What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-04-28 compared with 2021-01-27 · 138 added, 159 removed, 161 unchanged (65% of the section changed)

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

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

References herein to the first three quarters or first thirty-nine weeks of fiscal 2021 and fiscal 2021 are to the thirty-nine weeks ended March 25, 2021 and March 26, 2020, 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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We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States.

These nuts are sold under a variety of private brands and under the Fisher, Orchard Valley Harvest,

These nuts are sold under our Fisher, Orchard Valley Harvest,

Squirrel Brand, Southern Style Nuts

and Sunshine Country

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 private brands and brand names.

brand names and under a variety of 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,

The Company’s long-term objective to drive profitable growth, as identified in our strategic plan (the “Strategic Plan”), includes continuing to grow Fisher,

Orchard Valley Harvest, Squirrel Brand

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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 and focusing on new ways to buy, with an emphasis on increasing our sales via e-commerce

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

platforms and retailers.

In addition, 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.

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

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.

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.

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 also face changing industry trends as consumer preferences evolve into shopping in smaller store formats like grocery and online.

Additionally, the wooden pallet industry has been impacted for several months with low inventory levels, due in part to labor and lumber shortages.

The pallet shortage has impacted our operations, primarily at our Elgin, IL facility, and led to some cost increases.

We anticipate the industry to see some relief in the coming quarters.

In the interim, we are working with our vendors, customers and JBSS facilities in other regions of the country to source additional supply.

If the shortage continues, and we cannot secure an adequate supply of wooden pallets to fulfill customer orders, this shortage could have an unfavorable impact on net sales in our fourth quarter.

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

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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.

performance across several of our

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

We will continue to face the ongoing challenges specific to our business, such as food safety and regulatory compliance and the maintenance and growth of our customer base for branded and private label products.

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

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

We will continue to face challenges in the remainder of our fiscal 2021 (and into fiscal year 2022) as result of the COVID-19

pandemic and the uncertainty of future local, state and federal restrictions aimed to mitigate and control the pandemic.

As many of these restrictions were loosened near the conclusion of our fiscal 2020, we saw a gradual (albeit limited) increase in demand from our foodservice, restaurant, convenience store and non-essential

As many of these restrictions were eased near the conclusion of our fiscal 2020, we saw a gradual (albeit limited) increase in demand from our foodservice, restaurant, convenience store and non-essential

retail customers.

However, as conditions surrounding the pandemic deteriorated during the fall and winter of calendar 2020 and into 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

However, as conditions surrounding the pandemic deteriorated during the fall and winter of calendar 2020 and so far during calendar 2021, consumers were and continue to be limited in their ability to purchase meals outside their homes.

As indoor dining restrictions continued due to the impact of COVID-19,

consumers continued to snack, cook and bake more at home.

While this trend has had a positive impact on certain aspects of our consumer business, demand continued to be suppressed from our foodservice, restaurant and non-essential

retail customers.

Additionally, COVID-19

has had an unfavorable impact on a major customer’s business in our contract packaging distribution channel due to reduced foot traffic in convenience stores as people continue to work from home.

Although demand has been suppressed from our foodservice customers, the chart below indicates that the rate of decline is recovering from its low point in our fourth quarter of fiscal 2020, and we believe that as the COVID-19

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

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

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.

retail customers will continue to improve.

Also, during fiscal 2021, we have seen signs of a shortage in capacity in the transportation industry, which our transportation service providers believe is due, in part, to driver concerns related to the impacts of COVID-19.

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

This tightening in transportation capacity 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.

This tightening in transportation capacity, including rail and ocean freight, is expected to continue into fiscal 2022, has led to increased transportation costs and may lead to potential disruptions in service to our customers and from our suppliers.

The Company’s COVID-19

crisis team, which was created in the third quarter of fiscal 2020, continues to meet on a regular basis to discuss risks faced by the Company and mitigation strategies.

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.

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We update and enhance these measures as new guidance is provided.

In addition, we have extended personal time off for those who are in self quarantine or ill.

In addition, we extended personal time off for those employees who are in self-quarantine or ill and have organized a free, voluntary COVID-19

immunization clinic, which will be on-site

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

We have worked closely with our domestic and global suppliers to source and maintain a consistent supply of raw materials, ingredients and packaging.

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QUARTERLY HIGHLIGHTS

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

Our net sales of $207.9 million for the third quarter of fiscal 2021 decreased 1.8% from our net sales of $211.6 million for the third quarter of fiscal 2020.

Net sales for the first thirty-nine weeks of fiscal 2021 decreased $24.2 million, or 3.6%, to $651.7 million compared to the first thirty-nine weeks of fiscal 2020.

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

Sales volume for the first thirty-nine weeks of fiscal 2021 decreased 1.9 million pounds, or 0.9%, compared to the first thirty-nine weeks of fiscal 2020.

