JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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


							December 23, 2021		June 24, 2021		December 24, 2020
	December 24, 2020		June 25, 2020		December 26, 2019
ASSETS
CURRENT ASSETS:
Cash	$	1,763	$	1,535	$	1,393	$	1,027	$	672	$	1,763
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 $358, $291 and $325								65,032		66,334		60,495
Inventories		155,371		172,068		172,340		178,741		147,998		155,371
Prepaid expenses and other current assets		9,872		8,315		5,992		12,764		8,568		9,872
Assets held for sale								0		1,595		0

TOTAL CURRENT ASSETS		227,501		238,871		232,378		257,564		225,167		227,501

PROPERTY, PLANT AND EQUIPMENT:
Land		9,277		9,285		9,285		9,150		9,150		9,277
Buildings		110,611		110,294		109,671		102,801		102,666		110,611
Machinery and equipment		224,458		218,021		212,532		228,418		225,529		224,458
Furniture and leasehold improvements		5,199		5,179		5,160		5,296		5,287		5,199
Vehicles		642		682		682		614		614		642
Construction in progress		6,577		2,244		3,817		17,254		12,301		6,577

		356,764		345,705		341,147		363,533		355,547		356,764
Less: Accumulated depreciation		244,447		239,013		233,825		245,607		238,471		244,447

		112,317		106,692		107,322		117,926		117,076		112,317
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 $13,229, $12,825 and $12,422								15,894		16,298		16,701

TOTAL PROPERTY, PLANT AND EQUIPMENT		129,018		123,797		124,830		133,820		133,374		129,018

Intangible assets, net		10,968		12,125		13,282		8,953		9,961		10,968
Cash surrender value of officers’ life insurance and other assets		9,017		11,875		9,124		9,579		10,732		9,017
Deferred income taxes		7,288		6,788		5,616		4,304		6,087		7,288
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		2,852		3,484		4,119

TOTAL ASSETS	$	397,561	$	407,457	$	399,703	$	426,722	$	398,455	$	397,561

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 23, 2021			June 24, 2021			December 24, 2020
	December 24, 2020			June 25, 2020			December 26, 2019
LIABILITIES & STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Revolving credit facility borrowings	$	9,169		$	27,008		$	13,495		$	35,885		$	8,653		$	9,169
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 $586, $627 and $605 and net of unamortized debt issuance costs of $9, $15 and $20											3,909			3,875			3,780
Accounts payable		52,140			36,323			70,979			63,452			48,861			52,140
Bank overdraft		1,510			2,041			1,349			1,668			1,093			1,510
Accrued payroll and related benefits		13,470			25,641			13,429			12,832			24,109			13,470
Other accrued expenses		10,907			10,729			11,027			13,080			10,774			10,907
Income taxes payable		7,012			5,141			347			0			2,839			7,012

TOTAL CURRENT LIABILITIES		97,988			112,168			117,736			130,826			100,204			97,988

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 $8,088, $8,320 and $8,639 and net of unamortized debt issuance costs of $1, $4 and $10											8,943			10,855			12,817
Retirement plan		32,146			31,573			25,212			35,596			34,919			32,146
Long-term operating lease liabilities, net of current portion		2,704			2,990			3,456			1,504			2,103			2,704
Other		7,899			7,758			7,786			8,050			7,880			7,899

TOTAL LONG-TERM LIABILITIES		55,566			57,051			53,051			54,093			55,757			55,566

TOTAL LIABILITIES		153,554			169,219			170,787			184,919			155,961			153,554

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, 9,044,960, 8,988,812 and 8,983,588 shares issued											90			90			90
Capital in excess of par value		125,032			123,899			122,984			127,080			126,271			125,032
Retained earnings		128,070			124,058			111,807			124,298			126,336			128,070
Accumulated other comprehensive loss		(8,007	)		(8,630	)		(4,786	)		(8,487	)		(9,025	)		(8,007	)
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			241,803			242,494			244,007

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	397,561		$	407,457		$	399,703		$	426,722		$	398,455		$	397,561

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


Shares

Amount

Shares

Amount

Total

Balance, June 25, 2020
   2,597,426    $ 26    8,939,890    $ 89    $ 123,899 $ 124,058 $ (8,630 ) $ (1,204 ) $ 238,238
Net income
               12,812 12,812
Cash dividends ($2.50 per share)
               (28,685 ) (28,685 )
Pension liability amortization, net of income tax expense of $104
               312 312
Equity award exercises
         221    0      0   0
Stock-based compensation expense
               622 622
Balance, September 24, 2020
   2,597,426    $ 26    8,940,111    $ 89    $ 124,521 $ 108,185 $ (8,318 ) $ (1,204 ) $ 223,299
Net income
               19,885 19,885
Pension liability amortization, net of income tax expense of $103
               311 311
Equity award exercises, net of shares withheld for employee taxes
         43,477    1    (487 ) (486 )
Stock-based compensation expense
               998 998

Balance, December 24, 2020
   2,597,426    $ 26    8,983,588    $ 90    $ 125,032 $ 128,070 $ (8,007 ) $ (1,204 ) $ 244,007

Class A Common
Stock

Common Stock

Capital in
Excess of
Par Value

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Treasury
Stock


Shares

Amount

Shares

Amount

Total

Balance, June 27, 2019
   2,597,426    $ 26    8,909,406    $ 89    $ 122,257 $ 137,712 $ (4,325 ) $ (1,204 ) $ 254,555
Net income
               12,926 12,926
Cash dividends ($3.00 per share)
               (34,321 ) (34,321 )
Pension liability amortization, net of income tax expense of $86
               257 257
Impact of adopting ASU
2018-02
               976 (976 ) 0
Stock-based compensation expense
               633 633
Balance, September 26, 2019
   2,597,426    $ 26    8,909,406    $ 89    $ 122,890 $ 117,293 $ (5,044 ) $ (1,204 ) $ 234,050
Net income
               17,461 17,461
Cash dividends ($2.00 per share)
               (22,947 ) (22,947 )
Pension liability amortization, net of income tax expense of $86
               258 258
Equity award exercises, net of shares withheld for employee taxes
         27,830    0      (761 ) (761 )
Stock-based compensation expense
               855 855

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


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

	Shares		Amount		Shares		Amount														Total

Balance, June 24, 2021		2,597,426	$	26		8,988,812	$	90	$	126,271		$	126,336		$	(9,025	)	$	(1,204	)	$	242,494
Net income													19,249									19,249
Cash dividends ($3.00 per share)													(34,534	)								(34,534	)
Pension liability amortization, net of income tax expense of $95																269						269
Equity award exercises , net of shares withheld for employee taxes						1,168		0		(16	)											(16	)
Stock-based compensation expense										703												703

Balance, September 23, 2021		2,597,426	$	26		8,989,980	$	90	$	126,958		$	111,051		$	(8,756	)	$	(1,204	)	$	228,165
Net income													13,247									13,247
Pension liability amortization, net of income tax expense of $95																269						269
Equity award exercises, net of shares withheld for employee taxes						54,980		0		(946	)											(946	)
Stock-based compensation expense										1,068												1,068

Balance, December 23, 2021		2,597,426	$	26		9,044,960	$	90	$	127,080		$	124,298		$	(8,487	)	$	(1,204	)	$	241,803


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

	Shares		Amount		Shares		Amount														Total

Balance, June 25, 2020		2,597,426	$	26		8,939,890	$	89	$	123,899		$	124,058		$	(8,630	)	$	(1,204	)	$	238,238
Net income													12,812									12,812
Cash dividends ($2.50 per share)													(28,685	)								(28,685	)
Pension liability amortization, net of income tax expense of $104																312						312
Equity award exercises						221		0		0												0
Stock-based compensation expense										622												622

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

Balance, December 24, 2020		2,597,426	$	26		8,983,588	$	90	$	125,032		$	128,070		$	(8,007	)	$	(1,204	)	$	244,007

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 Twenty-six Weeks Ended
	December 24, 2020		��	December 26, 2019			December 23, 2021			December 24, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	32,697		$	30,387		$	32,496		$	32,697
Depreciation and amortization		9,089			9,225			9,143			9,089
Gain on disposition of assets, net		(2,530	)		(33	)		(1,765	)		(2,530	)
Deferred income tax (benefit) expense		(500	)		107
Deferred income tax expense (benefit)								1,783			(500	)
Stock-based compensation expense		1,620			1,488			1,771			1,620
Change in assets and liabilities:
Accounts receivable, net		(1,247	)		8,316			1,302			(1,247	)
Inventories		16,697			(15,316	)		(30,743	)		16,697
Prepaid expenses and other current assets		(1,557	)		(345	)		(3,429	)		(1,557	)
Accounts payable		16,244			28,486			16,244			16,244
Accrued expenses		(11,993	)		(8,964	)		(8,971	)		(11,993	)
Income taxes payable		1,871			(640	)		(3,606	)		1,871
Other long-term assets and liabilities		344			582			379			344
Other, net		1,200			992			1,216			1,200

