What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-01-27 compared with 2020-10-28 · 171 added, 103 removed, 149 unchanged (65% of the section changed)

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

References herein to the first quarter of fiscal 2021 and fiscal 2020 are to the quarters ended September 24, 2020 and September 26, 2019, respectively.

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

As used herein, unless the context otherwise indicates, the terms “we”, “us”, “our” or “Company” collectively refer to John B.

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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 in fiscal 2021.

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

recipe nut sales have been negatively impacted in fiscal 2020 and the first quarter of fiscal 2021 due to this increased competition for market share.

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.

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 shopping in smaller store formats like grocery and online.

With restaurant closures and other limitations due to the impact of COVID-19,

consumers are also doing more cooking and baking at home, which has had a positive impact on certain aspects of our consumer business but a negative impact on our foodservice business.

As restaurant closures and other out-of-home

dining limitations continue due to the impact of COVID-19,

consumers are also doing more snacking and cooking and baking at home.

While these developments have had a positive impact on certain aspects of our consumer business, they have had a negative impact on our foodservice business.

We will continue to focus on seeking profitable business opportunities to maximize the utilization of our production capacity at our primary manufacturing, processing and distribution facility located in Elgin, Illinois.

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

platforms to match consumer behavior.

We continue to see strong e-commerce

performance across our Orchard Valley Harvest

recipe brands and expect that there will be additional opportunities to connect these brands to consumers’ desires for more functional snacking and baking and cooking ideas, respectively.

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.

We will continue to face challenges in our fiscal 2021 as result of the COVID-19

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retail customers.

However, if conditions deteriorate in the future and consumers are limited in their ability to purchase meals outside their homes, we believe demand will decrease (or demand will continue to be suppressed) from our foodservice, restaurant, convenience store and non-essential

retail customers and the collectability of accounts receivables from these customers could be impacted.

Also, in our first quarter of fiscal 2021, we began to see signs of a shortage in capacity in the transportation industry, which our transportation service providers believe is due to driver concerns regarding health and safety from increasing COVID-19

cases and social unrest seen in certain large cities within the country.

We believe this shortage in transportation capacity may continue in fiscal 2021 and may lead to increased transportation costs and potential disruptions in service to our customers and from our suppliers.

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, and we believe that as the COVID-19

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

retail customers will continue to improve and we expect to eventually return to pre-pandemic

Also, in the first half of fiscal 2021, we have seen signs of 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.

Compounding this driver shortage is an increase in demand driven by additional spending on consumer goods.

This tightening in transportation capacity is expected to continue through the third quarter of fiscal 2021, has led to increased transportation costs and may lead to potential disruptions in service to our customers and from our suppliers.

The Company’s COVID-19

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We have contingency plans in place to help reduce the negative impact if one or more of our manufacturing facilities encounters a partial or full shut down.

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

platforms to match consumer behavior.

We continue to see strong e-commerce

and grocery performance across our Orchard Valley Harvest

recipe brands and expect that there will be additional opportunities to connect these brands to consumers’ desires for more functional snacking and baking and cooking ideas, respectively.

See the information referenced in Part I, Item 1A — “Risk Factors” of this report for additional information about our risks, challenges and uncertainties.

QUARTERLY HIGHLIGHTS

Our net sales of $210.3 million for the first quarter of fiscal 2021 decreased 3.5% from our net sales of $217.8 million for the first quarter of fiscal 2020.

Sales volume, measured as pounds sold to customers, decreased 3.5% compared to the first quarter of fiscal 2020.

Gross profit decreased $2.9 million, and our gross profit margin, as a percentage of net sales, decreased to 18.7% for the first quarter of fiscal 2021 compared to 19.4% for the first quarter of fiscal 2020.

Total operating expenses for the first quarter of fiscal 2021 decreased $2.7 million, or 11.8%, compared to the first quarter of fiscal 2020.