Gross profit increased $3.2 million, and our gross profit margin, as a percentage of net sales, increased to 22.1% for the third quarter of fiscal 2021 compared to 20.2% for the third quarter of fiscal 2020.

Gross profit increased $3.1 million and our gross profit margin increased to 21.2% from 20.0% for the first thirty-nine weeks of fiscal 2021 compared to the first thirty-nine weeks of fiscal 2020.

Total operating expenses for the third quarter of fiscal 2021 increased $1.5 million, or 6.6%, compared to the third quarter of fiscal 2020.

As a percentage of net sales, total operating expenses in the third quarter of fiscal 2021 increased to 12.0% from 11.1% for the third quarter of fiscal 2020.

For the first thirty-nine weeks of fiscal 2021, total operating expenses decreased $1.7 million, and total operating expenses as a percentage of net sales increased to 10.8% from 10.7% compared to the first thirty-nine weeks of fiscal 2020.

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

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

We have completed procurement of inshell walnuts during the first half of fiscal 2021, and the final total payments due to our walnut growers were determined in the current quarter.

The final prices paid, and remaining to be paid to the walnut growers, were based upon current market prices and other factors, such as crop size and export demand.

A large majority of payments to walnut growers were completed in the third quarter of fiscal 2021.

Remaining amounts to be paid to walnut growers as of March 25, 2021 are final and are not subject to revision.

We increased our walnut grower liability by approximately $0.7 million during the third quarter of fiscal 2021, as the final payments to walnut growers were slightly more than the amounts estimated at the end of last quarter.

This increase is insignificant compared to our total inshell walnut procurement costs for the year, and the adjustment to cost of sales was immaterial to our results of operations.

RESULTS OF OPERATIONS

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.

Our net sales decreased 1.8% to $207.9 million in the third quarter of fiscal 2021 compared to net sales of $211.6 million for the third quarter of fiscal 2020.

The decrease in net sales was primarily attributable to a 1.2% decrease in sales volume, which is defined as pounds sold to customers.

The decline in sales volume was due to a reduction in sales volume for almonds and peanuts, which was offset in part by increased sales volume for trail and snack mixes.

For the first thirty-nine weeks of fiscal 2021 our net sales were $651.7 million, a decrease of $24.2 million, or 3.6%, compared to the same period of fiscal 2020.

The decrease in net sales was primarily attributable to a 2.7% decline in the weighted average selling price per pound.

The decrease in the weighted average selling price per pound was attributable to lower selling prices for tree nuts, which were due to lower commodity acquisition costs.

A 0.9% decrease in sales volume, due to the same reasons cited in the quarterly comparison, 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

For the Twenty-six Weeks Ended

For the Thirty-Nine Weeks

Cashews & Mixed Nuts

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Contract Packaging

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.

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

branded products were approximately 63% and 58% of branded sales during the third quarter of fiscal 2021 and fiscal 2020, respectively, with Orchard Valley Harvest

branded 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

For the Thirty-nine Weeks Ended

Distribution Channel

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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 of branded products were approximately 25% and 29% of total consumer sales during the first thirty-nine weeks of fiscal 2021 and fiscal 2020, respectively.

branded products were approximately 68% and 67% of branded sales during the first thirty-nine weeks of fiscal 2021 and fiscal 2020, respectively, with Orchard Valley Harvest

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

Net sales in the consumer distribution channel increased 6.8% in dollars and 9.1% in sales volume in the third quarter of fiscal 2021 compared to the third quarter of fiscal 2020.

The sales volume increase was driven by an 11.8% increase in sales volume for private brand products, specifically snack nuts and trail and snack mixes, from new distribution at existing customers, a shift in consumer preferences to lower priced private brand products and growth in snacking as many consumers continue to purchase food for consumption at home.

Sales volume for Fisher

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

snack nuts decreased 3.1%, primarily as a result of reduced merchandising activity for Fisher

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

Sales volume of Fisher

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

recipe nuts decreased 6.4% as a result of lost distribution at two grocery customers.

of Orchard Valley Harvest

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sector as a result of COVID-19.

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.

decreased 14.2% primarily due to the discontinuance of an item at a major customer.

In the first thirty-nine weeks of fiscal 2021, net sales in the consumer distribution channel increased 4.8% in dollars and 7.7% in sales volume, compared to the same period of fiscal 2020.

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

Increased sales for Fisher

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

Net sales in the commercial ingredients distribution channel decreased 30.5% in dollars and 29.8% in sales volume in the third quarter of fiscal 2021 compared to the third quarter of fiscal 2020.

The decline in sales volume was due to a 25.7% decrease in sales volume in our foodservice business and a decline in sales of peanut crushing stock to peanut oil processors.

