSUs outstanding that were vested but deferred.~~

At March 25, 2021, there are 47,127 RSUs outstanding that are 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 24,

2020

December 26,

2019

December 24,
2020

December 26,
2019

Stock-based compensation expense
   $ 998    $ 855    $ 1,620    $ 1,488


	For the Quarter Ended				For the Thirty-Nine Weeks Ended
	March 25, 2021		March 26, 2020		March 25, 2021		March 26, 2020
Stock-based compensation expense	$	710	$	702	$	2,330	$	2,190

As of ~~December 24, 2020,~~March 25, 2021, there was ~~$5,406~~$4,602 of total unrecognized compensation expense related to

non-vested

RSUs granted under our stock-based compensation plans. We expect to recognize that cost over a weighted average period of ~~1.8~~1.6 years.

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				For the Quarter Ended				For the Thirty-Nine Weeks Ended
	December 24, 2020		December 26, 2019		December 24, 2020		December 26, 2019		March 25, 2021		March 26, 2020		March 25, 2021		March 26, 2020
Service cost	$	236	$	178	$	472	$	356	$	236	$	178	$	708	$	534
Interest cost		215		223		429		446		214		223		643		669
Amortization of prior service cost		119		240		239		479		120		239		359		718
Amortization of loss		295		104		591		208		296		104		887		312

Net periodic benefit cost	$	865	$	745	$	1,731	$	1,489	$	866	$	744	$	2,597	$	2,233

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.

~~Table of Contents~~

Note 10 – Accumulated Other Comprehensive Loss

The table below sets forth the changes to accumulated other comprehensive loss (“AOCL”) for the

~~twenty-six~~

thirty-nine weeks ended ~~December 24, 2020~~March 25, 2021 and ~~December~~March 26, ~~2019.~~2020.

These changes are all related to our defined benefit pension plan.


	For the Twenty-Six Weeks Ended						For the Thirty-Nine Weeks Ended
Changes to AOCL (a)	December 24, 2020			December 26, 2019			March 25, 2021			March 26, 2020
Balance at beginning of period	$	(8,630	)	$	(4,325	)	$	(8,630	)	$	(4,325	)
Other comprehensive income before reclassifications		0			0			0			0
Amounts reclassified from accumulated other comprehensive loss		830			687			1,246			1,030
Tax effect		(207	)		(172	)		(311	)		(258	)

Net current-period other comprehensive income		623			515			935			772
Impact of adopting ASU 2018-02		0			(976	)		—			(976	)

Balance at end of period	$	(8,007	)	$	(4,786	)	$	(7,695	)	$	(4,529	)

(a)	~~(a)~~ Amounts in parenthesis indicate debits/expense.

The reclassifications out of AOCL for the quarter and

~~twenty-six~~

thirty-nine weeks ended ~~December 24,~~March 25, 2021 and March 26, 2020 ~~and December 26, 2019~~ were as follows:

For the Quarter Ended

For the Twenty-six Weeks Ended

Affected line item
in the Consolidated
Statements of
Comprehensive Income
Reclassifications from AOCL to earnings
(b)

December 24,
2020

December 26,
2019

December 24,
2020

December 26,
2019

Amortization of defined benefit pension items:

Unrecognized prior service cost
   $ (119 ) $ (240 ) $ (239 ) $ (479 ) Other expense
Unrecognized net loss
   (295 ) (104 ) (591 ) (208 ) Other expense

Total before tax
   (414 ) (344 ) (830 ) (687 )
Tax effect
   103 86 207 172 Income tax expense

Amortization of defined pension items, net of tax
   $ (311 ) $ (258 ) $ (623 ) $ (515 )


													Affected line item in the Consolidated Statements of Comprehensive Income
Reclassifications from AOCL to earnings (b)	For the Quarter Ended						For the Thirty-Nine Weeks Ended
Reclassifications from AOCL to earnings (b)	March 25, 2021			March 26, 2020			March 25, 2021			March 26, 2020
Amortization of defined benefit pension items:
Unrecognized prior service cost	$	(120	)	$	(239	)	$	(359	)	$	(718	)		Other expense
Unrecognized net loss		(296	)		(104	)		(887	)		(312	)		Other expense

Total before tax		(416	)		(343	)		(1,246	)		(1,030	)
Tax effect		104			86			311			258			Income tax expense

Amortization of defined pension items, net of tax	$	(312	)	$	(257	)	$	(935	)	$	(772	)

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

Note 11 – Commitments and Contingent Liabilities

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

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Note 12 – Fair Value of Financial Instruments

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



Level 1	–	Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities.

Level 2	–	Observable inputs other than quoted prices in active markets. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

Level 3	–	Unobservable inputs for which there is little or no market data available.

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

The carrying value of our revolving credit facility borrowings approximates fair value at each balance sheet date because interest rates on this instrument approximate current market rates (Level 2 criteria), and because of the short-term maturity and nature of this balance. In addition, there has been no significant change in our inherent credit risk.

The following table summarizes the carrying value and fair value estimate of our current and long-term debt, excluding unamortized debt issuance costs:


	December 24, 2020		June 25, 2020		December 26, 2019		March 25, 2021		June 25, 2020		March 26, 2020
Carrying value of long-term debt:	$	16,627	$	20,059	$	23,767	$	15,694	$	20,059	$	21,918
Fair value of long-term debt:		17,180		20,186		24,164		16,250		20,186		22,946

The estimated fair value of our long-term debt was determined using a market approach based upon Level 2 observable inputs, which estimates fair value based on interest rates currently offered on loans with similar terms to borrowers of similar credit quality or broker quotes. In addition, there have been no significant changes in the underlying assets securing our long-term debt.