As a percentage of net sales, total operating expenses in the first quarter of fiscal 2021 decreased to 9.7% from 10.6% for the first quarter of fiscal 2020.

The total value of inventories on hand at the end of the first quarter of fiscal 2021 decreased $6.1 million, or 3.9%, in comparison to the total value of inventories on hand at the end of the first quarter of fiscal 2020.

We expect acquisition costs for walnuts and almonds to decrease in the 2020 crop year (which falls into our current 2021 fiscal year).

We also expect acquisition costs to decline or remain stable for all other major tree nuts.

While we began to procure inshell walnuts during the first quarter of fiscal 2021, the total payments due to our walnut growers will not be determined until the second and/or third quarters of fiscal 2021.

We will determine the final prices to be paid to the walnut growers based upon current market prices and other factors such as crop size and export demand.

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.

Net sales for the first twenty-six

weeks of fiscal 2021 decreased by $20.4 million, or 4.4%, to $443.8 million compared to the first twenty-six

weeks of fiscal 2020.

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

Sales volume for the first twenty-six

weeks of fiscal 2021 decreased 0.7% compared to the first twenty-six

weeks of fiscal 2020.

Gross profit increased by $2.8 million, and our gross profit margin, as a percentage of net sales, increased to 22.6% for the second quarter of fiscal 2021 compared to 20.3% for the second quarter of fiscal 2020.

Gross profit dollars remained relatively unchanged and our gross profit margin increased to 20.8% from 19.9% for the first twenty-six

weeks of fiscal 2021 compared to the first twenty-six

weeks of fiscal 2020.

Total operating expenses for the second quarter of fiscal 2021 decreased by $0.5 million, or 2.0%, compared to the second quarter of fiscal 2020.

As a percentage of net sales, total operating expenses in the second quarter of fiscal 2021 increased to 10.7% from 10.4% for the second quarter of fiscal 2020.

For the first half of fiscal 2021, total operating expenses decreased by $3.2 million, to 10.2% of net sales compared to 10.5% for the first half of fiscal 2020.

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

We have seen acquisition costs for all major tree nuts decrease in the 2020 crop year (which falls into our current 2021 fiscal year).

We completed procurement of inshell walnuts during the first half of fiscal 2021.

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 payments will be determined during the second and/or third quarters of fiscal 2021 and will be recognized in our financial results at that time.

Any difference between our estimated liability and the actual final liability will be determined during the third quarter of fiscal 2021 and will be recognized in our financial results at that time.

RESULTS OF OPERATIONS

Our net sales decreased 3.5% to $210.3 million in the first quarter of fiscal 2021 compared to net sales of $217.8 million for the first quarter of fiscal 2020.

Sales volume, which is defined as pounds sold to customers, decreased 3.5% in the quarterly comparison.

Our net sales decreased 5.2% to $233.6 million in the second quarter of fiscal 2021 compared to net sales of $246.4 million for the second quarter of fiscal 2020.

The decrease in net sales was primarily attributable to lower selling prices for tree nuts, which were due to lower commodity acquisition costs.

The decline in net sales from lower selling prices was partially offset by a 1.8% increase in sales volume, which is defined as pounds sold to customers.

For the first twenty-six

weeks of fiscal 2021 our net sales were $443.8 million, a decrease of $20.4 million, or 4.4%, compared to the same period of fiscal 2020.

The decrease 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 in sales volume also contributed to the overall decline in net sales.

The following table summarizes sales by product type as a percentage of total gross sales.

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For the Quarter Ended

September 24,

September 26,

For the Twenty-six Weeks Ended

Cashews & Mixed Nuts

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Distribution Channel

September 24,

September 26,

Commercial Ingredients

Contract Packaging

Sales of branded products were approximately 25% and 28% of total consumer channel sales during the first quarter of fiscal 2021 and fiscal 2020, respectively.

branded products were approximately 65% and 64% of branded sales during the first quarter of fiscal 2021 and fiscal 2020, respectively, with branded produce products accounting for the majority of the remaining branded product sales.