Net cash provided by operating activities		61,935			54,285			15,820			61,935

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(11,121	)		(6,465	)		(9,485	)		(11,121	)
Proceeds from insurance recoveries		0			232
Proceeds from dispositions of assets, net								3,950			294
Other		387			85			(354	)		93

Net cash used in investing activities		(10,734	)		(6,148	)		(5,889	)		(10,734	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term (repayments) borrowings		(17,839	)		13,495
Debt issue costs		0			(218	)
Net short-term borrowings (repayments)								27,232			(17,839	)
Principal payments on long-term debt		(3,432	)		(4,031	)		(1,887	)		(3,432	)
(Decrease) increase in bank overdraft		(531	)		448
Increase (decrease) in bank overdraft								575			(531	)
Dividends paid		(28,685	)		(57,268	)		(34,534	)		(28,685	)
Taxes paid related to net share settlement of equity awards		(486	)		(761	)		(962	)		(486	)

Net cash used in financing activities		(50,973	)		(48,335	)		(9,576	)		(50,973	)

NET INCREASE (DECREASE) IN CASH		228			(198	)
NET INCREASE IN CASH								355			228
Cash, beginning of period		1,535			1,591			672			1,535

Cash, end of period	$	1,763		$	1,393		$	1,027		$	1,763

Supplemental disclosure of non-cash activities:
Right-of-use assets recognized at ASU No. 2016-02 transition	$	0		$	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~~2022 and fiscal ~~2020~~2021 are to the 53 week fiscal year ending June ~~24, 2021~~30, 2022 and the 52 week fiscal year ended June ~~25, 2020,~~24, 2021, respectively.

References herein to the second quarter of fiscal ~~2021~~2022 and fiscal ~~2020~~2021 are to the quarters ended December ~~24, 2020~~23, 2021 and December ~~26, 2019,~~24, 2020, respectively.

References herein to the first half or first

twenty-six

weeks of fiscal ~~2021~~2022 and fiscal ~~2020~~2021 are to the

twenty-six

weeks ended December ~~24, 2020~~23, 2021 and December ~~26, 2019,~~24, 2020, 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~~snack 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~~24, 2021 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~~2021 Annual Report on Form

10-K

for the fiscal year ended June ~~25, 2020.~~24, 2021.

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. The contract asset balance at June 24, 2021 was $74 and was recorded in the caption “Prepaid expenses and other current assets” on the Consolidated Balance Sheets. There was 0 contract asset balance for ~~any~~the other 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 Twenty-six Weeks Ended
Distribution Channel	December 24, 2020		December 26, 2019		December 24, 2020		December 26, 2019		December 23, 2021		December 24, 2020		December 23, 2021		December 24, 2020

Consumer	$	192,029	$	188,086	$	358,786	$	345,232	$	203,479	$	192,029	$	383,240	$	358,786
Commercial Ingredients		20,536		34,247		43,347		71,135		27,756		20,536		55,912		43,347
Contract Packaging		21,010		24,090		41,715		47,902		21,972		21,010		40,384		41,715

Total	$	233,575	$	246,423	$	443,848	$	464,269	$	253,207	$	233,575	$	479,536	$	443,848

~~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~~4.8 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	December 23, 2021		June 24, 2021		December 24, 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	$	2,852	$	3,484	$	4,119	Operating lease right-of-use assets

Total lease right-of-use assets	$	4,119	$	4,351	$	4,823		$	2,852	$	3,484	$	4,119

Liabilities
Current:
Operating leases	$	1,429	$	1,376	$	1,354	Other accrued expenses	$	1,392	$	1,430	$	1,429	Other accrued expenses
Noncurrent:
Operating leases		2,704		2,990		3,456	Long-term operating lease liabilities		1,504		2,103		2,704	Long-term operating lease liabilities

Total lease liabilities	$	4,133	$	4,366	$	4,810		$	2,896	$	3,533	$	4,133

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 Twenty-six Weeks Ended				December 23, 2021		December 24, 2020		December 23, 2021		December 24, 2020
	December 24, 2020		December 26, 2019		December 24, 2020		December 26, 2019
Operating lease costs (a)	$	477	$	460	$	950	$	834	$	470	$	477	$	914	$	950
Variable lease costs (b)		17		15		37		31		19		17		36		37

Total Lease Cost	$	494	$	475	$	987	$	865	$	489	$	494	$	950	$	987

(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
	December 23, 2021		December 24, 2020

Operating cash flows information:
Cash paid for amounts included in measurements for lease liabilities	$	794	$	810
Non-cash activity:
Right-of-use assets obtained in exchange for new operating lease obligations	$	89	$	490

For the Twenty-six Weeks Ended


December 24,
2020

December 26,
2019

Operating cash flows information:

Cash paid for amounts included in measurements for lease liabilities
   $ 810    $ 770
Non-cash
activity:

Right-of-use
assets obtained in exchange for new operating lease obligations
   $ 490    $ 163


										December 23, 2021			June 24, 2021			December 24, 2020
	December 24, 2020			June 25, 2020			December 26, 2019
Weighted Average Remaining Lease Term (in years)		3.1			3.4			3.8			2.5			2.8			3.1
Weighted Average Discount Rate		4.3	%		4.4	%		4.5	%		4.2	%		4.3	%		4.3	%

Maturities of operating lease liabilities as of December ~~24, 2020~~23, 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 30, 2022 (excluding the twenty-six weeks ended December 23, 2021)	$	772
June 29, 2023		1,280
June 27, 2024		637
June 26, 2025		260
June 25, 2026		86
June 24, 2027		7
Thereafter		0

Total lease payment		3,042
Less imputed interest		(146	)

Present value of operating lease liabilities	$	2,896

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 Twenty-six weeks ended
	December 23, 2021		December 24, 2020		December 23, 2021		December 24, 2020

Lease income related to lease payments	$	408	$	452	$	818	$	903

~~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 30, 2022		1,708
June 30, 2022 (excluding the twenty-six weeks ended December 23, 2021)			$	880
June 29, 2023		1,737		1,794
June 27, 2024		1,766		1,818
June 26, 2025		1,228		1,228
June 25, 2026		670		670
June 24, 2027				614
Thereafter		614		0

	$8,706		$	7,004

Note 4 – Inventories

Inventories consist of the following:


									December 23, 2021		June 24, 2021		December 24, 2020
	December 24, 2020		June 25, 2020		December 26, 2019
Raw material and supplies	$	66,793	$	69,276	$	$		81,135	$	71,960	$	64,219	$	66,793
Work-in-process and finished goods		88,578		102,792		91,205				106,781		83,779		88,578

Total	$	155,371	$	172,068			$	172,340	$	178,741	$	147,998	$	155,371

Note 5 – Goodwill and Intangible Assets

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


										December 23, 2021			June 24, 2021			December 24, 2020
	December 24, 2020			June 25, 2020			December 26, 2019
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	)		(18,279	)		(17,643	)		(17,008	)
Brand names		(10,217	)		(9,873	)		(9,527	)		(10,908	)		(10,562	)		(10,217	)
Non-compete agreement		(167	)		(139	)		(113	)		(220	)		(194	)		(167	)

		(27,392)			(26,235)			(25,078)			(29,407	)		(28,399	)		(27,392	)

Net intangible assets	$	10,968		$	12,125		$	13,282		$	8,953		$	9,961		$	10,968

Customer relationships are being amortized on an accelerated basis. The brand names remaining to be amortized consist of the

Squirrel Brand

and

Southern Style Nuts

brand names.

Total amortization expense related to intangible assets, which is a component of ~~Administrative expense,~~“Administrative expenses” on the Consolidated Statements of Comprehensive Income, was ~~$579~~$504 and ~~$1,157~~$1,008 for the quarter and

twenty-six

weeks ended December ~~24, 2020,~~23, 2021, respectively. Amortization expense for the remainder of fiscal ~~2021~~2022 is expected to be approximately ~~$1,008~~$888 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~~


Fiscal year ending
June 29, 2023	$	1,657
June 27, 2024		1,414
June 26, 2025		1,156
June 25, 2026		861
June 24, 2027		690

Our net goodwill of $9,650 relates entirely to the Squirrel Brand acquisition ~~(the “Acquisition”)~~ completed in the second quarter of fiscal 2018. There was no change in the carrying amount of goodwill during the

twenty-six

weeks ended December ~~24, 2020.~~23, 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,~~23, 2021, we had ~~$105,146~~$77,330 of available credit under the Credit Facility which reflects borrowings of ~~$9,169~~$35,885 and reduced availability as a result of ~~$3,185~~$4,285 in outstanding letters of credit. As of December ~~24, 2020,~~23, 2021, we were in compliance with all financial covenants under the Credit Facility and Mortgage ~~Facility (as defined below).~~Facility.

