UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended December 23, 2021

OR

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

Commission File Number 0-19681

JOHN B. SANFILIPPO & SON, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	36-2419677
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
1703 North Randall Road Elgin, Illinois	60123-7820
(Address of Principal Executive Offices)	(Zip Code)

(847) 289-1800

(Registrant’s Telephone Number, Including Area Code)

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

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

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No

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

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

As of January 21, 2022, 8,928,322 shares of the Registrant’s Common Stock, $0.01 par value per share and 2,597,426 shares of the Registrant’s Class A Common Stock, $0.01 par value per share, were outstanding.

JOHN B. SANFILIPPO & SON, INC.

FORM 10-Q

FOR THE QUARTER ENDED DECEMBER 23, 2021

INDEX

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Comprehensive Income for the Quarter and Twenty-Six Weeks Ended December 23, 2021 and December 24, 2020		3
Consolidated Balance Sheets as of December 23, 2021, June 24, 2021 and December 24, 2020		4
Consolidated Statements of Stockholders’ Equity for the Quarter and Twenty-Six Weeks Ended December 23, 2021 and December 24, 2020		6
Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended December 23, 2021 and December 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		29
SIGNATURE		33

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

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

	For the Quarter Ended						For the Twenty-six Weeks Ended
	December 23, 2021			December 24, 2020			December 23, 2021			December 24, 2020
Net sales	$	253,207		$	233,575		$	479,536		$	443,848
Cost of sales		200,977			180,780			375,503			351,721
Gross profit		52,230			52,795			104,033			92,127
Operating expenses:
Selling expenses		23,567			17,694			41,312			29,778
Administrative expenses		10,401			7,305			19,470			15,680
Gain on sale of facility, net		—			—			(2,349	)		—
Total operating expenses		33,968			24,999			58,433			45,458
Income from operations		18,262			27,796			45,600			46,669
Other expense:
Interest expense including $203, $165, $392 and $332 to related parties		420			376			791			826
Rental and miscellaneous expense, net		323			365			671			797
Other expense		619			629			1,237			1,259
Total other expense, net		1,362			1,370			2,699			2,882
Income before income taxes		16,900			26,426			42,901			43,787
Income tax expense		3,653			6,541			10,405			11,090
Net income	$	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		364			414			728			830
Income tax expense related to pension adjustments		(95	)		(103	)		(190	)		(207	)
Other comprehensive income, net of tax		269			311			538			623
Comprehensive income	$	13,516		$	20,196		$	33,034		$	33,320
Net income per common share-basic	$	1.15		$	1.73		$	2.82		$	2.85
Net income per common share-diluted	$	1.14		$	1.72		$	2.81		$	2.83

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

3

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

	December 23, 2021		June 24, 2021		December 24, 2020
ASSETS
CURRENT ASSETS:
Cash	$	1,027	$	672	$	1,763
Accounts receivable, less allowance for doubtful accounts of $358, $291 and $325		65,032		66,334		60,495
Inventories		178,741		147,998		155,371
Prepaid expenses and other current assets		12,764		8,568		9,872
Assets held for sale		—		1,595		—
TOTAL CURRENT ASSETS		257,564		225,167		227,501
PROPERTY, PLANT AND EQUIPMENT:
Land		9,150		9,150		9,277
Buildings		102,801		102,666		110,611
Machinery and equipment		228,418		225,529		224,458
Furniture and leasehold improvements		5,296		5,287		5,199
Vehicles		614		614		642
Construction in progress		17,254		12,301		6,577
		363,533		355,547		356,764
Less: Accumulated depreciation		245,607		238,471		244,447
		117,926		117,076		112,317
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		133,820		133,374		129,018
Intangible assets, net		8,953		9,961		10,968
Cash surrender value of officers’ life insurance and other assets		9,579		10,732		9,017
Deferred income taxes		4,304		6,087		7,288
Goodwill		9,650		9,650		9,650
Operating lease right-of-use assets		2,852		3,484		4,119
TOTAL ASSETS	$	426,722	$	398,455	$	397,561

