Significant Accounting Policies | NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Consolidation and Description of Business Our consolidated financial statements include the accounts of John B. Sanfilippo & Son, Inc., and our wholly-owned subsidiary, JBSS Ventures, LLC. Our fiscal year ends on the last Thursday of June each year, and typically consists of fifty-two We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States. These nuts are sold under a variety of private brands and under the Fisher, Orchard Valley Harvest Sunshine Country Management Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include reserves for customer deductions, the quantity of bulk inventories, the evaluation of recoverability of long-lived assets, the assumptions used in estimating the retirement plan liability and pension expense, and the realizability of deferred tax assets. Actual results could differ from those estimates. Accounts Receivable Accounts receivable are stated at the amounts charged to customers, less allowances for doubtful accounts, and reserves for estimated cash discounts and customer deductions. The allowance for doubtful accounts is calculated by specifically identifying customers that are credit risks and estimating the extent that other non-specifically Inventories Inventories, which consist principally of inshell bulk-stored nuts, shelled nuts, dried fruit and processed and packaged nut products, are stated at the lower of cost (first-in, first-out) (first-in, first-out) Property, Plant and Equipment Property, plant and equipment are stated at cost. Major improvements that extend the useful life, add capacity or add functionality are capitalized and charged to expense through depreciation. Repairs and maintenance costs are charged to expense as incurred. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts, and any gain or loss is recognized currently in operating income. Depreciation expense for the last three fiscal years is as follows: Year Ended Year Ended Year Ended Depreciation expense $ 14,190 $ 14,875 $ 14,117 Cost is depreciated using the straight-line method over the following estimated useful lives: Classification Estimated Useful Lives Buildings 10 to 40 years Machinery and equipment 5 to 10 years Furniture and leasehold improvements 5 to 10 years Vehicles 3 to 5 years Computers and software 3 to 5 years No interest costs were capitalized for the last three fiscal years due to the lack of any significant project requiring such capitalization. Impairment of Long-Lived Assets We review held and used long-lived assets, including our rental investment property and amortizable identifiable intangible assets, to assess recoverability from projected undiscounted cash flows whenever events or changes in facts and circumstances indicate that the carrying value of the assets may not be recoverable. When such events occur, we compare the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of the long-lived asset or asset group. The cash flows are based on our best estimate of future cash flows derived from the most recent business projections. If this comparison indicates there is an impairment, the carrying value of the asset is reduced to its estimated fair value. We did not record any impairment of long-lived assets for the last three fiscal years. Facility Consolidation Project/Real Estate Transactions In April 2005, we acquired property to be used for the Elgin Site. Two buildings are located on the Elgin Site, one of which is an office building. Approximately 75% of the office building has been built-out The net rental expense from the office building is included in the caption “Rental and miscellaneous expense, net”. Gross rental income and rental (expense), net for the last three fiscal years are as follows: Year ended Year ended Year ended Gross rental income $ 2,003 $ 1,898 $ 1,792 Rental (expense), net (1,311 ) (1,371 ) (3,062 ) Expected future gross rental income under operating leases within the office building is as follows for the fiscal years ending: June 28, 2018 $ 1,961 June 27, 2019 1,859 June 25, 2020 1,765 June 24, 2021 1,534 June 30, 2022 1,314 Thereafter 3,096 $ 11,529 Fair Value of Financial Instruments Authoritative guidance issued by 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 June 29, 2017 and June 30, 2016 because of the short-term maturities and nature of these balances. The carrying value of our Credit Facility (as defined in Note 4 – “Revolving Credit Facility” in the Notes to Consolidated Financial Statements “Revolving Credit Facility” below) borrowings approximates fair value at June 29, 2017 and June 30, 2016 because interest rates on this instrument approximate current market rates (Level 2 criteria), 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: June 29, June 30, Carrying value of long-term debt: $ 28,808 $ 32,290 Fair value of long-term debt: 29,316 35,479 The estimated fair value of 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. Revenue Recognition We recognize revenue when persuasive evidence of an arrangement exists, title has transferred (based upon terms of shipment), price is fixed, delivery occurred and collection is reasonably assured. We sell our products under some arrangements which include customer contracts which fix the sales price for periods, which typically can be up to one year, for some commercial ingredient customers and through specific programs consisting of promotion allowances, volume and customer rebates and marketing allowances, among others, to consumer customers and commercial ingredient users. Reserves for these programs are established based upon the terms of specific arrangements. Revenues are recorded net of rebates and promotion and marketing allowances. Revenues are also recorded net of expected customer deductions which are provided for based upon past experiences. While customers do have the right to return products, past experience has demonstrated that product returns have generally been insignificant. Provisions for returns are reflected as a