Note 7 – Earnings Per Common Share

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

For the Quarter Ended

For the Twenty-six Weeks Ended


December 24,

2020

December 26,

2019

December 24,

2020

December 26,

2019

Weighted average number of shares outstanding – basic
   11,493,759    11,458,524    11,485,523    11,451,542
Effect of dilutive securities:

Restricted stock units
   39,767    66,863    56,534    80,640

Weighted average number of shares outstanding – diluted
   11,533,526    11,525,387    11,542,057    11,532,182


	For the Quarter Ended				For the Twenty-six Weeks Ended
	December 23, 2021		December 24, 2020		December 23, 2021		December 24, 2020
Weighted average number of shares outstanding – basic		11,531,844		11,493,759		11,525,730		11,485,523
Effect of dilutive securities:
Restricted stock units		44,812		39,767		56,912		56,534

Weighted average number of shares outstanding – diluted		11,576,656		11,533,526		11,582,642		11,542,057

There were no0 anti-dilutive awards excluded from the computation of diluted earnings per share for any periods presented.

Note 8 – Stock-Based Compensation Plans

During the second quarter of fiscal ~~2021,~~2022, there were ~~54,966~~53,524 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 activity for the first half of fiscal ~~2021:~~2022:


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

Outstanding at June 24, 2021							159,846		$	58.05
Activity:
Granted		54,966			68.97		53,524			75.94
Vested (a)		(50,602	)		47.76		(67,598	)		45.91
Forfeited		(1,064	)		68.66		0			0

Outstanding at December 24, 2020		170,179		$	58.27
Outstanding at December 23, 2021							145,772		$	70.25

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

At December ~~24, 2020,~~23, 2021, there were ~~52,351~~23,356 RSUs outstanding that were vested but deferred.

~~Table of Contents~~

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 Twenty-six Weeks Ended
	December 23, 2021		December 24, 2020		December 23, 2021		December 24, 2020

Stock-based compensation expense	$	1,068	$	998	$	1,771	$	1,620

As of December ~~24, 2020,~~23, 2021, there was ~~$5,406~~$6,064 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~~1.9 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 Twenty-six Weeks Ended				December 23, 2021		December 24, 2020		December 23, 2021		December 24, 2020
	December 24, 2020		December 26, 2019		December 24, 2020		December 26, 2019
Service cost	$	236	$	178	$	472	$	356	$	247	$	236	$	495	$	472
Interest cost		215		223		429		446		255		215		509		429
Amortization of prior service cost		119		240		239		479		0		119		0		239
Amortization of loss		295		104		591		208		364		295		728		591

Net periodic benefit cost	$	865	$	745	$	1,731	$	1,489	$	866	$	865	$	1,732	$	1,731

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

weeks ended December ~~24, 2020~~23, 2021 and December ~~26, 2019.~~24, 2020.

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


	For the Twenty-Six Weeks Ended						For the Twenty-Six Weeks Ended
Changes to AOCL (a)							December 23, 2021			December 24, 2020
Changes to AOCL (a)	December 24, 2020			December 26, 2019
Balance at beginning of period	$	(8,630	)	$	(4,325	)	$	(9,025	)	$	(8,630	)
Other comprehensive income before reclassifications		0			0			0			0
Amounts reclassified from accumulated other comprehensive loss		830			687			728			830
Tax effect		(207	)		(172	)		(190	)		(207	)

Net current-period other comprehensive income		623			515			538			623
Impact of adopting ASU 2018-02		0			(976	)

Balance at end of period	$	(8,007	)	$	(4,786	)	$	(8,487	)	$	(8,007	)

(a)	Amounts in parenthesis indicate debits/expense.

The reclassifications out of AOCL for the quarter and

twenty-six

weeks ended December ~~24, 2020~~23, 2021 and December ~~26, 2019~~24, 2020 were as follows:


	For the Quarter Ended						For the Twenty-six Weeks Ended						Affected line item in the Consolidated Statements of Comprehensive Income													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				For the Quarter Ended						For the Twenty-six Weeks Ended
Reclassifications from AOCL to earnings (b)														December 23, 2021			December 24, 2020			December 23, 2021			December 24, 2020
Reclassifications from AOCL to earnings (b)
Amortization of defined benefit pension items:
Unrecognized prior service cost	$	(119	)	$	(240	)	$	(239	)	$	(479	)	Other expense	$	0		$	(119	)	$	0		$	(239	)	Other expense
Unrecognized net loss		(295	)		(104	)		(591	)		(208	)	Other expense		(364	)		(295	)		(728	)		(591	)	Other expense

Total before tax		(414	)		(344	)		(830	)		(687	)			(364	)		(414	)		(728	)		(830	)
Tax effect		103			86			207			172		Income tax expense		95			103			190			207		Income tax expense

Amortization of defined pension items, net of tax	$	(311	)	$	(258	)	$	(623	)	$	(515	)		$	(269	)	$	(311	)	$	(538	)	$	(623	)

(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 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.

~~Table of Contents~~

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 23, 2021		June 24, 2021		December 24, 2020
	December 24, 2020		June 25, 2020		December 26, 2019
Carrying value of long-term debt:	$	16,627	$	20,059	$	23,767	$	12,862	$	14,749	$	16,627
Fair value of long-term debt:		17,180		20,186		24,164		14,282		16,210		17,180

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 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~~

~~weeks ended December 24, 2020, and interest paid while the former executive officer was a related party was $57 and $127 for the quarter and~~

~~twenty-six~~

~~weeks ended December 26, 2019, respectively.~~

Note 1413 – Garysburg, North Carolina Facility

OnIn 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

~~Table of Contents~~

second quarter of ~~this~~ fiscal ~~year~~2021 and the facility ~~will continue to be~~was used to store and ship inshell peanuts through the remainder of fiscal ~~2021. We also expect~~2021, at which time the Company decided to ~~spend~~permanently cease all operations at 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.Garysburg facility.

~~We have adequate~~During the first quarter of fiscal 2022 we sold the Garysburg property ~~damage~~ and ~~business interruption insurance in respect~~remaining equipment located at the property to ~~this event,~~a third party for $4,000, subject to ~~applicable deductibles. Insurance claims have been filed under our property damage and business interruption policies. Insurance proceeds totaling~~customary adjustments to reflect closing costs, which resulted in a $2,349 gain.

~~$2,934~~

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

~~$2,523~~

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

Note 1514 – Recent Accounting Pronouncements

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

In ~~August 2018,~~December 2019, the FASB issued ASU

No. ~~2018-15~~2019-12

“

~~Intangibles~~“Income Taxes (Topic 740) – ~~Goodwill and Other –~~

~~Internal-Use~~

~~Software (Subtopic~~

~~350-40):~~

~~Customer’s~~Simplifying the Accounting for ~~Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract~~Income Taxes”

”. The amendments in this Update ~~align~~were issued as part of FASB’s initiative to reduce complexity in accounting standards. The amendments simplify the ~~requirements~~accounting for ~~capitalizing implementation costs incurred~~income taxes by removing certain exceptions in ~~a hosting arrangement that is a service contract with the requirements~~Topic 740 and improve consistent application of and simplify GAAP for ~~capitalizing implementation costs incurred to develop or obtain~~

~~internal-use~~

~~software (and hosting arrangements that include an internal use software license).~~other areas of Topic 740 by clarifying and amending existing guidance. ASU

No. ~~2018-15~~2019-12

was adopted using ~~the~~a prospective method in the first quarter of fiscal ~~2021~~2022 and did not have a material impact on our Consolidated Financial Statements.

In ~~August 2018,~~October 2020, the FASB issued ASU

No. ~~2018-14~~2020-10

“

~~Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic~~

~~715-20):~~“Codification Improvements”

~~Disclosure Framework – Changes~~

. This ASU was issued to address a wide variety of topics in the ~~Disclosure Requirements for Defined Benefit Plans~~

~~”. The amendments in this Update modify~~Accounting Standard Codification with 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, clarifyintent to make the ~~specific requirements of disclosures,~~Codification easier to understand and ~~add disclosure requirements identified as relevant.~~apply by eliminating inconsistencies and providing clarifications. 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~~2020-10

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~~2022 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.

~~Table of Contents~~

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~~2022 and fiscal ~~2020~~2021 are to the fiscal year for the 53 weeks ending June ~~24, 2021~~30, 2022 and the fiscal year for the 52 weeks ended June ~~25, 2020,~~24, 2021, respectively.