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

4

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

	December 23, 2021			June 24, 2021			December 24, 2020
LIABILITIES & STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Revolving credit facility borrowings	$	35,885		$	8,653		$	9,169
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		63,452			48,861			52,140
Bank overdraft		1,668			1,093			1,510
Accrued payroll and related benefits		12,832			24,109			13,470
Other accrued expenses		13,080			10,774			10,907
Income taxes payable		—			2,839			7,012
TOTAL CURRENT LIABILITIES		130,826			100,204			97,988
LONG-TERM LIABILITIES:
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		35,596			34,919			32,146
Long-term operating lease liabilities, net of current portion		1,504			2,103			2,704
Other		8,050			7,880			7,899
TOTAL LONG-TERM LIABILITIES		54,093			55,757			55,566
TOTAL LIABILITIES		184,919			155,961			153,554
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Class A Common Stock, convertible to Common Stock on a per share basis, cumulative voting rights of ten votes per share, $.01 par value; 10,000,000 shares authorized, 2,597,426 shares issued and outstanding		26			26			26
Common Stock, non-cumulative voting rights of one vote per share, $.01 par value; 17,000,000 shares authorized, 9,044,960, 8,988,812 and 8,983,588 shares issued		90			90			90
Capital in excess of par value		127,080			126,271			125,032
Retained earnings		124,298			126,336			128,070
Accumulated other comprehensive loss		(8,487	)		(9,025	)		(8,007	)
Treasury stock, at cost; 117,900 shares of Common Stock		(1,204	)		(1,204	)		(1,204	)
TOTAL STOCKHOLDERS’ EQUITY		241,803			242,494			244,007
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	426,722		$	398,455		$	397,561

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

5

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

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

	Class A Common Stock				Common Stock				Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock
	Shares		Amount		Shares		Amount														Total
Balance, June 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		—		(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		—		(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		—		—												—
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.

6

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	For the Twenty-six Weeks Ended
	December 23, 2021			December 24, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	32,496		$	32,697
Depreciation and amortization		9,143			9,089
Gain on disposition of assets, net		(1,765	)		(2,530	)
Deferred income tax expense (benefit)		1,783			(500	)
Stock-based compensation expense		1,771			1,620
Change in assets and liabilities:
Accounts receivable, net		1,302			(1,247	)
Inventories		(30,743	)		16,697
Prepaid expenses and other current assets		(3,429	)		(1,557	)
Accounts payable		16,244			16,244
Accrued expenses		(8,971	)		(11,993	)
Income taxes payable		(3,606	)		1,871
Other long-term assets and liabilities		379			344
Other, net		1,216			1,200
Net cash provided by operating activities		15,820			61,935
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(9,485	)		(11,121	)
Proceeds from dispositions of assets, net		3,950			294
Other		(354	)		93
Net cash used in investing activities		(5,889	)		(10,734	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings (repayments)		27,232			(17,839	)
Principal payments on long-term debt		(1,887	)		(3,432	)
Increase (decrease) in bank overdraft		575			(531	)
Dividends paid		(34,534	)		(28,685	)
Taxes paid related to net share settlement of equity awards		(962	)		(486	)
Net cash used in financing activities		(9,576	)		(50,973	)
NET INCREASE IN CASH		355			228
Cash, beginning of period		672			1,535
Cash, end of period	$	1,027		$	1,763

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

7

JOHN B. SANFILIPPO & SON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 1 – Basis of Presentation and Description of Business

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

• References herein to fiscal 2022 and fiscal 2021 are to the 53 week fiscal year ending June 30, 2022 and the 52 week fiscal year ended June 24, 2021, respectively.

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

• References herein to the first half or first twenty-six weeks of fiscal 2022 and fiscal 2021 are to the twenty-six weeks ended December 23, 2021 and December 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 our Fisher, Orchard Valley Harvest, Squirrel Brand, Southern Style Nuts and Sunshine Country brand 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, 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. Our products are sold through three primary distribution channels, 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 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 2021 Annual Report on Form 10-K for the fiscal year ended June 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.