Net sales in the consumer distribution channel increased $9.6 million, or 6.1%, and sales volume increased 3.8% in the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020.

The sales volume increase was driven by increased sales of private brand trail and snack mixes, mixed nuts, cashews and peanuts at existing customers, which was partially offset by a decline in peanut butter sales volume due to a temporary peanut supply shortage during the current quarter.

Sales volume for Fisher

snack nuts increased 12.6% due to increased promotional activity and distribution gains at new and existing customers for our Oven Roasted Never Fried

product line.

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

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

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

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

For the Twenty-six

Distribution Channel

Commercial Ingredients

Contract Packaging

Sales of branded products were approximately 27% and 31% of total consumer sales during the first twenty-six

weeks of fiscal 2021 and fiscal 2020, respectively.

branded products were approximately 70% and 71% of branded sales during the first twenty-six

weeks of fiscal 2021 and fiscal 2020, respectively, with branded produce

products accounting for majority of the remaining branded product sales.

Net sales in the consumer distribution channel increased $3.9 million, or 2.1%, and sales volume increased 9.9% in the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020.

The sales volume increase was driven by increased sales of private brand peanuts, trail mixes and snack mixes, as consumer preferences have shifted to lower priced products due to current economic conditions.

Sales volume for Fisher

recipe nuts decreased 14.1% as a result of lost distribution at some customers, which was offset in part by increased sales with Internet retailers and increased sales with other existing customers in the grocery sector.

snack nuts increased 30.2%, primarily as a result of increased promotional activity.

Sales volume of Fisher

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

of Orchard Valley Harvest

produce products decreased 16.1% due to some lost distribution at one customer and reduced foot traffic at a major customer in the non-food

products decreased 13.0% due to reduced foot traffic at a major customer in the non-food

sector as a result of COVID-19,

Sales volume for Southern Style Nuts

decreased 8.4% as a result of lower promotional activity at several customers, which was offset in part by distribution gains with new grocery customers and increased sales with Internet retailers.

Net sales in the commercial ingredients distribution channel decreased 38.2% in dollars and 27.7% in sales volume in the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020.

The decline in sales volume was due to a 40.9% decrease in sales volume in our foodservice business which resulted from a decline in air travel and nationwide restrictions on occupancy rates in and closures of restaurants, both of which were attributable to COVID-19.

Net sales in the contract packaging distribution channel decreased 13.0% in dollars and 12.2% in sales volume in the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020.

reduced promotional activity and lost distribution at some customers.

Sales volume of Southern Style Nuts

decreased 4.2% due to a reduction in merchandising and promotional activity, which was offset in part by distribution gains with new customers.

In the first twenty-six

weeks of fiscal 2021, net sales in the consumer distribution channel increased $13.6 million, or 3.9%, and sales volume increased 7.0% compared to the same period of fiscal 2020.

The sales volume increase occurred for the same reason cited in the quarterly comparison.

Net sales in the commercial ingredients distribution channel decreased by 40.0% in dollars and 23.6% in sales volume in the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020.

The decline in sales volume was due to a 29.4% decrease in sales volume in our foodservice business.

The sales volume decline in our foodservice business resulted from a decline in air travel and nationwide restrictions on indoor restaurant dining and closures of restaurants, all of which were attributable to COVID-19.

In the first twenty-six

weeks of fiscal 2021, net sales in the commercial ingredients distribution channel decreased by 39.1% in dollars and 25.6% in sales volume compared to the same period of fiscal 2020.

The decline in sales volume was due to a 35.5% decrease in sales volume in our foodservice business, which occurred for the same reasons cited in the quarterly comparison.

Net sales in the contract packaging distribution channel decreased by 12.8% in dollars and 14.1% in sales volume in the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020.

The decline in sales volume was primarily attributable to the unfavorable impact of lower convenience store foot traffic on one customer’s business as a result of COVID-19.

as well as the loss of peanut butter business with another customer due to the temporary peanut supply shortage cited above.