References herein to the second quarter of fiscal ~~2021~~2022 and fiscal ~~2020~~2021 are to the quarters ended December ~~24, 2020~~23, 2021 and December ~~26, 2019,~~24, 2020, respectively.

References herein to the first half or first

twenty-six

weeks of fiscal 2021 and fiscal 2020 are to the

twenty-six

weeks ended December ~~24, 2020~~23, 2021 and December ~~26, 2019,~~24, 2020, 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, 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 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, we intend to invest in our people and facilities in order to research, develop, market and sell new product offerings for our branded business and private brand partners in fiscal 2021.~~

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. We have observed consumers shopping in smaller store formats like grocery, using delivery apps for shopping and generally migrating more of their shopping online. ~~As restaurant closures~~Additionally, in recent months we have faced challenges with shortages and cost increases for shipping pallets, resin-based packaging, imported materials, transportation and shipping availability and labor at our production facilities. We have also experienced supply chain issues related to transportation delays. These shortages and related challenges have impacted our operations and resulted in increased expenses and manufacturing inefficiencies that have adversely impacted (and may continue to impact) our net income. We anticipate pricing relief in some of these areas in the coming quarters if and as shortages decrease, but we expect that some costs may remain elevated or unpredictable for a longer period of time. We are working with our vendors, customers and suppliers to source additional raw materials and packaging supplies and to remain flexible in obtaining the transportation and labor services we need. If these shortages and other

~~out-of-home~~

~~dining limitations~~ supply chain issues continue, ~~due~~and we cannot secure adequate supplies to fulfill customer orders or cannot obtain the ~~impact of~~

~~COVID-19,~~

~~consumers are also doing more snacking~~transportation and ~~cooking and baking at home. While these developments~~labor services we need, they could have ~~had a positive~~an unfavorable impact on ~~certain aspects~~net sales and our operations in the remainder of this fiscal year. In addition, there is an additional risk of not being able to pass (in part or in full) such potential cost increases onto our ~~consumer business, they have had~~customers in a ~~negative impact on our foodservice business.~~timely manner.

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 invest in our brands to ~~focus on more digital~~achieve growth. We intend to execute an omnichannel approach to win in key categories including recipe nuts, nut flours, snack nuts, trail mix and

~~e-commerce~~

~~platforms to match consumer behavior.~~ snacking. We continue to see strong

e-commerce

performance across our

~~Orchard Valley Harvest~~

~~and~~

~~Fisher~~

~~recipe brands~~ branded portfolio and ~~expect~~anticipate taking various actions to accelerate that ~~there will be additional opportunities to connect these brands to consumers’ desires for more functional snacking~~growth across a variety of established and ~~baking and cooking ideas, respectively.~~emerging platforms. 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 our fiscal ~~2021~~2022 as a result of the

COVID-19

pandemic and the uncertainty of future local, state and federal restrictions aimed to mitigate and control the pandemic. ~~As many of these restrictions were loosened near~~During 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 calendar 2021, consumers were and continue to be limited in their ability to purchase meals outside their homes, and therefore, demand continued to be suppressed from our foodservice, restaurant, convenience store and

~~non-essential~~

~~retail customers. 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,~~2021 and ~~we believe that~~into the first half of fiscal 2022, as ~~the~~various

COVID-19

~~vaccine becomes~~vaccines became more widely distributed and accepted by the public and indoor dining restrictions ~~are~~were again loosened, we saw a significant improvement in quarterly sales volume with our foodservice, restaurant, convenience store and

non-essential

retail customers. However, demand from these customers ~~will continue~~could be negatively impacted in the third quarter if conditions deteriorate as a result of the recent surge in

COVID-19

cases due to ~~improve~~the Omicron variant, a more contagious strain of

COVID-19.

Our financial results could be adversely impacted if the decrease in sales to foodservice, restaurant, convenience store and ~~we expect to eventually return to~~

~~pre-pandemic~~non-essential

~~levels.~~retail customers is not offset by an increase in sales in our consumer channel that is driven by customers eating at home.

Also, induring fiscal 2021 and into the first half of fiscal ~~2021,~~2022, we have ~~seen signs of~~experienced the implications from a shortage in capacity in the transportation ~~industry, which our transportation service providers believe is due to driver concerns related to the impacts of~~

~~COVID-19.~~

industry. Compounding this driver shortage is an increase in demand driven by additional spending on consumer ~~goods.~~goods, which has led to periodic shortages of shipping containers, container chassis, space on container ships and trains and capacity constraints at U.S. ports. This tightening in transportation capacity is expected to continue ~~through the third quarter of~~further into fiscal ~~2021,~~2022, and it has led to increased transportation costs and may lead to potential disruptions in service to our customers and from our suppliers. While we have mitigated some of the impact from transportation shortages and increased prices of transportation, we may continue to face an unpredictable transportation environment, and there is no guarantee our mitigation strategies will continue to be effective.

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~~ill or ~~ill.~~must self-quarantine and hosted several free, voluntary

on-site

COVID-19

vaccination clinics for our employees and their family members. We highly encourage our employees to get vaccinated (including booster shots) and provide incentives to those who do.

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.~~pandemic other than from manufacturing inefficiencies due to production scheduling challenges. However, recent surges in

COVID-19

cases due to the Omicron variant could have a negative impact on our plant personnel attendance rates, our suppliers’ ability to maintain supply of key materials and, therefore, our operations. 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.

~~Table of Contents~~

QUARTERLY HIGHLIGHTS

Our net sales of $253.2 million for the second quarter of fiscal 2022 increased 8.4% from our net sales of $233.6 million for the second quarter of fiscal ~~2021 decreased 5.2% from our net sales of $246.4 million for the second quarter of fiscal 2020.~~2021. Net sales for the first

twenty-six

weeks of fiscal ~~2021 decreased~~2022 increased by ~~$20.4~~$35.7 million, or ~~4.4%~~8.0%, to ~~$443.8~~$479.5 million compared to the first

twenty-six

weeks of fiscal ~~2020.~~2021.

Sales volume, measured as pounds sold to customers, increased ~~1.8%~~6.0% for the second quarter of fiscal ~~2021~~2022 compared to the second quarter of fiscal ~~2020.~~2021. Sales volume for the first

twenty-six

weeks of fiscal ~~2021 decreased 0.7%~~2022 increased 9.7% compared to the first

twenty-six

weeks of fiscal ~~2020.~~2021.

Gross profit ~~increased~~decreased by ~~$2.8~~$0.6 million, and our gross profit margin, as a percentage of net sales, ~~increased~~decreased to 20.6% for the second quarter of fiscal 2022 compared to 22.6% for the second quarter of fiscal ~~2021 compared to 20.3% for the second quarter of fiscal 2020.~~2021. Gross profit ~~dollars remained relatively unchanged~~increased $11.9 million and our gross profit margin increased to ~~20.8%~~21.7% from ~~19.9%~~20.8% for the first

twenty-six

weeks of fiscal ~~2021~~2022 compared to the first

twenty-six

weeks of fiscal ~~2020.~~2021.

Total operating expenses for the second quarter of fiscal ~~2021 decreased~~2022 increased by ~~$0.5~~$9.0 million, or ~~2.0%~~35.9%, compared to the second quarter of fiscal ~~2020.~~2021. As a percentage of net sales, total operating expenses in the second quarter of fiscal ~~2021~~2022 increased to ~~10.7%~~13.4% from ~~10.4%~~10.7% for the second quarter of fiscal ~~2020.~~2021. For the first half of fiscal ~~2021,~~2022, total operating expenses ~~decreased~~increased by ~~$3.2~~$13.0 million, to ~~10.2%~~12.2% of net sales compared to ~~10.5%~~10.2% for the first half of fiscal ~~2020.~~2021.

The total value of inventories on hand at the end of the second quarter of fiscal ~~2021 decreased~~2022 increased by ~~$17.0~~$23.4 million, or ~~9.8%~~15.0%, in comparison to the total value of inventories on hand at the end of the second quarter of fiscal ~~2020.~~2021.

We have seen acquisition costs for ~~all~~dried fruit and most major ~~tree nuts decrease~~nut categories increase in the ~~2020~~2021 crop year (which falls into our current ~~2021~~2022 fiscal year). We completed procurement of inshell walnuts during the first half of fiscal ~~2021.~~2022. During the third quarter, we will determine the final prices to be paid to the walnut growers based upon current market prices and other factors such as crop size and export demand. We have estimated the liability to our walnut growers and our walnut inventory costs using currently available information. Any difference between our estimated liability and the actual final liability will be determined during the third quarter of fiscal ~~2021~~2022 and will be recognized in our financial results at that time.