Note 13 – Related Party Transaction

In connection with the acquisition of the Squirrel Brand business in the second quarter of fiscal 2018, we incurred $11,500 of unsecured debt pursuant to a promissory note (the “Promissory Note”) to the principal owner and seller of the Squirrel Brand business, who was subsequently appointed as an executive officer of the Company and 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~~bala

ce on the Promissory Note is not reflected as related party debt on our Consolidated Balance Sheet for any periods presented. There was no related party interest paid to this former executive officer during the

~~twenty-six~~

thirty-nine weeks ended ~~December 24, 2020, and interest~~March

, 2021 or the quarter ended March

, 2020. Interest paid while the former executive officer was a related party was ~~$57 and~~ $127 for the ~~quarter and~~

~~twenty-six~~

thirty-nine weeks ended ~~December~~ March

26 ~~2019, respectively.~~

, 2020.

Note 14 – Garysburg, North Carolina Facility

On October 7, 2019 we experienced a fire at our peanut processing facility located in Garysburg, North Carolina. 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. During fiscal 2020, the building and roof were repaired and brought back to their original condition.

After evaluating our options with regard to our peanut production operations, the Company currently plans to cease all operations permanently at the Garysburg facility. We completed shelling of the 2019 peanut crop during the

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second quarter of this fiscal year and the facility will continue to be used to store and ship inshell peanuts through the remainder of fiscal 2021. During fiscal 2020 we manufactured and sold approximately 6 million pounds of inshell peanuts from this facility and plan to discontinue that product line at the end of the current fiscal year. We also expect to spend the remainder of the 2021 fiscal year cleaning and preparing the facility for sale or other utilization in our operations. Employee separation and related closure costs were immaterial for all periods presented.

We have adequate property damage and business interruption insurance in respect to this event, subject to applicable deductibles. Insurance claims have been filed under our property damage and business interruption policies. Insurance proceeds totaling

~~$2,934~~

$2,934 were received from the insurance carrier in fiscal 2020, and ~~a receivable of~~

~~$2,523~~

~~for~~ the ~~estimated~~ final payment of $2,730 was ~~recorded in~~received during the current ~~second~~third quarter. Insurance proceeds received for damage to capital equipment are recorded as investing activities on the Consolidated Statements of Cash Flows when received.

Note 15 – Recent Accounting Pronouncements

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

In August 2018, the FASB issued ASU

No. 2018-15

“

Intangibles – Goodwill and Other –

Internal-Use

Software (Subtopic

350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract

”. The amendments in this Update align the requirements for 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 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 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 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 combination, commonly referred to as “Step 2”. Under this amendment, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value. ASU

No. 2017-04

was adopted in the first quarter of fiscal 2021 and did not have a material impact on our Consolidated Financial Statements.

In June 2016, the FASB issued ASU

No. 2016-13

“

Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

”. The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU

No. 2016-13

was adopted using a modified retrospective transition method in the first quarter of fiscal 2021 and did not have a material impact on our Consolidated Financial Statements.

There are no recent accounting pronouncements that have been issued and not yet adopted that are expected to have a material impact on our Consolidated Financial Statements.

~~Note 16 – Subsequent Event~~

~~On January 27, 2021~~

, our Board of Directors declared a special cash dividend of $2.50 per share on all issued and outstanding shares of Common Stock and Class A Stock of the Company (the “January 2021 Dividends”). The January 2021 Dividends will be paid on March 16, 2021 to stockholders of record as of the close of business on February 26, 2021.

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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 2021 and fiscal ~~2020~~2010 are to the fiscal year ending June 24, 2021 and the fiscal year ended June 25, 2020, respectively.

References herein to the ~~second~~third quarter of fiscal 2021 and fiscal 2020 are to the quarters ended ~~December 24,~~March 25, 2021 and March 26, 2020, ~~and December 26, 2019,~~ respectively.

References herein to the first ~~half~~three quarters or first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 and fiscal ~~2020~~2021 are to the

~~twenty-six~~

thirty-nine weeks ended ~~December 24,~~March 25, 2021 and March 26, 2020, ~~and December 26, 2019,~~ 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~~our

Fisher, Orchard Valley Harvest,

Squirrel Brand, Southern Style Nuts

and

Sunshine Country

brand ~~names.~~names and under a variety of private brands. 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 our brand names and under private ~~brands and brand names.~~brands. 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,~~strategic plan (the “Strategic Plan”), includes continuing to grow

Fisher,

Orchard Valley Harvest, Squirrel Brand

and

Southern Style Nuts

into leading brands and providing integrated nut solutions to grow

non-branded

business across key customers. We plan to execute on our Strategic Plan to grow our branded business by reaching new consumers via product and ~~pack~~packaging innovation, expanding distribution across current and alternative channels, diversifying our product offerings and focusing on new ways for consumers to buy our products, with an emphasis on increasing our sales via

e-commerce

platforms and retailers. In addition, during fiscal 2021 we ~~intend to invest~~have invested in our people and facilities in order to research, develop, market and sell new ~~product offerings~~products in snack categories we currently are not in for our branded business and private brand ~~partners in fiscal 2021.~~partners.

We face a number of challenges in the future which include ~~among others, decreasing commodity acquisition costs, as well as~~ intensified competition on pricing and for market share from both private brand and name brand nut products. Our

Fisher

recipe nut sales have been negatively impacted due to this increased competition for market share. We also face changing industry trends as consumer preferences ~~shift to~~evolve into shopping in smaller store formats like grocery and online. ~~As restaurant closures~~Additionally, the wooden pallet industry has been impacted for several months with low inventory levels, due in part to labor and ~~other~~

~~out-of-home~~

~~dining limitations continue due~~lumber shortages. The pallet shortage has impacted our operations, primarily at our Elgin, IL facility, and led to some cost increases. We anticipate the ~~impact~~industry to see some relief in the coming quarters. In the interim, we are working with our vendors, customers and JBSS facilities in other regions of

~~COVID-19,~~

~~consumers are also doing more snacking~~ the country to source additional supply. If the shortage continues, and ~~cooking and baking at home. While these developments~~we cannot secure an adequate supply of wooden pallets to fulfill customer orders, this shortage could have ~~had a positive~~an unfavorable impact on ~~certain aspects of~~net sales in our ~~consumer business, they have had a negative impact on our foodservice business.~~fourth quarter.