reduction in net sales and are estimated based upon customer specific circumstances. Billings for shipping and handling costs are included in revenues. Segment Reporting We operate in a single reportable and operating segment that consists of selling various nut and nut related products through multiple distribution channels. Significant Customers and Concentration of Credit Risk The highly competitive nature of our business provides an environment for the loss of customers and the opportunity to gain new customers. We are subject to concentrations of credit risk, primarily in trade accounts receivable, and we attempt to mitigate this risk through our credit evaluation process, collection terms and through geographical dispersion of sales. Sales to three customers each exceeded 10% of net sales during fiscal 2017 and fiscal 2016. In fiscal 2015 two customers each exceeded 10% of net sales. Sales to these customers represented approximately 53%, 50% and 39% of our net sales in fiscal 2017, fiscal 2016 and fiscal 2015, respectively. Net accounts receivable from these customers were 56% and 51% of net accounts receivable at June 29, 2017 and June 30, 2016, respectively. Promotion, Marketing and Advertising Costs Promotions, allowances and customer rebates are recorded at the time revenue is recognized and are reflected as reductions in sales. Annual volume rebates are estimated based upon projected volumes for the year, while promotions and allowances are recorded based upon terms of the actual arrangements. Coupon incentive costs are accrued based on an estimate of redemptions to occur. Marketing and advertising costs are incurred to promote and support branded products in the consumer distribution channel. These costs are generally expensed as incurred, recorded in selling expenses, and were as follows for the last three fiscal years: Year ended Year ended Year ended Marketing and advertising expense $ 10,064 $ 11,569 $ 11,069 Shipping and Handling Costs Shipping and handling costs, which include freight and other expenses to prepare finished goods for shipment, are included in selling expenses. Shipping and handling costs for the last three fiscal years were as follows: Year ended Year ended Year ended Shipping and handling costs $ 17,682 $ 16,686 $ 17,699 Research and Development Expenses Research and development expense represents the cost of our research and development personnel and their related expenses and is charged to selling expenses as incurred. Research and development expenses for the last three fiscal years were as follows: Year ended Year ended Year ended Research and development expense $ 658 $ 653 $ 979 Stock-Based Compensation We account for stock-based employee compensation arrangements in accordance with the provisions of ASC 718, as amended by Accounting Standard Update (“ASU”) 2016-09, Income Taxes We account for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been reported in our financial statements or tax returns. Such items give rise to differences in the financial reporting and tax basis of assets and liabilities. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets if it is more likely than not that all or a portion of the asset will not be realized. In estimating future tax consequences, we consider all expected future events other than changes in tax law or rates. We record liabilities for uncertain income tax positions based on a two-step We recognize interest and penalties accrued related to unrecognized tax benefits in the Income tax expense caption in the Consolidated Statement of Comprehensive Income. We evaluate the realization of deferred tax assets by considering our historical taxable income and future taxable income based upon the reversal of deferred tax liabilities. As of June 29, 2017, we believe that our deferred tax assets are fully realizable, except for $171 of net basis differences for which we have provided a valuation allowance. Earnings per Share Basic earnings per common share are calculated using the weighted average number of shares of Common Stock and Class A Stock outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock. The following table presents the reconciliation of the weighted average shares outstanding used in computing basic and diluted earnings per share: Year ended Year ended Year ended Weighted average number of shares outstanding — basic 11,317,149 11,233,975 11,150,658 Effect of dilutive securities: Stock options and restricted stock units 86,456 98,949 97,601 Weighted average number of shares outstanding — diluted 11,403,605 11,332,924 11,248,259 The following table presents a summary of anti-dilutive awards excluded from the computation of diluted earnings per share: Year ended Year ended Year ended Weighted average number of anti-dilutive shares: 1,068 — — Weighted average exercise price per share: $ 65.35 $ — $ — Comprehensive Income We account for comprehensive income in accordance with ASC Topic 220, Comprehensive Income non-owner Recent Accounting Pronouncements The following recent accounting pronouncements were adopted in the current fiscal year: In March 2016, the FASB issued ASU No. 2016-09 In April 2015, the FASB issued ASU No. 2015-05 Internal-Use 350-40): 2015-05 In April 2015, the FASB issued ASU No. 2015-03 835-30) 2015-03 2015-03 In February 2015, the FASB issued ASU No. 2015-02 2015-02 2015-02 In August 2014, the FASB issued ASU No. 2014-15 205-40)”. 2014-15 The following recent accounting pronouncements have not yet been adopted: In May 2017, the FASB issued ASU No. 2017-09 2017-09 2017-09 In March 2017, the FASB issued ASU No. 2017-07 In October 2016, the FASB issued ASU No. 2016-17 2015-02 2016-17 2016-17 In August 2016, the FASB issued ASU No. 2016-15 2016-15 In June 2016, the FASB issued ASU No. 2016-13 2013-13 In February 2016, the FASB issued ASU No. 2016-02 2016-02 In July 2015, the FASB issued ASU No. 2015-11 Inventory (Topic 330) Simplifying the Measurement of Inventory first-in, first-out In May 2014, the FASB issued ASU No. 2014-09 340-40, No. 2015-14 2014-09 |