~~Table of Contents~~

RESULTS OF OPERATIONS

Net Sales

Our net sales ~~decreased 5.2%~~increased 8.4% to ~~$233.6~~$253.2 million in the second quarter of fiscal ~~2021~~2022 compared to net sales of ~~$246.4~~$233.6 million for the second quarter of fiscal ~~2020.~~2021. The ~~decrease~~increase 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%~~6.0% increase in sales volume, which is defined as pounds sold to ~~customers.~~customers, and a 2.3% increase in the weighted average sales price per pound. The increase in the weighted average selling price per pound came from a shift in product mix from lower priced peanuts to higher priced trail and snack mixes and tree nuts as consumer preferences favored higher priced products in the current second quarter.

For the first

twenty-six

weeks of fiscal ~~2021~~2022 our net sales were ~~$443.8~~$479.5 million, ~~a decrease~~an increase of ~~$20.4~~$35.7 million, or ~~4.4%~~8.0%, compared to the same period of fiscal ~~2020.~~2021. The ~~decrease~~increase in net sales was primarily attributable to ~~lower selling prices resulting primarily for the same reasons cited in the quarterly comparison. A 0.7% decrease~~a 9.7% increase in sales volume, ~~also contributed to~~which was partially offset by a 1.5% decrease in the ~~overall~~weighted average selling price per pound for our products. The decline in ~~net sales.~~the weighted average selling price resulted from a decline in commodity acquisition costs for all major tree nuts except cashews.

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 Twenty-six Weeks Ended
Product Type	December 24, 2020			December 26, 2019			December 24, 2020			December 26, 2019			December 23, 2021			December 24, 2020			December 23, 2021			December 24, 2020
Peanuts		18.8	%		15.8	%		19.1	%		16.8	%		16.6	%		18.8	%		17.1	%		19.1	%
Pecans		15.0			16.2			12.0			13.0			15.7			15.0			12.4			12.0
Cashews & Mixed Nuts		23.1			22.7			23.4			22.7			20.9			23.1			21.6			23.4
Walnuts		7.2			8.7			6.9			7.9			7.0			7.2			6.4			6.9
Almonds		9.2			13.2			10.8			14.8			9.0			9.2			9.8			10.8
Trail & Snack Mixes		22.2			18.3			22.5			19.3			25.1			22.2			26.5			22.5
Other		4.5			5.1			5.3			5.5			5.7			4.5			6.2			5.3

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			December 23, 2021		Percentage of Total			December 24, 2020		Percentage of Total			$ Change		Percent Change
Consumer (1)	$	192,029		82.2	%	$	188,086		76.3	%	$	3,943			2.1	%	$	203,479		80.3	%	$	192,029		82.2	%	$	11,450		6.0	%
Commercial Ingredients		20,536		8.8			34,247		13.9			(13,711	)		(40.0	)		27,756		11.0			20,536		8.8			7,220		35.2
Contract Packaging		21,010		9.0			24,090		9.8			(3,080	)		(12.8	)		21,972		8.7			21,010		9.0			962		4.6

Total	$	233,575		100.0	%	$	246,423		100.0	%	$	(12,848	)		(5.2	)%	$	253,207		100.0	%	$	233,575		100.0	%	$	19,632		8.4	%

(1)

Sales of branded products were approximately ~~30%~~28% and ~~33%~~30% of total consumer sales during each of the second quarter of fiscal ~~2021~~2022 and fiscal ~~2020,~~2021, respectively.

Fisher

branded products were approximately ~~74%~~71% and ~~76%~~74% of branded sales during the second quarter of fiscal ~~2021~~2022 and fiscal ~~2020,~~2021, respectively, with

Orchard Valley Harvest

branded ~~produce~~

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

~~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 Twenty-six Weeks Ended
Distribution Channel	December 24, 2020		Percentage of Total			December 26, 2019		Percentage of Total			$ Change			Percent Change			December 23, 2021		Percentage of Total			December 24, 2020		Percentage of Total			$ Change			Percent Change
Consumer (1)	$	358,786		80.8	%	$	345,232		74.4	%	$	13,554			3.9	%	$	383,240		79.9	%	$	358,786		80.8	%	$	24,454			6.8	%
Commercial Ingredients		43,347		9.8			71,135		15.3			(27,788	)		(39.1	)		55,912		11.7			43,347		9.8			12,565			29.0
Contract Packaging		41,715		9.4			47,902		10.3			(6,187	)		(12.9	)		40,384		8.4			41,715		9.4			(1,331	)		(3.2	)

Total	$	443,848		100.0	%	$	464,269		100.0	%	$	(20,421	)		(4.4	)%	$	479,536		100.0	%	$	443,848		100.0	%	$	35,688			8.0	%

(1)

Sales of branded products were approximately ~~27%~~24% and ~~31%~~27% of total consumer sales during the first

twenty-six

weeks of fiscal ~~2021~~2022 and fiscal ~~2020,~~2021, respectively.

Fisher

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

twenty-six

weeks of fiscal ~~2021~~2022 and fiscal ~~2020,~~2021, 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~~$11.5 million, or ~~2.1%~~6.0%, and sales volume increased ~~9.9%~~2.2% in the second quarter of fiscal ~~2021~~2022 compared to the second quarter of fiscal ~~2020.~~2021. The sales volume increase was driven by increased sales of private brand ~~peanuts,~~ trail ~~mixes~~ and snack mixes, almonds and mixed nuts mainly from new distribution at existing customers, which was partially offset by a decrease in sales for private brand peanuts and cashews. Sales volume increases for all of our branded products with the exception of

Fisher

snack nuts also contributed to the sales volume increase. Sales volume of

Fisher

recipe nuts increased 9.6% as ~~consumer preferences have shifted to lower priced products due to current economic conditions.~~a result of increased distribution and merchandising activity at two existing grocery customers. Sales volume for

Fisher

snack nuts ~~increased 30.2%~~decreased 45.0%, primarily as a result of ~~increased promotional activity. Sales volume~~the discontinuance of

~~Fisher~~

~~recipe nuts decreased 18.4% as~~ our inshell peanut product line, which occurred in the fourth quarter of fiscal 2021, and a ~~result of lost distribution~~seasonal rotation at ~~some customers, which was offset~~a club store that did not repeat in ~~part by increased sales with an Internet retailer.~~the current second quarter. Sales volume

Orchard Valley Harvest

products ~~decreased 13.0%~~increased 4.1% due to ~~reduced foot traffic~~increased sales at a major customer in the

non-food

sector, as ~~a result of~~this retailer continues to recover from

COVID-19

restrictions, and new distribution at an internet retailer. These gains were partially offset by reduced ~~promotional~~merchandising activity and ~~lost distribution~~item discontinuance at ~~some customers.~~a mass merchandising retailer. Sales volume of

Southern Style Nuts

~~decreased 4.2%~~increased 8.5% due to ~~a reduction in merchandising and~~increased promotional activity ~~which was offset in part by distribution gains with new customers.~~at a current club store customer.

In the first

twenty-six

weeks of fiscal ~~2021,~~2022, net sales in the consumer distribution channel increased ~~$13.6~~$24.5 million, or ~~3.9%~~6.8%, and sales volume increased ~~7.0%~~7.2% compared to the same period of fiscal ~~2020.~~2021. The sales volume increase ~~occurred~~was driven by increased sales of private brand trail and snack mixes and mixed nuts mainly from new distribution at existing customers, which was partially offset by a decrease in sales volume for private brand peanuts and a sales volume decline for our

Fisher

snack nuts for the same ~~reason~~reasons cited in the quarterly comparison.

Net sales in the commercial ingredients distribution channel ~~decreased by 40.0%~~increased 35.2% in dollars and ~~23.6%~~27.1% in sales volume in the second quarter of fiscal ~~2021~~2022 compared to the second quarter of fiscal ~~2020.~~2021. The ~~decline~~increase in sales volume was due to a ~~29.4% decrease~~42.7% increase in sales volume in our foodservice business. The sales volume ~~decline~~increase in our foodservice business ~~resulted~~was attributable to improved conditions in the restaurant industry from ~~a decline in air travel and nationwide restrictions on indoor restaurant dining and closures of restaurants, all of which were attributable to~~fewer

~~COVID-19.~~COVID-19

restrictions.

In the first

twenty-six

weeks of fiscal ~~2021,~~2022, net sales in the commercial ingredients distribution channel ~~decreased by 39.1%~~increased 29.0% in dollars and ~~25.6%~~32.0% in sales volume compared to the same period of fiscal ~~2020.~~2021. The ~~decline~~increase in sales volume was due to a ~~35.5% decrease~~45.2% increase in sales volume in our foodservice business, which occurred for the same ~~reasons~~reason cited in the quarterly comparison.