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. We expect to redirect our promotional and advertising activity with respect to our brands to focus on more digital and

e-commerce

platforms to match consumer behavior. We continue to see strong

e-commerce

performance across several of our

~~Orchard Valley Harvest~~

~~and~~

~~Fisher~~

~~recipe brands~~branded products and expect that there will be additional opportunities to connect these brands to consumers’ desires for more functional snacking, ~~and~~ baking and cooking ~~ideas, respectively.~~ideas. We will continue to face the ongoing challenges specific to our business, such as food safety and regulatory compliance and the maintenance and growth of our customer base for branded and private label products. See the information referenced in Part II, Item 1A — “Risk Factors” of this report for additional information about our risks, challenges and uncertainties.

~~Table of Contents~~

COVID-19

Impacts

We will continue to face challenges in the remainder of our fiscal 2021 (and into fiscal year 2022) 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~~eased 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 customers. However, as conditions surrounding the pandemic deteriorated during the fall and winter of calendar 2020 and ~~into~~so far during calendar 2021, consumers were and continue to be limited in their ability to purchase meals outside their ~~homes,~~homes. As indoor dining restrictions continued due to the impact of

COVID-19,

consumers continued to snack, cook and ~~therefore,~~bake more at home. While this trend has had a positive impact on certain aspects of our consumer business, demand continued to be suppressed from our foodservice, restaurant ~~convenience store~~ and

non-essential

retail customers. Additionally,

COVID-19

has had an unfavorable impact on a major customer’s business in our contract packaging distribution channel due to reduced foot traffic in convenience stores as people continue to work from home. Although demand has been suppressed from our foodservice customers, the chart below indicates that the rate of decline is recovering from its low point in our fourth quarter of fiscal 2020, and we believe that as the

COVID-19

vaccine becomes more widely distributed and accepted by the public, and restrictions are again loosened, sales volume with our foodservice, restaurant, convenience store and

non-essential

retail customers will continue to ~~improve and we expect to eventually return to~~

~~pre-pandemic~~

~~levels.~~improve.

Also, ~~in the first half of~~during fiscal 2021, we have seen signs of a shortage in capacity in the transportation industry, which our transportation service providers believe is due, in part, to driver concerns related to the impacts of

COVID-19.

Compounding this driver shortage is an increase in demand driven by additional spending on consumer goods. This tightening in transportation capacity, including rail and ocean freight, is expected to continue ~~through the third quarter of~~into fiscal ~~2021,~~2022, has led to increased transportation costs and may lead to potential disruptions in service to our customers and from our suppliers.

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 the majority of our office employees, staggered shifts and 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 employees who are in ~~self quarantine~~self-quarantine or ~~ill.~~ill and have organized a free, voluntary

COVID-19

immunization clinic, which will be

on-site

at our Elgin, IL facility during our fourth fiscal quarter for interested employees and their families.

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.

1920

~~Table of Contents~~

QUARTERLY HIGHLIGHTS

Our net sales of ~~$233.6~~$207.9 million for the ~~second~~third quarter of fiscal 2021 decreased ~~5.2%~~1.8% from our net sales of ~~$246.4~~$211.6 million for the ~~second~~third quarter of fiscal 2020. Net sales for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 decreased ~~by $20.4~~$24.2 million, or ~~4.4%~~3.6%, to ~~$443.8~~$651.7 million compared to the first

~~twenty-six~~

thirty-nine weeks of fiscal 2020.

Sales volume, measured as pounds sold to customers, ~~increased 1.8% for~~decreased 0.9 million pounds, or 1.2%, in the ~~second~~third quarter of fiscal 2021, compared to the ~~second~~third quarter of fiscal 2020. Sales volume for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 decreased ~~0.7%~~1.9 million pounds, or 0.9%, compared to the first

~~twenty-six~~

thirty-nine weeks of fiscal 2020.

Gross profit increased ~~by $2.8~~$3.2 million, and our gross profit margin, as a percentage of net sales, increased to ~~22.6%~~22.1% for the ~~second~~third quarter of fiscal 2021 compared to ~~20.3%~~20.2% for the ~~second~~third quarter of fiscal 2020. Gross profit ~~dollars remained relatively unchanged~~increased $3.1 million and our gross profit margin increased to ~~20.8%~~21.2% from ~~19.9%~~20.0% for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 compared to the first

~~twenty-six~~

thirty-nine weeks of fiscal 2020.

Total operating expenses for the ~~second~~third quarter of fiscal 2021 ~~decreased by $0.5~~increased $1.5 million, or ~~2.0%~~6.6%, compared to the ~~second~~third quarter of fiscal 2020. As a percentage of net sales, total operating expenses in the ~~second~~third quarter of fiscal 2021 increased to ~~10.7%~~12.0% from ~~10.4%~~11.1% for the ~~second~~third quarter of fiscal 2020. For the first ~~half~~thirty-nine weeks of fiscal 2021, total operating expenses decreased ~~by $3.2~~$1.7 million, ~~to 10.2%~~and total operating expenses as a percentage of net sales increased to 10.8% from 10.7% compared to ~~10.5% for~~ the first ~~half~~thirty-nine weeks of fiscal 2020.

The total value of inventories on hand at the end of the ~~second~~third quarter of fiscal 2021 decreased ~~by $17.0~~$36.8 million, or ~~9.8%~~19.5%, in comparison to the total value of inventories on hand at the end of the ~~second~~third quarter of fiscal 2020.

We have seen acquisition costs for all major tree nuts decrease in the 2020 crop year (which falls into our ~~current~~ 2021 fiscal year). We have completed procurement of inshell walnuts during the first half of fiscal ~~2021. During the third quarter, we will determine~~2021, and the final total payments due to our walnut growers were determined in the current quarter. The final prices paid, and remaining to be paid to the walnut growers, were based upon current market prices and other factors, such as crop size and export demand. A large majority of payments to walnut growers were completed in the third quarter of fiscal 2021. Remaining amounts to be paid to walnut growers as of March 25, 2021 are final and are not subject to revision. We ~~have estimated the liability to~~increased our walnut ~~growers and our walnut inventory costs using currently available information. Any difference between our estimated~~grower liability ~~and the actual final liability will be determined~~by approximately $0.7 million during the third quarter of fiscal 2021, as the final payments to walnut growers were slightly more than the amounts estimated at the end of last quarter. This increase is insignificant compared to our total inshell walnut procurement costs for the year, and ~~will be recognized in~~the adjustment to cost of sales was immaterial to our ~~financial~~ results ~~at that time.~~of operations.