8

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 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 no contract asset balance for 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
Distribution Channel	December 23, 2021		December 24, 2020		December 23, 2021		December 24, 2020
Consumer	$	203,479	$	192,029	$	383,240	$	358,786
Commercial Ingredients		27,756		20,536		55,912		43,347
Contract Packaging		21,972		21,010		40,384		41,715
Total	$	253,207	$	233,575	$	479,536	$	443,848

9

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 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 23, 2021		June 24, 2021		December 24, 2020		Affected Line Item in Consolidated Balance Sheet
Assets
Operating lease right-of-use assets	$	2,852	$	3,484	$	4,119	Operating lease right-of-use assets
Total lease right-of-use assets	$	2,852	$	3,484	$	4,119
Liabilities
Current:
Operating leases	$	1,392	$	1,430	$	1,429	Other accrued expenses
Noncurrent:
Operating leases		1,504		2,103		2,704	Long-term operating lease liabilities
Total lease liabilities	$	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
	December 23, 2021		December 24, 2020		December 23, 2021		December 24, 2020
Operating lease costs (a)	$	470	$	477	$	914	$	950
Variable lease costs (b)		19		17		36		37
Total Lease Cost	$	489	$	494	$	950	$	987

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

(b) Variable lease costs consist of sales tax.

10

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

	For the Twenty-six Weeks Ended
	December 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

	December 23, 2021			June 24, 2021			December 24, 2020
Weighted Average Remaining Lease Term (in years)		2.5			2.8			3.1
Weighted Average Discount Rate		4.2	%		4.3	%		4.3	%

Maturities of operating lease liabilities as of December 23, 2021 are as follows:

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		—
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 23, 2021		December 24, 2020		December 23, 2021		December 24, 2020
Lease income related to lease payments	$	408	$	452	$	818	$	903

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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 30, 2022 (excluding the twenty-six weeks ended December 23, 2021)	$	880
June 29, 2023		1,794
June 27, 2024		1,818
June 26, 2025		1,228
June 25, 2026		670
June 24, 2027		614
Thereafter		—
	$	7,004

Note 4 – Inventories

Inventories consist of the following:

	December 23, 2021		June 24, 2021		December 24, 2020
Raw material and supplies	$	71,960	$	64,219	$	66,793
Work-in-process and finished goods		106,781		83,779		88,578
Total	$	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
Customer relationships	$	21,100		$	21,100		$	21,100
Brand names		16,990			16,990			16,990
Non-compete agreement		270			270			270
		38,360			38,360			38,360
Less accumulated amortization:
Customer relationships		(18,279	)		(17,643	)		(17,008	)
Brand names		(10,908	)		(10,562	)		(10,217	)
Non-compete agreement		(220	)		(194	)		(167	)
		(29,407	)		(28,399	)		(27,392	)
Net intangible assets	$	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 expenses” on the Consolidated Statements of Comprehensive Income, was $504 and $1,008 for the quarter and twenty-six weeks ended December 23, 2021, respectively. Amortization expense for the remainder of fiscal 2022 is expected to be approximately $888 and expected amortization expense the next five fiscal years is as follows:

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 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 23, 2021.

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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 23, 2021, we had $77,330 of available credit under the Credit Facility which reflects borrowings of $35,885 and reduced availability as a result of $4,285 in outstanding letters of credit. As of December 23, 2021, we were in compliance with all financial covenants under the Credit Facility and Mortgage 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 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 no 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 2022, there were 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.

The following is a summary of RSU activity for the first half of fiscal 2022:

Restricted Stock Units	Shares			Weighted Average  Grant Date Fair Value
Outstanding at June 24, 2021		159,846		$	58.05
Activity:
Granted		53,524			75.94
Vested (a)		(67,598	)		45.91
Forfeited		—			—
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 23, 2021, there were 23,356 RSUs outstanding that were vested but deferred.

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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 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 23, 2021, there was $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 1.9 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
	December 23, 2021		December 24, 2020		December 23, 2021		December 24, 2020
Service cost	$	247	$	236	$	495	$	472
Interest cost		255		215		509		429
Amortization of prior service cost		—		119		—		239
Amortization of loss		364		295		728		591
Net periodic benefit cost	$	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.

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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 23, 2021 and December 24, 2020. These changes are all related to our defined benefit pension plan.