Net sales in the contract packaging distribution channel ~~decreased by 12.8%~~increased 4.6% in dollars and ~~14.1%~~11.4% in sales volume in the second quarter of fiscal ~~2021~~2022 compared to the second quarter of fiscal ~~2020.~~2021. The ~~decline~~increase in sales volume was primarily ~~attributable~~due to ~~the unfavorable impact of lower convenience store foot traffic on one customer’s business as~~increased promotional and merchandising activity and increased distribution by a ~~result of~~

~~COVID-19.~~major customer in this channel.

In the first

twenty-six

weeks of fiscal ~~2021,~~2022, net sales in the contract packaging distribution channel decreased ~~by 12.9%~~3.2% in dollars and ~~13.2% in~~ sales volume increased 3.8% compared to the first

twenty-six

weeks of fiscal ~~2020.~~2021. The ~~decline~~increase in sales volume occurred for the same ~~reason~~reasons cited in the quarterly comparison, ~~as well as~~which was partially offset by promotional activity by the ~~loss of peanut butter business with another~~same customer ~~due to a temporary peanut supply shortage~~ that ~~existed~~did not recur in the current year first ~~quarter of fiscal 2021.~~quarter.

Gross Profit

Gross profit ~~increased~~decreased by ~~$2.8~~$0.6 million, or ~~5.6%~~1.1%, to ~~$52.8~~$52.2 million for the second quarter of fiscal ~~2021~~2022 compared to the second quarter of fiscal ~~2020.~~2021. Our gross profit margin, as a percentage of net sales, ~~increased~~decreased to 20.6% for the second quarter of fiscal 2022 compared to 22.6% for the second quarter of fiscal ~~2021 compared to 20.3% for the second quarter of fiscal 2020.~~2021. The ~~increases~~decreases in gross profit and gross profit margin were mainly attributable to ~~lower commodity acquisition costs for tree nuts~~manufacturing scheduling inefficiencies due to supply chain issues, and ~~the~~inflationary cost increases including labor, freight and manufacturing supplies, which were partially offset by increased sales ~~volume increase discussed above.~~volume.

~~Table of Contents~~

Gross profit was $104.0 million for the first

twenty-six

weeks of fiscal 2022 compared to $92.1 million for the first

twenty-six

weeks of fiscal ~~2021 compared~~2021. Our gross profit margin, as a percentage of sales, increased to ~~$92.2 million~~21.7% for the first

twenty-six

weeks of fiscal ~~2020. Our gross profit margin increased~~2022 compared to 20.8% for the first

twenty-six

weeks of fiscal ~~2021 compared to 19.9% for the first~~

~~twenty-six~~

~~weeks of fiscal 2020.~~2021. The ~~increase~~increases in gross profit and gross profit margin in the year to date comparison ~~was~~were primarily attributable to lower commodity acquisition costs for all major tree ~~nuts.~~nuts except cashews and increased sales volume, which were partially offset by the manufacturing inefficiencies and inflationary cost increases cited in the quarterly comparison.

Operating Expenses

Total operating expenses for the second quarter of fiscal ~~2021 decreased~~2022 increased by ~~$0.5~~$9.0 million, or ~~2.0%~~35.9%, to ~~$25.0~~$34.0 million. Operating expenses increased to 13.4% of net sales for the second quarter of fiscal 2022 compared to 10.7% of net sales for the second quarter of fiscal ~~2021 compared to 10.4% of net sales for the second quarter of fiscal 2020.~~2021.

Selling expenses for the second quarter of fiscal ~~2021~~2022 were ~~$17.7~~$23.6 million, an increase of ~~$1.6~~$5.9 million, or ~~9.9%~~33.2%, from the second quarter of fiscal ~~2020.~~2021. The increase was driven primarily by a ~~$1.0~~$3.0 million increase in advertising, ~~expense primarily~~consumer insight research and related ~~to online advertising for our branded products and~~consulting expenses, a ~~$0.7~~$1.9 million increase in freight expense due to higher rates and an increase in sales pounds ~~shipped.~~shipped, a $0.3 million increase in commissions expense and a $0.3 million increase in payroll and payroll-related expenses.

Administrative expenses for the second quarter of fiscal ~~2021~~2022 were ~~$7.3~~$10.4 million compared to ~~$9.4~~$7.3 million for the second quarter of fiscal ~~2020.~~2021. The ~~decrease~~increase was ~~primarily~~ due to a $2.8 million decrease in the gain on asset disposals, primarily driven by an insurance settlement gain of $2.3 million ~~gain on~~in the ~~estimated final insurance settlement~~second quarter of fiscal 2021 related to the fire that occurred in our Garysburg, North Carolina facility that did not reoccur in the ~~second quarter of fiscal 2020.~~current quarter.

Total operating expenses for the first

twenty-six

weeks of fiscal ~~2021 decreased~~2022 increased by ~~$3.2~~$13.0 million, or ~~6.7%~~28.5%, to ~~$45.5~~$58.4 million. Operating expenses ~~decreased~~increased to 12.2% of net sales for the first half of fiscal 2022 compared to 10.2% of net sales for the first half of fiscal ~~2021 compared to 10.5% of net sales for the first half of fiscal 2020.~~2021.

Selling expenses for the first

twenty-six

weeks of fiscal ~~2021~~2022 were ~~$29.8~~$41.3 million, ~~a decrease~~an increase of ~~$0.4~~$11.5 million, or ~~1.4%~~38.7%, from the amount recorded for the first

twenty-six

weeks of fiscal ~~2020.~~2021. The ~~decrease~~increase was driven primarily by a ~~$0.5~~$5.3 million ~~decrease~~increase in ~~payroll~~advertising, consumer insight research and related ~~and incentive compensation expense and~~consulting expenses, a ~~$0.3 million decrease in travel expense due to~~

~~COVID-19~~

~~travel restrictions. These decreases were partially offset by a $0.3~~$4.3 million increase in freight expense for the same reasons ~~discussed~~cited in the quarterly ~~comparison.~~comparison, a $0.8 million increase in payroll and payroll related expenses and a $0.5 million increase in commissions expense.

Administrative expenses for the first

twenty-six

weeks of fiscal ~~2021~~2022 were ~~$15.7~~$19.5 million, ~~a decrease~~an increase of ~~$2.8~~$3.8 million, or ~~15.2%~~24.2%, compared to the same period of fiscal ~~2020.~~2021. The ~~decrease~~increase was primarily due to ~~$2.5~~a $3.1 million decrease in the gain on asset disposals, mainly resulting from the insurance settlement discussed above combined with alosses on current year disposals. A $0.3 million ~~decrease~~increase in ~~consulting expense.~~payroll and payroll-related expenses also contributed to the increase.

The $2.3 million gain on sale of facility, net is the result of the sale of our Garysburg, North Carolina facility that occurred in the first quarter of fiscal 2022.

Income from Operations

Due to the factors discussed above, income from operations was $18.3 million, or 7.2% of net sales, for the second quarter of fiscal 2022 compared to $27.8 million, or 11.9% of net sales, for the second quarter of fiscal ~~2021 compared to $24.5 million, or 9.9% of net sales, for the second quarter of fiscal 2020.~~2021.

Due to the factors discussed above, income from operations was $45.6 million, or 9.5% of net sales, for the first

twenty-six

weeks of fiscal 2022 compared to $46.7 million, or 10.5% of net sales, for the first

twenty-six

weeks of fiscal ~~2021 compared to $43.5 million, or 9.4% of net sales, for the first~~

~~twenty-six~~

~~weeks of fiscal 2020.~~2021.

Interest Expense

Interest expense was $0.4 million for both the second quarter of fiscal ~~2021~~2022 and fiscal ~~2020.~~2021. Interest expense was $0.8 million for both the first two quarters of fiscal ~~2021 was $0.8 million compared to $1.0 million for the first two quarters of~~2022 and fiscal 2020. The decrease in interest expense in the year to date comparison resulted from lower weighted average interest rates from the reduction of long-term debt and was largely offset by higher average short-term debt levels.2021.

~~Table of Contents~~

Rental and Miscellaneous Expense, Net

Net rental and miscellaneous expense was $0.3 million for the second quarter of fiscal 2022 compared to $0.4 million for the second quarter of fiscal ~~2021 compared to $0.3 million for the second quarter of fiscal 2020.~~2021. Net rental and miscellaneous expense was $0.7 million for the first

twenty-six

weeks of fiscal 2022 compared to $0.8 million for the first

twenty-six

weeks of fiscal ~~2021 compared to $0.7 million for the first~~

~~twenty-six~~

~~weeks of fiscal 2020.~~2021.