2021

~~Table of Contents~~

RESULTS OF OPERATIONS

Net Sales

Our net sales decreased ~~5.2%~~1.8% to ~~$233.6~~$207.9 million in the ~~second~~third quarter of fiscal 2021 compared to net sales of ~~$246.4~~$211.6 million for the ~~second~~third quarter of fiscal 2020. The decrease in net sales was primarily attributable to ~~lower selling prices for tree nuts, which were due to lower commodity acquisition costs. The decline in net sales from lower selling prices was partially offset by~~ a ~~1.8% increase~~1.2% decrease in sales volume, which is defined as pounds sold to customers. The decline in sales volume was due to a reduction in sales volume for almonds and peanuts, which was offset in part by increased sales volume for trail and snack mixes.

For the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 our net sales were ~~$443.8~~$651.7 million, a decrease of ~~$20.4~~$24.2 million, or ~~4.4%~~3.6%, compared to the same period of fiscal 2020. The decrease in net sales was primarily attributable to a 2.7% decline in the weighted average selling price per pound. The decrease in the weighted average selling price per pound was attributable to lower selling prices ~~resulting primarily~~ for tree nuts, which were due to lower commodity acquisition costs. A 0.9% decrease in sales volume, due to the same reasons cited in the quarterly ~~comparison. A 0.7% decrease in sales volume~~comparison, also contributed to the overall decline in net sales.

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						For the Quarter Ended						For the Thirty-Nine Weeks Ended
Product Type	December 24, 2020			December 26, 2019			December 24, 2020			December 26, 2019			March 25, 2021			March 26, 2020			March 25, 2021			March 26, 2020
Peanuts		18.8	%		15.8	%		19.1	%		16.8	%		19.5	%		19.5	%		19.2	%		17.7	%
Pecans		15.0			16.2			12.0			13.0			7.8			7.0			10.7			11.2
Cashews & Mixed Nuts		23.1			22.7			23.4			22.7			23.1			23.0			23.3			22.8
Walnuts		7.2			8.7			6.9			7.9			5.4			6.1			6.4			7.4
Almonds		9.2			13.2			10.8			14.8			10.5			16.1			10.7			15.2
Trail & Snack Mixes		22.2			18.3			22.5			19.3			27.8			22.6			24.1			20.3
Other		4.5			5.1			5.3			5.5			5.9			5.7			5.6			5.4

Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

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


	For the Quarter Ended																For the Quarter Ended
Distribution Channel	December 24, 2020		Percentage of Total			December 26, 2019		Percentage of Total			$ Change			Percent Change			March 25, 2021		Percentage of Total			March 26, 2020		Percentage of Total			$ Change			Percent Change
Consumer (1)	$	192,029		82.2	%	$	188,086		76.3	%	$	3,943			2.1	%	$	169,415		81.5	%	$	158,616		75.0	%	$	10,799			6.8	%
Commercial Ingredients		20,536		8.8			34,247		13.9			(13,711	)		(40.0	)		21,052		10.1			30,312		14.3			(9,260	)		(30.5	)
Contract Packaging		21,010		9.0			24,090		9.8			(3,080	)		(12.8	)		17,425		8.4			22,696		10.7			(5,271	)		(23.2	)

Total	$	233,575		100.0	%	$	246,423		100.0	%	$	(12,848	)		(5.2	)%	$	207,892		100.0	%	$	211,624		100.0	%	$	(3,732	)		(1.8	)%

(1)

Sales of branded products were approximately ~~30%~~20% and ~~33%~~24% of total consumer sales during ~~each of~~ the ~~second~~third quarter of fiscal 2021 and fiscal 2020, respectively.

Fisher

branded products were approximately ~~74%~~63% and ~~76%~~58% of branded sales during the ~~second~~third quarter of fiscal 2021 and fiscal 2020, respectively, with

Orchard Valley Harvest

branded ~~produce~~

products accounting for the majority of the remaining branded product sales.

2122

~~Table of Contents~~

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


	For the Twenty-six Weeks Ended																For the Thirty-nine Weeks Ended
Distribution Channel	December 24, 2020		Percentage of Total			December 26, 2019		Percentage of Total			$ Change			Percent Change			March 25, 2021		Percentage of Total			March 26, 2020		Percentage of Total			$ Change			Percent Change
Consumer (1)	$	358,786		80.8	%	$	345,232		74.4	%	$	13,554			3.9	%	$	528,201		81.0	%	$	503,848		74.6	%	$	24,353			4.8	%
Commercial Ingredients		43,347		9.8			71,135		15.3			(27,788	)		(39.1	)		64,399		9.9			101,447		15.0			(37,048	)		(36.5	)
Contract Packaging		41,715		9.4			47,902		10.3			(6,187	)		(12.9	)		59,140		9.1			70,598		10.4			(11,458	)		(16.2	)

Total	$	443,848		100.0	%	$	464,269		100.0	%	$	(20,421	)		(4.4	)%	$	651,740		100.0	%	$	675,893		100.0	%	$	(24,153	)		(3.6	)%

(1)

Sales of branded products were approximately ~~27%~~25% and ~~31%~~29% of total consumer sales during the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 and fiscal 2020, respectively.

Fisher

branded products were approximately ~~70%~~68% and ~~71%~~67% of branded sales during the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 and fiscal 2020, respectively, with

Orchard Valley Harvest

branded ~~produce~~

products accounting for the majority of the remaining branded product sales.