Gross profit decreased $2.9 million, or 6.9%, to $39.3 million for the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020.

Our gross profit margin, as a percentage of net sales, decreased to 18.7% for the first quarter of fiscal 2021 compared to 19.4% for the first quarter of fiscal 2020.

The decreases in gross profit and gross profit margin were mainly attributable to the sales volume decrease discussed above.

In the first twenty-six

weeks of fiscal 2021, net sales in the contract packaging distribution channel decreased by 12.9% in dollars and 13.2% in sales volume compared to the first twenty-six

weeks of fiscal 2020.

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

Gross profit increased by $2.8 million, or 5.6%, to $52.8 million for the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020.

Our gross profit margin, as a percentage of net sales, increased to 22.6% for the second quarter of fiscal 2021 compared to 20.3% for the second quarter of fiscal 2020.

The increases in gross profit and gross profit margin were mainly attributable to lower commodity acquisition costs for tree nuts and the sales volume increase discussed above.

Gross profit was $92.1 million for the first twenty-six

weeks of fiscal 2021 compared to $92.2 million for the first twenty-six

weeks of fiscal 2020.

Our gross profit margin increased 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.

The increase in gross profit margin in the year to date comparison was primarily attributable to lower commodity acquisition costs for tree nuts.

Operating Expenses

Total operating expenses for the first quarter of fiscal 2021 decreased $2.7 million to $20.5 million.

Operating expenses for the first quarter of fiscal 2021 decreased to 9.7% of net sales from 10.6% of net sales for the first quarter of fiscal 2020 due primarily to reductions in advertising, compensation and consulting expenses.

Selling expenses for the first quarter of fiscal 2021 were $12.1 million, a decrease of $2.0 million, or 14.4%, from the first quarter of fiscal 2020.

The decrease was driven primarily by a $1.1 million decrease in advertising expense due to a reduction in radio advertising campaigns and sports sponsorships, a $0.7 million decrease in compensation related expenses and a $0.5 million decrease in freight expense due to a reduction in sales pounds shipped.

Administrative expenses for the first quarter of fiscal 2021 were $8.4 million, a decrease of $0.7 million, or 7.7%, from the first quarter of fiscal 2020.

The decrease was driven primarily by a $0.3 million decrease in consulting fees and a $0.3 million decrease in compensation related expenses, primarily incentive compensation.

Total operating expenses for the second quarter of fiscal 2021 decreased by $0.5 million, or 2.0%, to $25.0 million.

Operating expenses increased 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.

Selling expenses for the second quarter of fiscal 2021 were $17.7 million, an increase of $1.6 million, or 9.9%, from the second quarter of fiscal 2020.

The increase was driven primarily by a $1.0 million increase in advertising expense primarily related to online advertising for our branded products and a $0.7 million increase in freight expense due to higher rates and an increase in sales pounds shipped.

Administrative expenses for the second quarter of fiscal 2021 were $7.3 million compared to $9.4 million for the second quarter of fiscal 2020.

The decrease was primarily due to a $2.3 million gain on the estimated final insurance settlement related to the fire that occurred in our Garysburg, North Carolina facility in the second quarter of fiscal 2020.

Total operating expenses for the first twenty-six

weeks of fiscal 2021 decreased by $3.2 million, or 6.7%, to $45.5 million.

Operating expenses decreased 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.

Selling expenses for the first twenty-six

weeks of fiscal 2021 were $29.8 million, a decrease of $0.4 million, or 1.4%, from the amount recorded for the first twenty-six

weeks of fiscal 2020.

The decrease was driven primarily by a $0.5 million decrease in payroll related and incentive compensation expense and a $0.3 million decrease in travel expense due to COVID-19

travel restrictions.

These decreases were partially offset by a $0.3 million increase in freight expense for the same reasons discussed in the quarterly comparison.