Other Expense

Other expense consists of pension related expenses other than the service cost component and was $0.6 million for both the second quarter of fiscal ~~2021~~2022 and fiscal ~~2020.~~2021. Other expense was $1.2 million for the first

twenty-six

weeks of fiscal 2022 compared to $1.3 million for the first

twenty-six

weeks of fiscal ~~2021 compared to $1.1 million for the first~~

~~twenty-six~~

~~weeks of fiscal 2020.~~2021.

Income Tax Expense

Income tax expense was ~~$6.5~~$3.7 million, or ~~24.8%~~21.6% of income before income taxes (the “Effective Tax Rate”), for the second quarter of fiscal ~~2021~~2022 compared to ~~$5.7~~$6.5 million, or ~~24.7%~~24.8% of income before income taxes, for the second quarter of fiscal ~~2020.~~2021. For the first

twenty-six

weeks of fiscal ~~2020,~~2022, income tax expense was ~~$11.1~~$10.4 million, or ~~25.3%~~24.3% of income before income taxes, compared to ~~$10.4~~$11.1 million, or ~~25.5%~~25.3% of income before income taxes, for the comparable period last year. The decrease in the Effective Tax Rate for both the quarterly and

twenty-six

week periods is mainly due to the favorable impact of $0.7 million of discrete tax benefits recognized in the current second quarter.

Net Income

Net income was $13.2 million, or $1.15 per common share basic and $1.14 per common share diluted, for the second quarter of fiscal 2022, compared to $19.9 million, or $1.73 per common share basic and $1.72 per common share diluted, for the second quarter of fiscal ~~2021, compared to $17.5~~2021.

Net income was $32.5 million, or ~~$1.52~~$2.82 per common share basic and $2.81 per common share diluted, for the ~~second quarter~~first

twenty-six

weeks of fiscal ~~2020.~~

~~Net~~2022, compared to net income ~~was~~of $32.7 million, or $2.85 per common share basic and $2.83 per common share diluted, for the first

twenty-six

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

~~twenty-six~~

~~weeks of fiscal 2020.~~2021.

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, increase consumer insight capabilities and promotional efforts, 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 of fiscal ~~2021~~2022 and ~~2020,~~2021, respectively (dollars in thousands):


	December 24, 2020			December 26, 2019			$ Change			December 23, 2021			December 24, 2020			$ Change
Operating activities	$	61,935		$	54,285		$	7,650		$	15,820		$	61,935		$	(46,115	)
Investing activities		(10,734	)		(6,148	)		(4,586	)		(5,889	)		(10,734	)		4,845
Financing activities		(50,973	)		(48,335	)		(2,638	)		(9,576	)		(50,973	)		41,397

Net increase in cash	$	228		$	(198	)	$	426		$	355		$	228		$	127

~~Table of Contents~~

Operating Activities

Net cash provided by operating activities was ~~$61.9~~$15.8 million for the first

twenty-six

weeks of fiscal ~~2021~~2022 compared to ~~$54.3~~$61.9 million for the comparative period of fiscal ~~2020.~~2021. The ~~increase~~decrease in operating cash flow was primarily due to ~~a decreased~~an increased use of working capital for inventory compared to the first

twenty-six

weeks of fiscal ~~2020.~~2021 primarily due to increasing commodity acquisition costs.

Total inventories were ~~$155.4~~$178.7 million at December ~~24, 2020, a decrease~~23, 2021, an increase of ~~$16.7~~$30.7 million, or ~~9.7%~~20.8%, from the inventory balance at June ~~25, 2020,~~24, 2021, and ~~a decrease~~an increase of ~~$17.0~~$23.4 million, or ~~9.8%~~15.0%, from the inventory balance at December ~~26, 2019.~~24, 2020. The ~~decrease~~increase in inventory at December ~~24, 2020~~23, 2021 compared to June ~~25,~~24, 2021 was primarily due to higher commodity acquisition costs for almost all tree nuts, peanuts, dried fruit and other raw materials and higher quantities of inshell walnuts on hand, which were partially offset by lower quantities of inshell pecans on hand. The increase in inventories at December 23, 2021 compared to December 24, 2020 was primarily due to ~~lower~~higher commodity acquisition costs ~~for all major tree nuts and~~as noted above, which were partially offset by lower quantities of ~~peanuts~~inshell pecans and pecans on hand, which was partially offset by greater quantities of walnuts on hand. The decrease in inventories at December 24, 2020 compared to December 26, 2019 was primarily due lower commodity acquisition costs for all major tree nuts and lower quantities of peanutscashews on hand.

Raw nut and dried fruit input stocks, some of which are classified as work in process, decreased by ~~14.2~~9.9 million pounds, or ~~19.4%~~16.7%, at December ~~24, 2020~~23, 2021 compared to December ~~26, 2019~~24, 2020 due to lower quantities of inshell pecans, peanuts and cashews on hand. The weighted average cost per pound of raw nut input stocks on hand at the end of the second quarter of fiscal ~~2021 decreased 4.6%~~2022 increased 24.4% compared to the end of the second quarter of fiscal ~~2020~~2021 primarily due to ~~lower~~higher commodity acquisition costs for almost all ~~major tree nuts,~~input stock items, which was partially offset by ~~a shift in product mix from~~ lower ~~priced peanuts to higher priced walnuts~~quantities of inshell pecans and ~~pecans.~~cashews.

Investing Activities

Cash used in investing activities was ~~$10.7~~$5.9 million during the first

twenty-six

weeks of fiscal ~~2021~~2022 compared to ~~$6.1~~$10.7 million for the same period last year. Capital asset purchases were $9.5 million during the first half of fiscal 2022 compared to $11.1 million for the first half of fiscal 2021. Partially offsetting the fiscal 2022 cash outflows for capital asset purchases was $4.0 million cash proceeds (subject to customary adjustments to reflect closing costs) resulting from the sale of our Garysburg, North Carolina facility. We expect total capital expenditures for new equipment, facility upgrades, and food safety enhancements for fiscal ~~2021~~2022 to be approximately ~~$23.0~~$18.0 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 in financing activities was ~~$51.0~~$9.6 million during the first

twenty-six

weeks of fiscal ~~2021~~2022 compared to ~~$48.3~~$51.0 million for the same period last year. Net borrowings under our Credit Facility were $27.2 million during the first half of fiscal 2022 compared to net repayments of $17.8 million for the first half of fiscal 2021. The increase in credit facility borrowings was primarily due to increasing commodity acquisition costs. Dividends paid in the first half of fiscal ~~2021~~2022 were approximately ~~$28.6~~$5.8 million ~~lower~~higher than dividends paid in the same period last year. ~~Net repayments under our Credit Facility were $17.8 million during the first half of fiscal 2021 compared to net short-term borrowings of $13.5 million for the first half of fiscal 2020.~~

Real Estate Matters

In August 2008, we completed the consolidation of our Chicago-based facilities into the Elgin Site. The Elgin Site includes both an office building and a warehouse. We are currently attempting to find additional tenants for the available space in the office building at the Elgin Site. Until additional tenant(s) are found, we will not receive the benefit of rental income associated with such space. Approximately ~~67%~~70% 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~~(as amended, 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 and Gustine, California ~~and Garysburg, North Carolina~~ (the “Encumbered Properties”).

~~Table of Contents~~

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,~~23, 2021, the weighted average interest rate for the Credit Facility was ~~at the Base Rate of 3.5%~~2.1%. ~~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,~~23, 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,~~23, 2021, we had ~~$105.1~~$77.3 million of available credit under the Credit Facility. If this entire amount were borrowed at December ~~24, 2020,~~23, 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,~~23, 2021, we were in compliance with all covenants under the Mortgage Facility and a total principal amount of ~~$7.4~~$4.2 million was outstanding.

Selma Property

In September 2006, we sold our Selma, Texas properties (the “Selma Properties”) to two related party partnerships for $14.3 million and are leasing them back. The selling price was determined by an independent appraiser to be the fair market value which also approximated our carrying value. The lease for the Selma Properties has a

ten-year

term at a fair market value rent with three five-year renewal options. In September 2015, we exercised two of the five-year renewal options which extended the lease term to September 2026. The lease extension also reduced the monthly lease payment on the Selma Properties, beginning in September 2016, to reflect then current market conditions. At the end of each five-year renewal option, the base monthly lease amounts are reassessed, and the monthly payments increased to $114 beginning in September 2021. 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~~23, 2021, $8.7 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 was repaid in full.

~~Table of Contents~~

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.~~24, 2021.

Recent Accounting Pronouncements

Refer to Note 1514 – “Recent Accounting Pronouncements” of the Notes to Consolidated Financial Statements, contained in Part I, Item 1 of this form

10-Q,

for a discussion of recently issued and adopted accounting pronouncements.