Net sales in the consumer distribution channel increased ~~$3.9 million, or 2.1%,~~6.8% in dollars and 9.1% in sales volume ~~increased 9.9%~~ in the ~~second~~third quarter of fiscal 2021 compared to the ~~second~~third quarter of fiscal 2020. The sales volume increase was driven by ~~increased~~an 11.8% increase in sales ofvolume for private brand ~~peanuts,~~products, specifically snack nuts and trail ~~mixes~~ and snack mixes, asfrom new distribution at existing customers, a shift in consumer preferences ~~have shifted~~ to lower priced private brand products ~~due~~and growth in snacking as many consumers continue to ~~current economic conditions.~~purchase food for consumption at home. Sales volume for

Fisher

snack nuts ~~increased 30.2%~~decreased 3.1%, primarily as a result of ~~increased promotional activity.~~reduced merchandising activity for

Fisher

inshell peanuts as we are in the process of discontinuing that inshell peanut product line, which we expect will be completed by the end of the fourth quarter of fiscal 2021. Sales volume of

Fisher

recipe nuts decreased ~~18.4%~~6.4% as a result of lost distribution at ~~some customers, which was offset in part by increased sales with an Internet retailer.~~two grocery customers. Sales volume

Orchard Valley Harvest

products decreased ~~13.0%~~21.4% due to reduced foot traffic at a major customer in the

non-food

sector as a result of

~~COVID-19,~~COVID-19.

~~reduced promotional activity and lost distribution at some customers.~~ Sales volume of

Southern Style Nuts

decreased ~~4.2%~~14.2% primarily due to the discontinuance of an item at a ~~reduction in merchandising and promotional activity, which was offset in part by distribution gains with new customers.~~major customer.

In the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021, net sales in the consumer distribution channel increased ~~$13.6 million, or 3.9%,~~4.8% in dollars and 7.7% in sales volume, ~~increased 7.0%~~ compared to the same period of fiscal 2020. The sales volume increase occurred for the same ~~reason~~reasons cited in the quarterly comparison. Increased sales for

Fisher

snack nuts also contributed to the sales volume increase in the consumer distribution channel.

Net sales in the commercial ingredients distribution channel decreased ~~by 40.0%~~30.5% in dollars and ~~23.6%~~29.8% in sales volume in the ~~second~~third quarter of fiscal 2021 compared to the ~~second~~third quarter of fiscal 2020. The decline in sales volume was due to a ~~29.4%~~25.7% decrease in sales volume in our foodservice ~~business.~~business and a decline in sales of peanut crushing stock to peanut oil processors. The sales volume decline in our foodservice business resulted from a decline in air travel and nationwide restrictions on indoor restaurant dining, ~~and closures of restaurants, all of~~ which were attributable to

COVID-19.

In the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021, net sales in the commercial ingredients distribution channel decreased ~~by 39.1%~~36.5% in dollars and ~~25.6%~~27.1% in sales volume compared to the same period of fiscal 2020. The decline in sales volume was primarily due to a ~~35.5%~~32.5% decrease in sales volume in our foodservice business, which occurred for the same reasons cited in the quarterly comparison.

Net sales in the contract packaging distribution channel decreased ~~by 12.8%~~23.2% in dollars and ~~14.1%~~19.2% in sales volume in the ~~second~~third quarter of fiscal 2021 compared to the ~~second~~third quarter of fiscal 2020. The decline in sales volume was primarily attributable to the unfavorable impact of lower convenience store foot traffic on one customer’s business as a result of

COVID-19.

In the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021, net sales in the contract packaging distribution channel decreased ~~by 12.9%~~16.2% in dollars and ~~13.2%~~15.1% in sales volume compared to the first

~~twenty-six~~

thirty-nine weeks of fiscal 2020. The decline in sales volume occurred for the same reason cited in the quarterly comparison, as well as the loss of peanut butter business with another customer due to a temporary peanut supply shortage that existed in the first quarter of fiscal 2021.

Gross Profit

Gross profit increased ~~by $2.8~~$3.2 million, or ~~5.6%~~7.6%, to ~~$52.8~~$46.0 million for the ~~second~~third quarter of fiscal 2021 compared to the ~~second~~third quarter of fiscal 2020. Our gross profit margin, as a percentage of net sales, increased to ~~22.6%~~22.1% for the ~~second~~third quarter of fiscal 2021 compared to ~~20.3%~~20.2% for the ~~second~~third quarter of fiscal 2020. The increases in gross profit and gross profit margin were mainly attributable to lower commodity acquisition costs for all major tree ~~nuts and the sales volume increase discussed above.~~nuts.

2223

~~Table of Contents~~

Gross profit ~~was $92.1~~increased $3.1 million, or 2.3%, to $138.2 million for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 compared to ~~$92.2 million for~~ the first

~~twenty-six~~

thirty-nine weeks of fiscal 2020. Our gross profit margin increased to ~~20.8%~~21.2% for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 compared to ~~19.9%~~20.0% for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2020. The ~~increase~~increases in gross profit and gross profit margin in the year to date comparison ~~was primarily attributable to lower commodity acquisition costs~~occurred for ~~tree nuts.~~the same reason cited in the quarterly comparison.

Operating Expenses

Total operating expenses for the ~~second~~third quarter of fiscal 2021 ~~decreased by $0.5~~increased $1.5 million, or ~~2.0%~~6.6%, to ~~$25.0~~$24.9 million. Operating expenses increased to ~~10.7%~~12.0% of net sales for the ~~second~~third quarter of fiscal 2021 compared to ~~10.4%~~11.1% of net sales for the ~~second~~third quarter of fiscal 2020.

Selling expenses for the ~~second~~third quarter of fiscal 2021 were ~~$17.7~~$15.1 million, an increase of ~~$1.6~~$1.2 million, or ~~9.9%~~8.7%, from the ~~second~~third quarter of fiscal 2020. The increase was driven ~~primarily~~ by a ~~$1.0 million increase in advertising expense primarily related to online advertising for our branded products and a $0.7~~$1.5 million increase in freight expense due to significantly higher freight rates compared to last year’s third quarter and, to a lesser extent, an increase in sales ~~pounds shipped.~~volume for our sales made on a delivered basis to customers. This increase was partially offset by a $0.3 million decrease in commission expense.