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

In the first thirty-nine weeks of fiscal 2021, net sales in the commercial ingredients distribution channel decreased 36.5% in dollars and 27.1% in sales volume compared to the same period of fiscal 2020.

The decline in sales volume was primarily due to a 32.5% decrease in sales volume in our foodservice business, which occurred for the same reasons cited in the quarterly comparison.

Net sales in the contract packaging distribution channel decreased 23.2% in dollars and 19.2% in sales volume in the third quarter of fiscal 2021 compared to the third quarter of fiscal 2020.

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

In the first twenty-six

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.

In the first thirty-nine weeks of fiscal 2021, net sales in the contract packaging distribution channel decreased 16.2% in dollars and 15.1% in sales volume compared to the first thirty-nine weeks of fiscal 2020.

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

Gross profit 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.

Gross profit increased $3.2 million, or 7.6%, to $46.0 million for the third quarter of fiscal 2021 compared to the third quarter of fiscal 2020.

Our gross profit margin, as a percentage of net sales, increased to 22.1% for the third quarter of fiscal 2021 compared to 20.2% for the third quarter of fiscal 2020.

The increases in gross profit and gross profit margin were mainly attributable to lower commodity acquisition costs for all major tree nuts.

Gross profit increased $3.1 million, or 2.3%, to $138.2 million for the first thirty-nine weeks of fiscal 2021 compared to the first thirty-nine weeks of fiscal 2020.

Our gross profit margin increased to 21.2% for the first thirty-nine weeks of fiscal 2021 compared to 20.0% for the first thirty-nine weeks of fiscal 2020.

The increases in gross profit and gross profit margin in the year to date comparison occurred for the same reason cited in the quarterly comparison.

Operating Expenses

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.

Total operating expenses for the third quarter of fiscal 2021 increased $1.5 million, or 6.6%, to $24.9 million.

Operating expenses increased to 12.0% of net sales for the third quarter of fiscal 2021 compared to 11.1% of net sales for the third quarter of fiscal 2020.

Selling expenses for the third quarter of fiscal 2021 were $15.1 million, an increase of $1.2 million, or 8.7%, from the third quarter of fiscal 2020.

The increase was driven by a $1.5 million increase in freight expense due to significantly higher freight rates compared to last year’s third quarter and, to a lesser extent, an increase in sales volume for our sales made on a delivered basis to customers.

This increase was partially offset by a $0.3 million decrease in commission expense.

Administrative expenses for the third quarter of fiscal 2021 were $9.9 million, an increase of $0.3 million, or 3.5%, compared to the third quarter of fiscal 2020.

The increase was primarily due to $0.7 million decrease in the gain on asset disposals due to an insurance recovery recognized in last year’s third quarter.

The insurance recovery, which was the first of two recoveries, related to a fire in our Garysburg, North Carolina facility that occurred in the second quarter of fiscal 2020.

This increase was largely offset by a $0.5 million decrease in incentive compensation expense.

Total operating expenses for the first thirty-nine weeks of fiscal 2021 decreased $1.7 million, or 2.4%, to $70.4 million.

Operating expenses increased to 10.8% of net sales for the first three quarters of fiscal 2021 compared to 10.7% of net sales for the three quarters of fiscal 2020.

Selling expenses for the first thirty-nine weeks of fiscal 2021 were $44.9 million, an increase of $0.8 million, or 1.8%, from the amount recorded for the first thirty-nine weeks of fiscal 2020.

The increase was driven by a $1.8 million increase in freight expense for the same reasons discussed in the quarterly comparison and was partially offset by a $1.0 million decrease in advertising expense due to less radio advertising.

Administrative expenses for the first thirty-nine weeks of fiscal 2021 were $25.5 million, a decrease of $2.5 million, or 8.8%, compared to the same period of fiscal 2020.

The decrease was due to a $1.8 million increase in the gain on asset disposals, mainly resulting from a $2.3 million gain from the final insurance recovery recognized in the second quarter of fiscal 2021 for the Garysburg facility fire, and a $0.6 million decrease in compensation related expenses, primarily incentive compensation expense.

Income from Operations

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.

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

Due to the factors discussed above, income from operations was $67.8 million, or 10.4% of net sales, for the first thirty-nine weeks of fiscal 2021 compared to $62.9 million, or 9.3% of net sales, for the first thirty-nine weeks of fiscal 2020.

Interest Expense

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.

Interest expense was $0.3 million for the third quarter of fiscal 2021 compared to $0.6 million in the third quarter of fiscal 2020.

Interest expense for the first three quarters of fiscal 2021 was $1.1 million compared to $1.5 million for the first three quarters of fiscal 2020.

The decrease in interest expense for both the quarterly and year to date comparisons was a result of lower average debt levels.

Rental and Miscellaneous Expense, Net

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.