~~Table of Contents~~

FORWARD LOOKING STATEMENTS

Some of the statements in this report are ~~forward-looking.~~forward-looking (including statements concerning our expectations regarding market risk and the impact of the purchasing decisions of major customers). These forward-looking statements may be generally identified by the use of forward-looking words and phrases such as “will”, “intends”, “may”, “believes”, “anticipates”, “should” and “expects” and are based on the Company’s current expectations or beliefs concerning future events and involve risks and uncertainties. Consequently, the Company’s actual results could differ materially. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors that affect the subject of these statements, except where expressly required to do so by law. Among the factors that could cause results to differ materially from current expectations are: (i) ~~the risks associated with our vertically integrated model with respect to pecans, peanuts and walnuts; (ii)~~ sales activity for the Company’s products, such as a decline in sales 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)~~(ii) changes in the availability and costs of raw materials and ingredients and the impact of fixed price commitments with customers; ~~(iv)~~(iii) 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)~~(iv) 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)~~(v) 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)~~(vi) 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)~~(vii) the ability of the Company to control ~~expenses,~~costs (including inflationary costs) and manage shortages in areas 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)~~labor; (viii) uncertainty in economic conditions, including the potential for inflation or economic downturn, particularly in light of ~~the outbreak of~~

COVID-19;

~~(xi)~~(ix) the timing and occurrence (or nonoccurrence) of other transactions and events which may be subject to circumstances beyond the Company’s control; ~~(xii)~~(x) the adverse effect of labor unrest or disputes, litigation and/or legal settlements, including potential unfavorable outcomes exceeding any amounts accrued; ~~(xiii)~~(xi) losses due to significant disruptions at any of our production or processing facilities or employee unavailability due to labor shortages, illness or quarantine; ~~(xiv)~~(xii) the ability to implement our Strategic Plan, including growing our branded and private brand product sales and expanding into alternative sales channels; ~~(xv)~~(xiii) technology disruptions or ~~failures, including disruptions due to employees working remotely; (xvi)~~failures; (xiv) the inability to protect the Company’s brand value, intellectual property or avoid intellectual property disputes; ~~(xvii) the Company’s~~(xv) our ability to manage ~~successfully~~ the ~~price gap between its private brand products~~impacts of changing weather patterns on raw material availability due to climate change; and ~~those of its branded competitors; and (xviii)~~(xvi) the ability of the Company to respond to or manage the outbreak of

COVID-19

or other infectious diseases and the various implications thereof.

~~Table of Contents~~

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.~~24, 2021.

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.~~23, 2021. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December ~~24, 2020,~~23, 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~~23, 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.~~24, 2021. There were no significant changes to the risk factors identified on the Form

10-K

for the fiscal year ended June ~~25, 2020~~24, 2021 during the second quarter of fiscal ~~2021.~~2022.

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.~~24, 2021.

~~Table of Contents~~

Item 6. Exhibits

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

EXHIBIT INDEX

(Pursuant to Item 601 of Regulation

S-K)


Exhibit No.		Description

3.1		Restated Certificate of Incorporation of the Company (incorporated by reference from Exhibit 3.1 to the Form 10-Q for the quarter ended March 24, 2005)

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, 2021 and ~~2021~~2022 awards cycle) (incorporated by reference from Exhibit 10.38 to the Form 10-Q for the quarter ended December 24, 2015)

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Exhibit No No.		Description

*10.8		Form of Non-Employee Director Restricted Stock Unit Award Agreement (deferral) under 2014 Omnibus Plan (fiscal ~~2020~~2021 and ~~2021~~2022 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 and 2022 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,~~Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number One among John E. Sanfilippo, as trustee of the Jasper and Marian Sanfilippo Irrevocable Trust, dated ~~as of November 30, 2017, by~~September 23, 1990, Jasper B. Sanfilippo, Marian R. Sanfilippo and ~~between the Company and J. Brent Meyer~~Registrant, dated December 31, 2003 (incorporated by reference from Exhibit ~~10.36~~10.34 to the Form 10-Q for the quarter ended December ~~28, 2017)~~25, 2003)

*10.14		~~Separation~~Amendment, dated February 12, 2004, to Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number One among John E. Sanfilippo, as trustee of the Jasper and Marian Sanfilippo Irrevocable Trust, dated ~~as of~~September 23, 1990, Jasper B. Sanfilippo, Marian R. Sanfilippo and Registrant, dated December ~~10, 2019, by and between the Company and J. Brent Meyer~~31, 2003 (incorporated by reference from Exhibit ~~10.29~~10.46 to the Form 10-Q for the quarter ended ~~December 26, 2019)~~March 25, 2004)

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~~Frank S. Pellegrino pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended


Exhibit No.		Description

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

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

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

101.INS		~~XBRL~~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.

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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, ~~2021.~~2022.


JOHN B. SANFILIPPO & SON, INC.

By		/s/ M~~ICHAEL~~ ~~J. VALENTINE~~
		F RANK S. P ~~Michael J. Valentine~~ELLEGRINO
		Frank S. Pellegrino
		Chief Financial Officer, ~~Group~~Executive Vice President, Finance and ~~Secretary~~Administration


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)


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, $.01 par value per share	JBSS	The NASDAQ Stock Market LLC (NASDAQ Global Select Market)


													For the Quarter Ended						For the Twenty-six Weeks Ended

	For the Quarter Ended						For the Twenty-six Weeks Ended						December 23, 2021			December 24, 2020			December 23, 2021			December 24, 2020
	December 24, 2020			December 26, 2019			December 24, 2020			December 26, 2019
Net sales	$	233,575		$	246,423		$	443,848		$	464,269		$	253,207		$	233,575		$	479,536		$	443,848
Cost of sales		180,780			196,443			351,721			372,041			200,977			180,780			375,503			351,721

Gross profit		52,795			49,980			92,127			92,228			52,230			52,795			104,033			92,127

Operating expenses:
Selling expenses		17,694			16,103			29,778			30,215			23,567			17,694			41,312			29,778
Administrative expenses		7,305			9,411			15,680			18,485			10,401			7,305			19,470			15,680
Gain on sale of facility, net														0			0			(2,349	)		0

Total operating expenses		24,999			25,514			45,458			48,700			33,968			24,999			58,433			45,458

Income from operations		27,796			24,466			46,669			43,528			18,262			27,796			45,600			46,669

Other expense:
Interest expense including $165, $232, $332 and $479 to related parties		376			435			826			956
Interest expense including $203, $165, $392 and $332 to related parties														420			376			791			826
Rental and miscellaneous expense, net		365			274			797			678			323			365			671			797
Other expense		629			567			1,259			1,133			619			629			1,237			1,259

Total other expense, net		1,370			1,276			2,882			2,767			1,362			1,370			2,699			2,882

Income before income taxes		26,426			23,190			43,787			40,761			16,900			26,426			42,901			43,787
Income tax expense		6,541			5,729			11,090			10,374			3,653			6,541			10,405			11,090

Net income	$	19,885		$	17,461		$	32,697		$	30,387		$	13,247		$	19,885		$	32,496		$	32,697
Other comprehensive income:
Amortization of prior service cost and actuarial loss included in net periodic pension cost		414			344			830			687			364			414			728			830
Income tax expense related to pension adjustments		(103	)		(86	)		(207	)		(172	)		(95	)		(103	)		(190	)		(207	)

Other comprehensive income, net of tax		311			258			623			515			269			311			538			623

Comprehensive income	$	20,196		$	17,719		$	33,320		$	30,902		$	13,516		$	20,196		$	33,034		$	33,320

Net income per common share-basic	$	1.73		$	1.52		$	2.85		$	2.65		$	1.15		$	1.73		$	2.82		$	2.85

Net income per common share-diluted	$	1.72		$	1.52		$	2.83		$	2.64		$	1.14		$	1.72		$	2.81		$	2.83


		(847) 289-1800
		(Registrant’s Telephone Number, Including Area Code)


	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Comprehensive Income for the Quarter and Twenty-Six Weeks Ended December ~~24, 2020~~23, 2021 and December ~~26, 2019~~24, 2020		3
Consolidated Balance Sheets as of December 23, 2021, June 24, ~~2020, June 25, 2020~~2021 and December ~~26, 2019~~24, 2020		4
Consolidated Statements of Stockholders’ Equity for the Quarter and Twenty-Six Weeks Ended December ~~24, 2020~~23, 2021 and December ~~26, 2019~~24, 2020		6
Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended December ~~24, 2020~~23, 2021 and December ~~26, 2019~~24, 2020		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		29
Item 4. Controls and Procedures		29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		29
Item 1A. Risk Factors		29
Item 6. Exhibits		3029
SIGNATURE		33


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

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company