Administrative expenses for the ~~second~~third quarter of fiscal 2021 were ~~$7.3~~$9.9 million, an increase of $0.3 million, or 3.5%, compared to ~~$9.4 million for~~ the ~~second~~third quarter of fiscal 2020. The ~~decrease~~increase was primarily due to ~~a $2.3~~$0.7 million decrease in the gain on asset disposals due to an insurance recovery recognized in last year’s third quarter. The insurance recovery, which was the ~~estimated final insurance settlement~~first of two recoveries, related to ~~the~~a fire ~~that occurred~~ in our Garysburg, North Carolina facility that occurred in the second quarter of fiscal 2020. This increase was largely offset by a $0.5 million decrease in incentive compensation expense.

Total operating expenses for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 decreased ~~by $3.2~~$1.7 million, or ~~6.7%~~2.4%, to ~~$45.5~~$70.4 million. Operating expenses ~~decreased~~increased to ~~10.2%~~10.8% of net sales for the first ~~half~~three quarters of fiscal 2021 compared to ~~10.5%~~10.7% of net sales for the ~~first half~~three quarters of fiscal 2020.

Selling expenses for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 were ~~$29.8~~$44.9 million, ~~a decrease~~an increase of ~~$0.4~~$0.8 million, or ~~1.4%~~1.8%, from the amount recorded for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2020. The ~~decrease~~increase was driven ~~primarily~~ by a ~~$0.5 million decrease in payroll related and incentive compensation expense and a $0.3 million decrease in travel expense due to~~

~~COVID-19~~

~~travel restrictions. These decreases were partially offset by a $0.3~~$1.8 million increase in freight expense for the same reasons discussed in the quarterly ~~comparison.~~comparison and was partially offset by a $1.0 million decrease in advertising expense due to less radio advertising.

Administrative expenses for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 were ~~$15.7~~$25.5 million, a decrease of ~~$2.8~~$2.5 million, or ~~15.2%~~8.8%, compared to the same period of fiscal 2020. The decrease was ~~primarily~~ due to ~~$2.5~~a $1.8 million increase in the gain on asset disposals, mainly resulting from a $2.3 million gain from the final insurance ~~settlement discussed above, combined with~~recovery recognized in the second quarter of fiscal 2021 for the Garysburg facility fire, and a ~~$0.3~~$0.6 million decrease in ~~consulting~~compensation related expenses, primarily incentive compensation expense.

Income from Operations

Due to the factors discussed above, income from operations was ~~$27.8~~$21.1 million, or ~~11.9%~~10.1% of net sales, for the ~~second~~third quarter of fiscal 2021 compared to ~~$24.5~~$19.4 million, or ~~9.9%~~9.2% of net sales, for the ~~second~~third quarter of fiscal 2020.

Due to the factors discussed above, income from operations was ~~$46.7~~$67.8 million, or ~~10.5%~~10.4% of net sales, for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 compared to ~~$43.5~~$62.9 million, or ~~9.4%~~9.3% of net sales, for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2020.

Interest Expense

Interest expense was ~~$0.4~~$0.3 million for ~~both~~ the ~~second~~third quarter of fiscal 2021 ~~and~~compared to $0.6 million in the third quarter of fiscal 2020. Interest expense for the first ~~two~~three quarters of fiscal 2021 was ~~$0.8~~$1.1 million compared to ~~$1.0~~$1.5 million for the first ~~two~~three quarters of fiscal 2020. The decrease in interest expense infor both the quarterly and year to date ~~comparison resulted from~~comparisons was a result of lower ~~weighted~~ average ~~interest rates from the reduction of long-term debt and was largely offset by higher average short-term~~ debt levels.

2324

Rental and Miscellaneous Expense, Net

Net rental and miscellaneous expense was $0.4 million for the ~~second~~third quarter of fiscal 2021 compared to $0.3 million for the ~~second~~third quarter of fiscal 2020. Net rental and miscellaneous expense was ~~$0.8~~$1.2 million for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 compared to ~~$0.7~~$1.0 million for the first

~~twenty-six~~

thirty-nine weeks of fiscal 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~~third quarter of fiscal 2021 and fiscal 2020. Other expense was ~~$1.3~~$1.9 million for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 compared to ~~$1.1~~$1.7 million for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2020.

Income Tax Expense

Income tax expense was ~~$6.5~~$5.1 million, or ~~24.8% of income before income taxes (the “Effective Tax Rate”), for the second quarter of fiscal 2021 compared to $5.7 million, or 24.7%~~25.7% of income before income taxes, for the ~~second~~third quarter of fiscal 2021 compared to $4.5 million, or 25.0% of income before income taxes, for the third quarter of fiscal 2020. For the first

~~twenty-six~~

thirty-nine weeks of fiscal ~~2020,~~2021, income tax expense was ~~$11.1~~$16.2 million, or ~~25.3%~~25.4% of income before income taxes, compared to ~~$10.4~~$14.9 million, or ~~25.5%~~25.3% of income before income taxes, for the comparable period last year.

Net Income

Net income was ~~$19.9~~$14.7 million, or ~~$1.73~~$1.28 per common share basic and ~~$1.72~~$1.27 per common share diluted, for the ~~second~~third quarter of fiscal 2021, compared to ~~$17.5~~$13.5 million, or ~~$1.52~~$1.17 per common share basic and diluted, for the ~~second~~third quarter of fiscal 2020.