Administrative expenses for the first twenty-six

weeks of fiscal 2021 were $15.7 million, a decrease of $2.8 million, or 15.2%, compared to the same period of fiscal 2020.

The decrease was primarily due to $2.5 million gain on asset disposals, mainly resulting from the insurance settlement discussed above, combined with a $0.3 million decrease in consulting expense.

Income from Operations

Due to the factors discussed above, income from operations decreased to $18.9 million, or 9.0% of net sales, for the first quarter of fiscal 2021 from $19.1 million, or 8.8% of net sales, for the first quarter of fiscal 2020.

Due to the factors discussed above, income from operations was $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.

Due to the factors discussed above, income from operations was $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.

Interest Expense

Interest expense was $0.5 million for both the first quarter of fiscal 2021 and fiscal 2020.

Interest expense was $0.4 million for both the second quarter of fiscal 2021 and fiscal 2020.

Interest expense for the first two quarters of fiscal 2021 was $0.8 million compared to $1.0 million for the first two quarters of 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.

Rental and Miscellaneous Expense, Net

Net rental and miscellaneous expense was $0.4 million for both the first quarter of fiscal 2021 and fiscal 2020.

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

Net rental and miscellaneous expense was $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.

Other Expense

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

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 and fiscal 2020.

Other expense was $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.

Income Tax Expense

Income tax expense was $4.5 million, or 26.2% of income before income taxes for the first quarter of fiscal 2021 compared to $4.6 million, or 26.4% of income before income taxes, for the first quarter of fiscal 2020.

Net income was $12.8 million, or $1.12 per common share basic and $1.11 per share diluted, for the first quarter of fiscal 2021, compared to $12.9 million, or $1.13 per common share basic and $1.12 per share diluted, for the first quarter of fiscal 2020.

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

For the first twenty-six

weeks of fiscal 2020, income tax expense was $11.1 million, or 25.3% of income before income taxes, compared to $10.4 million, or 25.5% of income before income taxes, for the comparable period last year.

Net income was $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 million, or $1.52 per common share basic and diluted for the second quarter of fiscal 2020.

Net income was $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.

LIQUIDITY AND CAPITAL RESOURCES

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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 products (especially our Fisher

and Orchard Valley Harvest

brands), consummate strategic business acquisitions such as the fiscal 2018 acquisition of the Squirrel Brand business, reinvest in the Company through capital expenditures, develop new products, pay cash dividends the past eight years and explore other growth strategies outlined in our Strategic Plan.

Our available credit under our Credit Facility has allowed us to devote more funds to promote our branded products, consummate strategic business acquisitions such as the fiscal 2018 acquisition of the Squirrel Brand business, reinvest in the Company through capital expenditures, develop new products, pay cash dividends 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 quarter of fiscal 2021 and 2020, respectively (dollars in thousands):

September 24,

September 26,

The following table sets forth certain cash flow information for the first half of fiscal 2021 and 2020, respectively (dollars in thousands):

Operating activities

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Financing activities

Net decrease in cash

Net increase in cash

Operating Activities

Net cash provided by operating activities was $20.6 million for the first quarter of fiscal 2021 compared to $22.5 million for the first quarter of fiscal 2020.

Net accounts receivable were $69.9 million at September 24, 2020, an increase of $12.9 million, or 22.7%, from the balance at June 25, 2020, and an increase of $9.4 million, or 15.6%, from the balance at September 26, 2019.

The increase in net accounts receivable at September 24, 2020 compared to both June 25, 2020 and September 26, 2019 was primarily due to extended terms that were temporarily granted to customers whose businesses were negatively impacted by the COVID-19

An increase in net sales for the first quarter of fiscal 2021 compared to net sales for the fourth quarter of fiscal 2020 also contributed to the increase in net accounts receivable at September 24, 2020 compared to June 25, 2020.