	For the Twenty-Six Weeks Ended
Changes to AOCL (a)	December 23, 2021			December 24, 2020
Balance at beginning of period	$	(9,025	)	$	(8,630	)
Other comprehensive income before reclassifications		—			—
Amounts reclassified from accumulated other comprehensive loss		728			830
Tax effect		(190	)		(207	)
Net current-period other comprehensive income		538			623
Balance at end of period	$	(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 23, 2021 and December 24, 2020 were as follows:

													Affected line item in the Consolidated Statements of Comprehensive Income
Reclassifications from AOCL to earnings (b)	For the Quarter Ended						For the Twenty-six Weeks Ended
	December 23, 2021			December 24, 2020			December 23, 2021			December 24, 2020
Amortization of defined benefit pension items:
Unrecognized prior service cost	$	—		$	(119	)	$	—		$	(239	)	Other expense
Unrecognized net loss		(364	)		(295	)		(728	)		(591	)	Other expense
Total before tax		(364	)		(414	)		(728	)		(830	)
Tax effect		95			103			190			207		Income tax expense
Amortization of defined pension items, net of tax	$	(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.

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Note 12 – Fair Value of Financial Instruments

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

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

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

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

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

	December 23, 2021		June 24, 2021		December 24, 2020
Carrying value of long-term debt:	$	12,862	$	14,749	$	16,627
Fair value of long-term debt:		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 – Garysburg, North Carolina Facility

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

We completed shelling of the 2019 peanut crop during the second quarter of fiscal 2021 and the facility was used to store and ship inshell peanuts through the remainder of fiscal 2021, at which time the Company decided to permanently cease all operations at the Garysburg facility.

During the first quarter of fiscal 2022 we sold the Garysburg property and remaining equipment located at the property to a third party for $4,000, subject to customary adjustments to reflect closing costs, which resulted in a $2,349 gain.

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Note 14 – Recent Accounting Pronouncements

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

In December 2019, the FASB issued ASU No. 2019-12 “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes”. The amendments in this Update were issued as part of FASB’s initiative to reduce complexity in accounting standards. The amendments simplify the accounting for income taxes by removing certain exceptions in Topic 740 and improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU No. 2019-12 was adopted using a prospective method in the first quarter of fiscal 2022 and did not have a material impact on our Consolidated Financial Statements.

In October 2020, the FASB issued ASU No. 2020-10 “Codification Improvements”. This ASU was issued to address a wide variety of topics in the Accounting Standard Codification with the intent to make the Codification easier to understand and apply by eliminating inconsistencies and providing clarifications. ASU No. 2020-10 was adopted in the first quarter of fiscal 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.

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

OVERVIEW

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

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

• References herein to fiscal 2022 and fiscal 2021 are to the fiscal year for the 53 weeks ending June 30, 2022 and the fiscal year for the 52 weeks ended June 24, 2021, respectively.

• References herein to the second quarter of fiscal 2022 and fiscal 2021 are to the quarters ended December 23, 2021 and December 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 23, 2021 and December 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 our Fisher, Orchard Valley Harvest, Squirrel Brand, Southern Style Nuts and Sunshine Country brand 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. 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.

We face a number of challenges in the future, which include intensified competition on pricing and for market share from both private brand and name brand nut products. We face changing industry trends as consumer preferences 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. 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 supply chain issues continue, and we cannot secure adequate supplies to fulfill customer orders or cannot obtain the transportation and labor services we need, they could have an unfavorable impact on 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 customers in a timely manner.

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We will continue to focus our promotional and advertising activity to invest in our brands to achieve growth. We intend to execute an omnichannel approach to win in key categories including recipe nuts, nut flours, snack nuts, trail mix and snacking. We continue to see strong e-commerce performance across our branded portfolio and anticipate taking various actions to accelerate that growth across a variety of established and 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.

COVID-19 Impacts

We will continue to face challenges in our fiscal 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. During the fourth quarter of fiscal 2021 and into the first half of fiscal 2022, as various COVID-19 vaccines became more widely distributed and accepted by the public and indoor dining restrictions 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 could be negatively impacted in the third quarter if conditions deteriorate as a result of the recent surge in COVID-19 cases due to 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 non-essential retail customers is not offset by an increase in sales in our consumer channel that is driven by customers eating at home.