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

Net rental and miscellaneous expense was $1.2 million for the first thirty-nine weeks of fiscal 2021 compared to $1.0 million for the first thirty-nine weeks of fiscal 2020.

Other Expense

Other expense consists of pension related expenses other than the service cost component and was $0.6 million for both the second 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.

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

Other expense was $1.9 million for the first thirty-nine weeks of fiscal 2021 compared to $1.7 million for the first thirty-nine weeks of fiscal 2020.

Income Tax Expense

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.

Income tax expense was $5.1 million, or 25.7% of income before income taxes, for the third quarter of fiscal 2021 compared to $4.5 million, or 25.0% of income before income taxes, for the third quarter of fiscal 2020.

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

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

Net income was $47.4 million, or $4.12 per common share basic and $4.10 per common share diluted, for the first thirty-nine weeks of fiscal 2021, compared to net income of $43.9 million, or $3.83 per common share basic and $3.80 per common share diluted, for the first thirty-nine 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 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.

Our available credit under our Credit Facility has allowed us to devote more funds to promote our products, consummate strategic investments and business acquisitions, such as the fiscal 2018 acquisition of the Squirrel Brand business, reinvest in the Company through capital expenditures, develop new products, pay cash dividends and explore other growth strategies outlined in our Strategic Plan.

Cash flows from operating activities have historically been driven by net income but are also significantly influenced by inventory requirements, which can change based upon fluctuations in both quantities and market prices of the various nuts and nut products we buy and sell.

Current market trends in nut prices and crop estimates also impact nut procurement.

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

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

For the Thirty-Nine

Operating activities

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Financing activities

Net increase in cash

Net decrease in cash

Operating Activities

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.

Net cash provided by operating activities was $77.0 million for the first thirty-nine weeks of fiscal 2021 compared to $35.0 million for the comparative period of fiscal 2020.

The increase in operating cash flow was primarily due to a decreased use of working capital for inventory compared to the first thirty-nine weeks of fiscal 2020.

Total inventories were $151.8 million at March 25, 2021, a decrease of $20.3 million, or 11.8%, from the inventory balance at June 25, 2020, and a decrease of $36.8 million, or 19.5%, from the inventory balance at March 26, 2020.

The decrease in inventory at March 25, 2021 compared to June 25, 2020 was primarily due to lower commodity acquisition costs for all major tree nuts and lower quantities of peanuts and almonds on hand, which was partially offset by greater quantities of walnuts and pecans on hand.

The decrease in inventories at March 25, 2021 compared to March 26, 2020 was primarily due to lower commodity acquisition costs for all major tree nuts, as well as lower quantities of peanuts, almonds and pecans on hand.

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

decreased 10.6 million pounds, or 14.7%, at March 25, 2021 compared to March 26, 2020.

The weighted average cost per pound of raw nut input stocks on hand at the end of the third quarter of fiscal 2021 decreased 17.8% compared to the end of the third quarter of fiscal 2020 primarily due to lower commodity acquisition costs for all major tree nuts.

Investing Activities

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.

Cash used in investing activities was $13.6 million during the first thirty-nine weeks of fiscal 2021 compared to $10.5 million for the same period last year.

We expect total capital expenditures for new equipment, facility upgrades and food safety enhancements for fiscal 2021 to be approximately $20.0 million.

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Financing Activities

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.

Cash used by financing activities was $63.9 million during the first thirty-nine weeks of fiscal 2021 compared to $25.0 million for the same period last year.

Net repayments under our Credit Facility were $1.0 million during the first three quarters of fiscal 2021 compared to borrowings of $38.2 million during the first three quarters of fiscal 2020.

The decrease in short term borrowings under our Credit Facility was due to less cash used for working capital for inventory due primarily to lower commodity acquisition costs for all major tree nuts.

Real Estate Matters

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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.

At March 25, 2021, the weighted average interest rate for the Credit Facility was 2.0%.

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 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.

As of March 25, 2021, we were in compliance with all covenants under the Credit Facility and we currently expect to be in compliance with the financial covenant in the Credit Facility for the foreseeable future.

At March 25, 2021, we had $88.3 million of available credit under the Credit Facility.

If this entire amount were borrowed at March 25, 2021, 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 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.

As of March 25, 2021, we were in compliance with all covenants under the Mortgage Facility and a total principal amount of $6.6 million was outstanding.

Selma Property

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

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

As of March 25, 2021, $9.1 million of the debt obligation was outstanding.

Squirrel Brand Seller-Financed Note

In November 2017 we completed the Squirrel Brand acquisition.

The acquisition was financed by a combination of cash (drawn under the Credit Facility) and a three-year seller-financed note for $11.5 million (“Promissory Note”).

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

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, which was repaid in full during the second quarter of fiscal 2021.

Critical Accounting Policies and Estimates

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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