Total inventories were $150.4 million at September 24, 2020, a decrease of $21.7 million, or 12.6%, from the inventory balance at June 25, 2020, and a decrease of $6.1 million, or 3.9%, from the inventory balance at September 26, 2019.

The decrease in inventory at September 24, 2020 compared to June 25, 2020 was primarily due to lower quantities of tree nuts and peanuts on hand, which were partially offset by increased quantities of finished goods inventory.

The decrease in inventories at September 24, 2020 compared to September 26, 2019 was primarily due to lower quantities of farmer stock peanuts and shelled pecans and walnuts on hand.

Lower acquisition costs for almonds and cashews also contributed to the decline in total inventory value.

Raw nut and dried fruit input stocks, some of which are classified as work in process, decreased 10.6 million pounds, or 22.5%, at September 24, 2020 compared to September 26, 2019.

The weighted average cost per pound of raw nut and dried fruit input stocks on hand at the end of the first quarter of fiscal 2021 increased 7.8% compared to the end of the first quarter of fiscal 2020 due to a shift in product mix from lower priced farmer stock peanuts to higher priced inshell pecans.

Net cash provided by operating activities was $61.9 million for the first twenty-six

weeks of fiscal 2021 compared to $54.3 million for the comparative period of fiscal 2020.

The increase in operating cash flow was primarily due to a decreased use of working capital for inventory compared to the first twenty-six

weeks of fiscal 2020.

Total inventories were $155.4 million at December 24, 2020, a decrease of $16.7 million, or 9.7%, from the inventory balance at June 25, 2020, and a decrease of $17.0 million, or 9.8%, from the inventory balance at December 26, 2019.

The decrease in inventory at December 24, 2020 compared to June 25, 2020 was primarily due to lower commodity acquisition costs for all major tree nuts and lower quantities of peanuts and pecans 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 peanuts on hand.

Raw nut and dried fruit input stocks, some of which are classified as work in process, decreased by 14.2 million pounds, or 19.4%, at December 24, 2020 compared to December 26, 2019 due to lower quantities of peanuts 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% compared to the end of the second quarter of fiscal 2020 primarily due to lower commodity acquisition costs for all major tree nuts, which was partially offset by a shift in product mix from lower priced peanuts to higher priced walnuts and pecans.

Investing Activities

Cash used in investing activities, primarily all for capital expenditures, was $6.0 million during the first quarter of fiscal 2021 compared to $3.1 million for the same period last year.

Cash used in investing activities was $10.7 million during the first twenty-six

weeks of fiscal 2021 compared to $6.1 million for the same period last year.

We expect total capital expenditures for new equipment, facility upgrades, and food safety enhancements for fiscal 2021 to be approximately $23.0 million.

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Financing Activities

Cash used in financing activities was $15.4 million during the first quarter of fiscal 2021 compared to $20.1 million for the same period last year.

The dividends paid in fiscal 2021 to date were approximately $5.6 million less than the same period of fiscal 2020.

Net short-term borrowings under our Credit Facility were $17.2 million during the first quarter of fiscal 2021 compared to net borrowings of $16.0 million for the first quarter of fiscal 2020.

Cash used in financing activities was $51.0 million during the first twenty-six

weeks of fiscal 2021 compared to $48.3 million for the same period last year.

Dividends paid in the first half of fiscal 2021 were approximately $28.6 million lower than dividends paid in the same period last year.

Net repayments under our Credit Facility were $17.8 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

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Credit Facility

At our election, borrowings under the Credit Facility currently accrue interest at either (i) a rate determined pursuant to the administrative agent’s prime rate plus an applicable margin determined by reference to the amount of loans which may be advanced under the borrowing base calculation, ranging from 0.25% to 0.75% or (ii) a rate based upon the London interbank offered rate (“LIBOR”) plus an applicable margin based upon the borrowing base calculation, ranging from 1.25% to 1.75%.

At September 24, 2020, the weighted average interest rate for the Credit Facility was 1.7%.