Also, during fiscal 2021 and into the first half of fiscal 2022, we have experienced the implications from a shortage in capacity in the transportation industry. Compounding this driver shortage is an increase in demand driven by additional spending on consumer 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 further into fiscal 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 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 update and enhance these measures as new guidance is provided. In addition, we have extended personal time off for those employees who are ill or 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 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.

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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. Net sales for the first twenty-six weeks of fiscal 2022 increased by $35.7 million, or 8.0%, to $479.5 million compared to the first twenty-six weeks of fiscal 2021.

Sales volume, measured as pounds sold to customers, increased 6.0% for the second quarter of fiscal 2022 compared to the second quarter of fiscal 2021. Sales volume for the first twenty-six weeks of fiscal 2022 increased 9.7% compared to the first twenty-six weeks of fiscal 2021.

Gross profit decreased by $0.6 million, and our gross profit margin, as a percentage of net sales, decreased to 20.6% for the second quarter of fiscal 2022 compared to 22.6% for the second quarter of fiscal 2021. Gross profit increased $11.9 million and our gross profit margin increased to 21.7% from 20.8% for the first twenty-six weeks of fiscal 2022 compared to the first twenty-six weeks of fiscal 2021.

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

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

We have seen acquisition costs for dried fruit and most major nut categories increase in the 2021 crop year (which falls into our current 2022 fiscal year). We completed procurement of inshell walnuts during the first half of fiscal 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 2022 and will be recognized in our financial results at that time.

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RESULTS OF OPERATIONS

Net Sales

Our net sales increased 8.4% to $253.2 million in the second quarter of fiscal 2022 compared to net sales of $233.6 million for the second quarter of fiscal 2021. The increase in net sales was primarily attributable to a 6.0% increase in sales volume, which is defined as pounds sold to 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 2022 our net sales were $479.5 million, an increase of $35.7 million, or 8.0%, compared to the same period of fiscal 2021. The increase in net sales was primarily attributable to a 9.7% increase in sales volume, which was partially offset by a 1.5% decrease in the weighted average selling price per pound for our products. The decline in 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
Product Type	December 23, 2021			December 24, 2020			December 23, 2021			December 24, 2020
Peanuts		16.6	%		18.8	%		17.1	%		19.1	%
Pecans		15.7			15.0			12.4			12.0
Cashews & Mixed Nuts		20.9			23.1			21.6			23.4
Walnuts		7.0			7.2			6.4			6.9
Almonds		9.0			9.2			9.8			10.8
Trail & Snack Mixes		25.1			22.2			26.5			22.5
Other		5.7			4.5			6.2			5.3
Total		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
Distribution Channel	December 23, 2021		Percentage of Total			December 24, 2020		Percentage of Total			$ Change		Percent Change
Consumer (1)	$	203,479		80.3	%	$	192,029		82.2	%	$	11,450		6.0	%
Commercial Ingredients		27,756		11.0			20,536		8.8			7,220		35.2
Contract Packaging		21,972		8.7			21,010		9.0			962		4.6
Total	$	253,207		100.0	%	$	233,575		100.0	%	$	19,632		8.4	%

(1) Sales of branded products were approximately 28% and 30% of total consumer sales during each of the second quarter of fiscal 2022 and fiscal 2021, respectively. Fisher branded products were approximately 71% and 74% of branded sales during the second quarter of fiscal 2022 and fiscal 2021, respectively, with Orchard Valley Harvest branded products accounting for the majority of the remaining branded product sales.

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

	For the Twenty-six Weeks Ended
Distribution Channel	December 23, 2021		Percentage of Total			December 24, 2020		Percentage of Total			$ Change			Percent Change
Consumer (1)	$	383,240		79.9	%	$	358,786		80.8	%	$	24,454			6.8	%
Commercial Ingredients		55,912		11.7			43,347		9.8			12,565			29.0
Contract Packaging		40,384		8.4			41,715		9.4			(1,331	)		(3.2	)