Net income was ~~$32.7~~$47.4 million, or ~~$2.85~~$4.12 per common share basic and ~~$2.83~~$4.10 per common share diluted, for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021, compared to net income of ~~$30.4~~$43.9 million, or ~~$2.65~~$3.83 per common share basic and ~~$2.64~~$3.80 per common share diluted, for the first

~~twenty-six~~

thirty-nine weeks of fiscal 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 Facility. We anticipate that expected net cash flow generated from operations and amounts available pursuant to the Credit Facility will be sufficient to fund our operations for the next twelve months. Our available credit under our Credit Facility has allowed us to devote more funds to promote our ~~branded~~ products, consummate strategic investments and 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 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~~three quarters of fiscal 2021 and 2020, respectively (dollars in thousands):


										For the Thirty-Nine Weeks Ended
	December 24, 2020			December 26, 2019			$ Change			March 25, 2021			March 26, 2020			$ Change
Operating activities	$	61,935		$	54,285		$	7,650		$	77,026		$	34,962		$	42,064
Investing activities		(10,734	)		(6,148	)		(4,586	)		(13,620	)		(10,533	)		(3,087	)
Financing activities		(50,973	)		(48,335	)		(2,638	)		(63,898	)		(25,027	)		(38,871	)

Net increase in cash	$	228		$	(198	)	$	426
Net decrease in cash										$	(492	)	$	(598	)	$	106

Operating Activities

Net cash provided by operating activities was ~~$61.9~~$77.0 million for the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 compared to ~~$54.3~~$35.0 million for the comparative period of fiscal 2020. The increase in operating cash flow was primarily due to a decreased use of working capital for inventory compared to the first

~~twenty-six~~

thirty-nine weeks of fiscal 2020.

Total inventories were ~~$155.4~~$151.8 million at ~~December 24, 2020,~~March 25, 2021, a decrease of ~~$16.7~~$20.3 million, or ~~9.7%~~11.8%, from the inventory balance at June 25, 2020, and a decrease of ~~$17.0~~$36.8 million, or ~~9.8%~~19.5%, from the inventory balance at ~~December~~March 26, ~~2019.~~2020. The decrease in inventory at ~~December 24, 2020~~March 25, 2021 compared to June 25, 2020 was primarily due to lower commodity acquisition costs for all major tree nuts and lower quantities of peanuts and ~~pecans~~almonds on hand, which was partially offset by greater quantities of walnuts and pecans on hand. The decrease in inventories at ~~December 24, 2020~~March 25, 2021 compared to ~~December~~March 26, ~~2019~~2020 was primarily due to lower commodity acquisition costs for all major tree nuts, ~~and~~as well as lower quantities of peanuts, almonds and pecans on hand.

Raw nut and dried fruit input stocks, some of which are classified as ~~work in process,~~

work-in-process,

decreased ~~by 14.2~~10.6 million pounds, or ~~19.4%~~14.7%, at ~~December 24, 2020~~March 25, 2021 compared to ~~December~~March 26, ~~2019 due to lower quantities of peanuts on hand.~~2020. The weighted average cost per pound of raw nut input stocks on hand at the end of the ~~second~~third quarter of fiscal 2021 decreased ~~4.6%~~17.8% compared to the end of the ~~second~~third quarter of fiscal 2020 primarily due to lower commodity acquisition costs for all major tree ~~nuts, which was partially offset by a shift in product mix from lower priced peanuts to higher priced walnuts and pecans.~~

nuts.

Investing Activities

Cash used in investing activities was ~~$10.7~~$13.6 million during the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 compared to ~~$6.1~~$10.5 million for the same period last year. We expect total capital expenditures for new equipment, facility upgrades and food safety enhancements for fiscal 2021 to be approximately ~~$23.0~~$20.0 million. The projected increase in capital expenditures from our previous expenditure level is due to a strategic investment for a new product line. Absent any material acquisitions or other significant investments, we believe that cash on hand, combined with cash provided by operations and borrowings available under the Credit Facility, will be sufficient to meet the cash requirements for planned capital expenditures.

Financing Activities

Cash used inby financing activities was ~~$51.0~~$63.9 million during the first

~~twenty-six~~

thirty-nine weeks of fiscal 2021 compared to ~~$48.3~~$25.0 million for ~~the same period last year. Dividends paid in the first half of fiscal 2021 were approximately $28.6 million lower than dividends paid in~~ the same period last year. Net repayments under our Credit Facility were ~~$17.8~~$1.0 million during the first ~~half~~three quarters of fiscal 2021 compared to ~~net short-term~~ borrowings of ~~$13.5~~$38.2 million ~~for~~during the first ~~half~~three quarters of fiscal 2020. The decrease in short term borrowings under our Credit Facility was due to less cash used for working capital for inventory due primarily to lower commodity acquisition costs for all major tree nuts.

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 ~~67%~~66% of the rentable area in the office building is currently vacant. Approximately 29% of the rentable area has not been

built-out.

There can be no assurance that we will be able to lease the unoccupied space and further capital expenditures will likely be necessary to lease the remaining space.

Financing Arrangements

On February 7, 2008, we entered into the Former Credit 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 March 5, 2020, we entered into an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) which amended and restated our Credit Agreement dated as of February 7, 2008 (the “Former Credit Agreement”). The Amended and Restated Credit Agreement provides for a $117.5 million senior secured revolving credit facility with the same borrowing capacity, interest rates and applicable margin as the Former Credit Agreement and extends the term of the Former Credit Agreement from July 7, 2021 to March 5, 2025.

The Amended and Restated Credit Facility is secured by substantially all of our assets other than machinery and equipment, real property, and fixtures and matures on 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% (“Base Rate”) 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 24, 2020,~~March 25, 2021, the weighted average interest rate for the Credit Facility was ~~at the Base Rate of 3.5%~~2.0%. ~~There were no borrowings under LIBOR contracts due to the low debt against the Credit Facility and projected positive cash flow for January.~~ 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 24, 2020,~~March 25, 2021, 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 24, 2020,~~March 25, 2021, we had ~~$105.1~~$88.3 million of available credit under the Credit Facility. If this entire amount were borrowed at ~~December 24, 2020,~~March 25, 2021, we would still be in compliance with all restrictive covenants under the Credit Facility.

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. Monthly principal payments on the Mortgage Facility in the amount of $0.3 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 24, 2020,~~March 25, 2021, we were in compliance with all covenants under the Mortgage Facility and a total principal amount of ~~$7.4~~$6.6 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 24, 2020, $9.2~~March 25, 2021, $9.1 million of the debt obligation was outstanding.

Squirrel Brand Seller-Financed Note

In November 2017 we completed the Squirrel Brand acquisition. The acquisition was financed by a combination of cash (drawn under the Credit Facility) and a three-year seller-financed note for $11.5 million, ~~(“Promissory Note”). As of December 24, 2020, the Promissory Note~~which was repaid in ~~full.~~full during the second quarter of fiscal 2021.

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 25, 2020.

Recent Accounting Pronouncements

Refer to Note 15 – “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.

2728

FORWARD LOOKING STATEMENTS

Some of the statements in this report are forward-looking. 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 to one or more key customers (of branded products, private label products or otherwise), 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 expenses; (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, 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 or employee unavailability due to illness or quarantine; (xiv) the 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, including disruptions due to employees working remotely; (xvi) the inability to protect the Company’s brand value, intellectual property or avoid intellectual property disputes; (xvii) the Company’s ability to manage successfully the price gap between its private brand products and those of its branded 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.

2829

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—Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form

10-K

for the fiscal year ended June 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 24, 2020.~~March 25, 2021. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~December 24, 2020,~~March 25, 2021, 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 24, 2020~~March 25, 2021 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART 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 25, 2020. There were no significant changes to the risk factors identified on the Form

10-K

for the fiscal year ended June 25, 2020 during the ~~second~~third quarter of fiscal 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 25, 2020.

Item 5. Other Information

29Increase in Board Size; Appointment of New Director

On April 28, 2021, the Board of Directors (the “Board”) of the Company increased the size of the Board from nine to ten members and, in accordance with the terms of its Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, the Class A Directors of the Company elected Lisa A. Sanfilippo as a Class A Director of the Company to serve until the next annual meeting of stockholders of the Company and until her respective successor is duly elected and qualified or until her death, resignation or removal.

Ms. Sanfilippo is a

Co-Director

of The Global Society for Female Entrepreneurs in Beverly Hills, California and

Co-Owner

of Acceptance Recovery Center in Scottsdale, Arizona. Previously, Ms. Sanfilippo served as Director of Business Development & Innovation Trends at the Company from 2011 to 2017. Before that, Ms. Sanfilippo served in several other roles at the Company, including Senior Business Manager in charge of Alternative Channels from 2009 to 2011, Director of Customer Service from 2007 to 2009, and Senior Business Manager for Industrial Sales from 1991 to 2007.

~~Table~~

Ms. Sanfilippo is eligible to participate in all compensation programs applicable to

non-employee

members of ~~Contents~~the Board, as described in the Proxy Statements filed by the Company from time to time. In accordance with the compensation program for

non-employee

directors, Ms. Sanfilippo will receive an annual cash retainer for Board service, prorated for the initial year of service. In addition, upon joining the Board, Ms. Sanfilippo received a grant of Restricted Stock Units, which were granted pursuant to a form of

Non-Employee

Director Restricted Stock Unit Award Agreement previously approved by the Board. Ms. Sanfilippo (as with the other current directors) is also expected to enter into an Indemnification Agreement with the Company in the form previously approved by the Board.

Ms. Sanfilippo was elected pursuant to an understanding with Messrs. Jeffrey T. Sanfilippo, Jasper B. Sanfilippo, Jr., James J. Sanfilippo, John E. Sanfilippo and Michael J. Valentine, as holders or beneficial owners of the Company’s Class A Common Stock and/or Class A Directors of the Company.

Ms. Sanfilippo has not entered into any transactions with the Company that are required to be disclosed pursuant to Item 404(a) of Regulation

S-K

in accordance with the rules and regulations of the SEC applicable hereto.

Item 6. Exhibits

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


Exhibit No.		Description

101.INS		~~XBRL~~ Inline eXtensible Business Reporting Language (XBRL) Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline 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.

3234

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 27,~~April 28, 2021.


JOHN B. SANFILIPPO & SON, INC.

By		/s/ MICHAEL J. VALENTINE
		~~Michael J. Valentine~~
		Michael J. Valentine
		Chief Financial Officer, Group President and Secretary

3335


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)

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)

*10.1		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)

*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)

*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)

*10.4		Form of Indemnification Agreement (incorporated by reference from Exhibit 10.01 to the Form 8-K filed on May 5, 2009)

*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)

*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)

*10.7		Form of Non-Employee Director Restricted Stock Unit Award Agreement (non-deferral) under 2014 Omnibus Plan (fiscal 2018, 2019, 2020 and 2021 awards cycle) (incorporated by reference from Exhibit 10.38 to the Form 10-Q for the quarter ended December 24, 2015)


Exhibit No No.		Description

*10.8		Form of Non-Employee Director Restricted Stock Unit Award Agreement (deferral) under 2014 Omnibus Plan (fiscal 2020 and 2021 awards cycle) (incorporated by reference from Exhibit 10.39 to the Form 10-Q for the quarter ended December 24, 2015)

*10.9		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)

*10.10		Form of Employee Restricted Stock Unit Award Agreement under 2014 Omnibus Plan (fiscal 2021 awards cycle) (incorporated by reference from Exhibit 10.10 to the Form 10-Q for the quarter ended December 24, 2020)

*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)

10.12		Amended and restated Credit Agreement dated as of March 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 10.1 to the Form 8-K filed on March 11, 2020)

*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)

*10.14		Separation Agreement, dated as of December 10, 2019, by and between the Company and J. Brent Meyer (incorporated by reference from Exhibit 10.29 to the Form 10-Q for the quarter ended December 26, 2019)

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

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


	For the Quarter Ended						For the Twenty-six Weeks Ended						Affected line item in the Consolidated Statements of Comprehensive Income
Reclassifications from AOCL to earnings (b)	December 24, 2020			December 26, 2019			December 24, 2020			December 26, 2019
Amortization of defined benefit pension items:
Unrecognized prior service cost	$	(119	)	$	(240	)	$	(239	)	$	(479	)	Other expense
Unrecognized net loss		(295	)		(104	)		(591	)		(208	)	Other expense

Total before tax		(414	)		(344	)		(830	)		(687	)
Tax effect		103			86			207			172		Income tax expense

Amortization of defined pension items, net of tax	$	(311	)	$	(258	)	$	(623	)	$	(515	)

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company