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, the interest rate for the Credit Facility was at the Base Rate of 3.5%.

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).

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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 September 24, 2020, we were in compliance with all covenants under the Credit Facility and we currently expect to be in compliance with the financial covenant in the Credit Facility for the foreseeable future.

At September 24, 2020, we had $70.0 million of available credit under the Credit Facility.

If this entire amount were borrowed at September 24, 2020, we would still be in compliance with all restrictive covenants under the Credit Facility.

As of December 24, 2020, we were in compliance with all covenants under the Credit Facility and we currently expect to be in compliance with the financial covenant in the Credit Facility for the foreseeable future.

At December 24, 2020, we had $105.1 million of available credit under the Credit Facility.

If this entire amount were borrowed at December 24, 2020, we would still be in compliance with all restrictive covenants under the Credit Facility.

Mortgage Facility

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with the covenants or upon the occurrence of certain other defaults by us under the Mortgage Facility.

As of September 24, 2020, we were in compliance with all covenants under the Mortgage Facility and a total principal amount of $8.2 million was outstanding.

As of December 24, 2020, we were in compliance with all covenants under the Mortgage Facility and a total principal amount of $7.4 million was outstanding.

Selma Property

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No gain or loss was recorded on the Selma Properties transaction.

As of September 24, 2020, $9.4 million of the debt obligation was outstanding.

As of December 24, 2020, $9.2 million of the debt obligation was outstanding.

Squirrel Brand Seller-Financed Note

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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”).

The principal owner and seller of the Squirrel Brand business was subsequently appointed as an executive officer of the Company and was considered a related party until the employment of this executive officer with the Company ceased during fiscal 2020.

The Promissory Note is unsecured, bears interest at 5.5% per annum and is payable in equal monthly principal payments of $0.3 million, plus interest, which began in January 2018.

Upon an event of default, as defined in the Promissory Note, the interest rate increases to 7.5% until such event of default is cured.

We can pre-pay

the Promissory Note at any time during the three-year period without penalty.

At September 24, 2020, the principal amount of $0.6 million of the Promissory Note was outstanding.

As of December 24, 2020, the Promissory Note was repaid in full.

Critical Accounting Policies and Estimates

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FORWARD LOOKING STATEMENTS

Some of the statements in this report are forward-looking (including statements concerning our expectations regarding market risk and the impact of the purchasing decisions of major customers).

Some of the statements in this report are forward-looking.

These forward-looking statements may be generally identified by the use of forward-looking words and phrases such as “will”, “intends”, “may”, “believes”, “anticipates”, “should” and “expects” and are based on the Company’s current expectations or beliefs concerning future events and involve risks and uncertainties.

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(i) the risks associated with our vertically integrated model with respect to pecans, peanuts and walnuts;

(ii) sales activity for the Company’s products, such as a decline in sales (of branded products, private label products or otherwise) to one or more key customers, or to customers generally, in some or all channels, a change in product mix to lower price products, a decline in sales of private brand products or changing consumer preferences, including a shift from higher margin products to lower margin products;

(ii) sales activity for the Company’s products, such as a decline in sales to one or more key customers (of branded products, private label products or otherwise), or to customers generally, in some or all channels, a change in product mix to lower price products, a decline in sales of private brand products or changing consumer preferences, including a shift from higher margin products to lower margin products;

(iii) changes in the availability and costs of raw materials and the impact of fixed price commitments with customers;

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(vii) losses associated with product recalls, product contamination, food labeling or other food safety issues, or the potential for lost sales or product liability if customers lose confidence in the safety of the Company’s products or in nuts or nut products in general, or are harmed as a result of using the Company’s products;

(viii) the ability of the Company to control expenses, such as transportation, compensation, medical and administrative expense;

(viii) the ability of the Company to control expenses, such as transportation, compensation, medical and administrative expenses;

(ix) the potential negative impact of government regulations and laws and regulations pertaining to food safety, such as the Food Safety Modernization Act;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis