SANFILIPPO JOHN B & SON INC 10-Q

Item 1. Financial Statements JOHN B. SANFILIPPO & SON, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Dollars in thousands, except share and per share amounts) For the Quarter Ended For the Thirty-Nine Weeks Ended March 25, 2021 March 26, 2020 March 25, 2021 March 26, 2020 Net sales $ 207,892 $ 211,624 $ 651,740 $ 675,893 Cost of sales 161,846 168,819 513,567 540,860 Gross profit 46,046 42,805 138,173 135,033 Operating expenses: Selling expenses 15,090 13,880 44,868 44,095 Administrative expenses 9,859 9,528 25,539 28,013 Total operating expenses 24,949 23,408 70,407 72,108 Income from operations 21,097 19,397 67,766 62,925 Other expense: Interest expense including $ 162 , $ 172 , $ 494 and $ 651 to related parties 309 579 1,135 1,535 Rental and miscellaneous expense, net 379 308 1,176 986 Other expense 630 566 1,889 1,699 Total other expense, net 1,318 1,453 4,200 4,220 Income before income taxes 19,779 17,944 63,566 58,705 Income tax expense 5,078 4,478 16,168 14,852 Net income $ 14,701 $ 13,466 $ 47,398 $ 43,853 Other comprehensive income: Amortization of prior service cost and actuarial loss included in net periodic pension cost 416 343 1,246 1,030 Income tax expense related to pension adjustments ( 104 ) ( 86 ) ( 311 ) ( 258 ) Other comprehensive income, net of tax 312 257 935 772 Comprehensive income $ 15,013 $ 13,723 $ 48,333 $ 44,625 Net income per common share-basic $ 1.28 $ 1.17 $ 4.12 $ 3.83 Net income per common share-diluted $ 1.27 $ 1.17 $ 4.10 $ 3.80 The accompanying unaudited notes are an integral part of these consolidated financial statements. 3 JOHN B. SANFILIPPO & SON, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands, except share and per share amounts) March 25, 2021 June 25, 2020 March 26, 2020 ASSETS CURRENT ASSETS: Cash $ 1,043 $ 1,535 $ 993 Accounts receivable, less allowance for doubtful accounts of $ 291 , $ 391 and $ 387 64,502 56,953 68,042 Inventories 151,757 172,068 188,514 Prepaid expenses and other current assets 6,481 8,315 5,249 TOTAL CURRENT ASSETS 223,783 238,871 262,798 PROPERTY, PLANT AND EQUIPMENT: Land 9,277 9,285 9,285 Buildings 110,739 110,294 110,278 Machinery and equipment 225,583 218,021 215,310 Furniture and leasehold improvements 5,322 5,179 5,170 Vehicles 604 682 682 Construction in progress 9,662 2,244 4,104 361,187 345,705 344,829 Less: Accumulated depreciation 247,812 239,013 237,171 113,375 106,692 107,658 Rental investment property, less accumulated depreciation of $ 12,623 , $ 12,018 and $ 11,816 16,500 17,105 17,306 TOTAL PROPERTY, PLANT AND EQUIPMENT 129,875 123,797 124,964 Intangible assets, net 10,464 12,125 12,704 Cash surrender value of officers’ life insurance and other assets 9,647 11,875 9,967 Deferred income taxes 5,051 6,788 5,973 Goodwill 9,650 9,650 9,650 Operating lease right-of-use assets 3,758 4,351 4,638 TOTAL ASSETS $ 392,228 $ 407,457 $ 430,694 The accompanying unaudited notes are an integral part of these consolidated financial statements. 4 JOHN B. SANFILIPPO & SON, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands, except share and per share amounts) March 25, 2021 June 25, 2020 March 26, 2020 LIABILITIES & STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Revolving credit facility borrowings $ 26,005 $ 27,008 $ 38,175 Current maturities of long-term debt, including related party debt of $ 616 , $ 585 and $ 574 and net of unamortized debt issuance costs of $ 17 , $ 25 and $ 27 3,828 5,285 6,197 Accounts payable 43,684 36,323 54,856 Bank overdraft 1,509 2,041 2,091 Accrued payroll and related benefits 19,224 25,641 21,116 Other accrued expenses 12,422 15,870 12,774 TOTAL CURRENT LIABILITIES 106,672 112,168 135,209 LONG-TERM LIABILITIES: Long-term debt, less current maturities, including related party debt of $ 8,481 , $ 8,947 and $ 9,097 and net of unamortized debt issuance costs of $ 7 , $ 19 and $ 24 11,842 14,730 15,670 Retirement plan 32,433 31,573 25,449 Long-term operating lease liabilities, net of current portion 2,359 2,990 3,259 Other 8,019 7,758 7,839 TOTAL LONG-TERM LIABILITIES 54,653 57,051 52,217 TOTAL LIABILITIES 161,325 169,219 187,426 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY: Class A Common Stock, convertible to Common Stock on a per share basis, cumulative voting rights of ten votes per share, $ .01 par value; 10,000,000 shares authorized, 2,597,426 shares issued and outstanding 26 26 26 Common Stock, non-cumulative voting rights of one vote per share, $ .01 par value; 17,000,000 shares authorized, 8,988,812 , 8,939,890 and 8,939,390 shares issued 90 89 89 Capital in excess of par value 125,693 123,899 123,613 Retained earnings 113,993 124,058 125,273 Accumulated other comprehensive loss ( 7,695 ) ( 8,630 ) ( 4,529 ) Treasury stock, at cost; 117,900 shares of Common Stock ( 1,204 ) ( 1,204 ) ( 1,204 ) TOTAL STOCKHOLDERS’ EQUITY 230,903 238,238 243,268 TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY $ 392,228 $ 407,457 $ 430,694 The accompanying unaudited notes are an integral part of these consolidated financial statements. 5 JOHN B. SANFILIPPO & SON, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (Dollars in thousands, except share and per share amounts) Class A Common Stock Common Stock Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Shares Amount Shares Amount Total Balance, June 25, 2020 2,597,426 $ 26 8,939,890 $ 89 $ 123,899 $ 124,058 $ ( 8,630 ) $ ( 1,204 ) $ 238,238 Net income 12,812 12,812 Cash dividends ($ 2.50 per share) ( 28,685 ) ( 28,685 ) Pension liability amortization, net of income tax expense of $ 104 312 312 Equity award exercises 221 — — — Stock-based compensation expense 622 622 Balance, September 24, 2020 2,597,426 $ 26 8,940,111 $ 89 $ 124,521 $ 108,185 $ ( 8,318 ) $ ( 1,204 ) $ 223,299 Net income 19,885 19,885 Pension liability amortization, net of income tax expense of $ 103 311 311 Equity award exercises , net of shares withheld for employee taxes 43,477 1 ( 487 ) ( 486 ) Stock-based compensation expense 998 998 Balance, December 24, 2020 2,597,426 $ 26 8,983,588 $ 90 $ 125,032 $ 128,070 $ ( 8,007 ) $ ( 1,204 ) $ 244,007 Net income 14,701 14,701 Cash dividends ($ 2.50 per share) ( 28,778 ) ( 28,778 ) Pension liability amortization, net of income tax expense of $ 104 312 312 Equity award exercises , net of shares withheld for employee taxes 5,224 — ( 49 ) ( 49 ) Stock-based compensation expense 710 710 Balance, March 25, 2021 2,597,426 $ 26 8,988,812 $ 90 $ 125,693 $ 113,993 $ ( 7,695 ) $ ( 1,204 ) $ 230,903 Class A Common Stock Common Stock Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Shares Amount Shares Amount Total Balance, June 27, 2019 2,597,426 $ 26 8,909,406 $ 89 $ 122,257 $ 137,712 $ ( 4,325 ) $ ( 1,204 ) $ 254,555 Net income 12,926 12,926 Cash dividends ($ 3.00 per share) ( 34,321 ) ( 34,321 ) Pension liability amortization, net of income tax expense of $ 86 257 257 Impact of adopting ASU 2018-02 976 ( 976 ) — Stock-based compensation expense 633 633 Balance, September 26, 2019 2,597,426 $ 26 8,909,406 $ 89 $ 122,890 $ 117,293 $ ( 5,044 ) $ ( 1,204 ) $ 234,050 Net income 17,461 17,461 Cash dividends ($ 2.00 per share) ( 22,947 ) ( 22,947 ) Pension liability amortization, net of income tax expense of $ 86 258 258 Equity award exercises , net of shares withheld for employee taxes 27,830 — ( 761 ) ( 761 ) Stock-based compensation expense 855 855 Balance, December 26, 2019 2,597,426 $ 26 8,937,236 $ 89 $ 122,984 $ 111,807 $ ( 4,786 ) $ ( 1,204 ) $ 228,916 Net income 13,466 13,466 Pension liability amortization, net of income tax expense of $ 86 257 257 Equity award exercises , net of shares withheld for employee taxes 2,154 — ( 73 ) ( 73 ) Stock-based compensation expense 702 702 Balance, March 26, 2020 2,597,426 $ 26 8,939,390 $ 89 $ 123,613 $ 125,273 $ ( 4,529 ) $ ( 1,204 ) $ 243,268 The accompanying unaudited notes are an integral part of these consolidated financial statements. 6 JOHN B. SANFILIPPO & SON, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) For the Thirty-Nine Weeks Ended March 25, 2021 March 26, 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 47,398 $ 43,853 Depreciation and amortization 13,665 13,521 Gain on disposition of assets, net ( 2,733 ) ( 899 ) Deferred income tax expense (benefit) 1,737 ( 250 ) Stock-based compensation expense 2,330 2,190 Change in assets and liabilities: Accounts receivable, net ( 7,553 ) ( 6,196 ) Inventories 20,311 ( 31,490 ) Prepaid expenses and other current assets 1,834 398 Accounts payable 7,498 12,080 Accrued expenses ( 6,138 ) ( 1,576 ) Income taxes payable ( 3,727 ) 1,039 Other long-term assets and liabilities 605 806 Other, net 1,799 1,486 Net cash provided by operating activities 77,026 34,962 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment ( 15,769 ) ( 10,560 ) Proceeds from insurance recoveries 2,506 232 Other ( 357 ) ( 205 ) Net cash used in investing activities ( 13,620 ) ( 10,533 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net short-term (repayments) borrowings ( 1,003 ) 38,175 Debt issue costs — ( 410 ) Principal payments on long-term debt ( 4,365 ) ( 5,880 ) (Decrease) increase in bank overdraft ( 532 ) 1,190 Dividends paid ( 57,463 ) ( 57,268 ) Taxes paid related to net share settlement of equity awards ( 535 ) ( 834 ) Net cash used in financing activities ( 63,898 ) ( 25,027 ) NET DECREASE IN CASH ( 492 ) ( 598 ) Cash, beginning of period 1,535 1,591 Cash, end of period $ 1,043 $ 993 Supplemental disclosure of non-cash activities: Right-of-use assets recognized at ASU No. 2016-02 transition — $ 5,361 The accompanying unaudited notes are an integral part of these consolidated financial statements. 7 JOHN B. SANFILIPPO & SON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands, except where noted and per share data) Note 1 – Basis of Presentation and Description of Business As used herein, unless the context otherwise indicates, the terms “we”, “us”, “our” or “Company” collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiary, JBSS Ventures, LLC. Our fiscal year ends on the final Thursday of June each year, and typically consists of fifty-two weeks (four thirteen-week quarters). Additional information on the comparability of the periods presented is as follows: • References herein to fiscal 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 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 2020 are to the thirty-nine weeks ended March 25, 2021 and March 26, 2020, respectively. We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds, and other nuts in the United States. These nuts are sold under our Fisher , Orchard Valley Harvest , Squirrel Brand , Southern Style Nuts and Sunshine Country brand names and under a variety of private brands. We also market and distribute, and in most cases, manufacture or process, a diverse product line of food and snack products, including peanut butter, almond butter, cashew butter, candy and confections, snacks and trail mixes, snack bites, sunflower kernels, dried fruit, corn snacks, chickpea snacks, sesame sticks and other sesame snack products under our brand names and under private brands. Our products are sold through three primary distribution channels, including food retailers in the consumer channel, commercial ingredient users and contract packaging customers. The accompanying unaudited financial statements fairly present the consolidated statements of comprehensive income, consolidated balance sheets, consolidated statements of stockholders’ equity and consolidated statements of cash flows, and reflect all adjustments, consisting only of normal recurring adjustments which are necessary for the fair statement of the results of the interim periods. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The interim results of operations are not necessarily indicative of the results to be expected for a full year. The balance sheet data as of June 25, 2020 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). Accordingly, these unaudited financial statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2020 Annual Report on Form 10-K for the fiscal year ended June 25, 2020. Note 2 – Revenue Recognition We recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. For each customer contract, a five-step process is followed in which we identify the contract, identify performance obligations, determine the transaction price, allocate the contract transaction price to the performance obligations, and recognize the revenue when (or as) the performance obligation is transferred to the customer. When Performance Obligations Are Satisfied A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations are primarily for the delivery of raw and processed recipe and snack nuts, nut butters and trail mixes. 8 Our customer contracts do not include more than one performance obligation. If a contract were to contain more than one performance obligation, we are required to allocate the contract’s transaction price to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by directly observable data. Revenue recognition is generally completed at a point in time when product control is transferred to the customer. For virtually all of our revenues, control transfers to the customer when the product is shipped or delivered to the customer based upon applicable shipping terms, as the customer can then direct the use and obtain substantially all of the remaining benefits from the asset at that point in time. Therefore, the timing of our revenue recognition requires little judgment. Variable Consideration Some of our products are sold through specific incentive programs consisting of promotional allowances, volume and customer rebates, in-store display incentives and marketing allowances, among others, to consumer and some commercial ingredient customers. The ultimate cost of these programs is dependent on certain factors such as actual purchase volumes or customer activities and is dependent on significant management judgment when determining estimates. The Company accounts for these programs as variable consideration and recognizes a reduction in revenue (and a corresponding reduction in the transaction price) in the same period as the underlying program based upon the terms of the specific arrangements. Trade promotions, consisting primarily of customer pricing allowances, merchandising funds and consumer coupons, are also offered through various programs to customers and consumers. A provision for estimated trade promotions is recorded as a reduction of revenue (and a reduction in the transaction price) in the same period when the sale is recognized. Revenues are also recorded net of expected customer deductions which are provided for based upon past experiences. Evaluating these estimates requires management judgment. We generally use the most likely amount method to determine the variable consideration. We believe there will not be significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. The Company reviews and updates its estimates and related accruals of variable consideration and trade promotions at least quarterly based on the terms of the agreements and historical experience. Any uncertainties in the ultimate resolution of variable consideration due to factors outside of the Company’s influence are typically resolved within a short timeframe, therefore, no additional constraint on the variable consideration is required. Contract Balances Contract assets or liabilities result from transactions with revenue recorded over time. If the measure of remaining rights exceeds the measure of the remaining performance obligations the Company records a contract asset. Conversely, if the measure of the remaining performance obligations exceeds the measure of the remaining rights, the Company records a contract liability. There was no contract asset balance for any periods presented. The Company generally does not have material deferred revenue or contract liability balances arising from transactions with customers. Disaggregation of Revenue Revenue disaggregated by sales channel is as follows: For the Quarter Ended For the Thirty-Nine Weeks Ended Distribution Channel March 25, 2021 March 26, 2020 March 25, 2021 March 26, 2020 Consumer $ 169,415 $ 158,616 $ 528,201 $ 503,848 Commercial Ingredients 21,052 30,312 64,399 101,447 Contract Packaging 17,425 22,696 59,140 70,598 Total $ 207,892 $ 211,624 $ 651,740 $ 675,893 9 Note 3 – Leases Description of Leases We lease equipment used in the transportation of goods in our warehouses, as well as a limited number of automobiles and a small warehouse near our Bainbridge, Georgia facility. Our leases generally do not contain non-lease components and do not contain any explicit guarantees of residual value. Our leases for warehouse transportation equipment generally require the equipment to be returned to the lessor in good working order. We determine if an arrangement is a lease at inception and analyze the lease to determine if it is operating or finance. Operating lease right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental collateralized borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Implicit rates are used when readily determinable. None of our leases currently contain options to extend the term. In the event of an option to extend the term of a lease, the lease term used in measuring the liability would include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the respective lease term. Our leases have remaining terms of up to 5.3 years. It is our accounting policy to not apply lease recognition requirements to short term leases, defined as leases with an initial term of 12 months or less. As such, leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheet. We have also made the policy election to not separate lease and non-lease components for all leases. The following table provides supplemental information related to operating lease right-of-use assets and liabilities: March 25, 2021 June 25, 2020 March 26, 2020 Affected Line Item in Consolidated Balance Sheet Assets Operating lease right-of-use assets $ 3,758 $ 4,351 $ 4,638 Operating lease right-of-use assets Total lease right-of-use assets $ 3,758 $ 4,351 $ 4,638 Liabilities Current: Operating leases $ 1,449 $ 1,376 $ 1,374 Other accrued expenses Noncurrent: Operating leases 2,359 2,990 3,259 Long-term operating lease liabilities Total lease liabilities $ 3,808 $ 4,366 $ 4,633 The following tables summarize the Company’s total lease costs and other information arising from operating lease transactions: For the Quarter Ended For the Thirty-nine Weeks Ended March 25, 2021 March 26, 2020 March 25, 2021 March 26, 2020 Operating lease costs (a) $ 437 $ 432 $ 1,387 $ 1,266 Variable lease costs (b) 17 16 54 47 Total Lease Cost $ 454 $ 448 $ 1,441 $ 1,313 (a) Includes short-term leases which are immaterial. (b) Variable lease costs consist of sales tax. 10 Supplemental cash flow and other information related to leases was as follows: For the Thirty-nine Weeks Ended March 25, 2021 March 26, 2020 Operating cash flows information: Cash paid for amounts included in measurements for lease liabilities $ 1,171 $ 1,163 Non-cash activity: Right-of-use assets obtained in exchange for new operating lease obligations $ 490 $ 326 March 25, 2021 June 25, 2020 March 26, 2020 Weighted Average Remaining Lease Term (in years) 3.0 3.4 3.6 Weighted Average Discount Rate 4.3 % 4.4 % 4.4 % Maturities of operating lease liabilities as of March 25, 2021 are as follows: Fiscal year ending June 24, 2021 (excluding the thirty-nine weeks ended March 25, 2021) $ 438 June 30, 2022 1,486 June 29, 2023 1,236 June 27, 2024 593 June 26, 2025 231 June 25, 2026 59 Thereafter — Total lease payment 4,043 Less imputed interest ( 235 ) Present value of operating lease liabilities $ 3,808 Lessor Accounting We lease office space in our four-story office building located in Elgin, Illinois. As a lessor, we retain substantially all of the risks and benefits of ownership of the investment property and under Topic 842 we continue to account for all of our leases as operating leases. Lease agreements may include options to renew. We accrue fixed lease income on a straight-line basis over the terms of the leases. There is generally no variable lease consideration and an immaterial amount of non-lease components such as recurring utility and storage fees. Leases between related parties are immaterial. Leasing revenue is as follows: For the Quarter ended For the Thirty-nine weeks ended March 25, 2021 March 26, 2020 March 25, 2021 March 26, 2020 Lease income related to lease payments $ 451 $ 510 $ 1,354 $ 1,515 11 The future minimum, undiscounted fixed cash flows under non-cancelable tenant operating leases for each of the next five years and thereafter is presented below. Fiscal year ending June 24, 2021 (excluding the thirty-nine weeks ended March 25, 2021) $ 499 June 30, 2022 1,747 June 29, 2023 1,790 June 27, 2024 1,818 June 26, 2025 1,228 June 25, 2026 670 Thereafter 614 $ 8,366 Note 4 – Inventories Inventories consist of the following: March 25, 2021 June 25, 2020 March 26, 2020 Raw material and supplies $ 73,068 $ 69,276 $ 87,120 Work-in-process and finished goods 78,689 102,792 101,394 Total $ 151,757 $ 172,068 $ 188,514 Note 5 – Goodwill and Intangible Assets Identifiable intangible assets that are subject to amortization consist of the following: March 25, 2021 June 25, 2020 March 26, 2020 Customer relationships $ 21,100 $ 21,100 $ 21,100 Brand names 16,990 16,990 16,990 Non-compete agreement 270 270 270 38,360 38,360 38,360 Less accumulated amortization: Customer relationships ( 17,326 ) ( 16,223 ) ( 15,830 ) Brand names ( 10,390 ) ( 9,873 ) ( 9,700 ) Non-compete agreement ( 180 ) ( 139 ) ( 126 ) ( 27,896 ) ( 26,235 ) ( 25,656 ) Net intangible assets $ 10,464 $ 12,125 $ 12,704 Customer relationships are being amortized on an accelerated basis. The brand names remaining to be amortized consist of the Squirrel Brand and Southern Style Nuts brand names. Total amortization expense related to intangible assets, which is recorded within Administrative expense, was $ 504 and $ 1,661 for the quarter and thirty-nine weeks ended March 25, 2021, respectively. Amortization expense for the remainder of fiscal 2021 is expected to be approximately $ 504 and expected amortization expense the next five fiscal years is as follows: Fiscal year ending June 30, 2022 $ 1,896 June 29, 2023 1,657 June 27, 2024 1,414 June 26, 2025 1,156 June 25, 2026 861 12 Our net goodwill of $ 9,650 relates entirely to the Squirrel Brand acquisition completed in the second quarter of fiscal 2018. There was no change in the carrying amount of goodwill during the thirty-nine weeks ended March 25, 2021. Note 6 – Credit Facility Our Amended and Restated Credit Agreement dated March 5, 2020 provides for a $ 117,500 senior secured revolving credit facility (the “Credit Facility”). The Credit Facility is secured by substantially all our assets other than machinery and equipment, real property and fixtures. At March 25, 2021, we had $ 88,310 of available credit under the Credit Facility which reflects borrowings of $ 26,005 and reduced availability as a result of $ 3,185 in outstanding letters of credit. As of March 25, 2021, we were in compliance with all financial covenants under the Credit Facility and Mortgage Facility (as defined below). Note 7 – Earnings Per Common Share The following table presents the reconciliation of the weighted average shares outstanding used in computing basic and diluted earnings per share: For the Quarter Ended For the Thirty-Nine Weeks Ended March 25, 2021 March 26, 2020 March 25, 2021 March 26, 2020 Weighted average number of shares outstanding – basic 11,515,465 11,475,874 11,495,504 11,459,653 Effect of dilutive securities: Stock options and restricted stock units 58,552 63,767 57,206 75,015 Weighted average number of shares outstanding – diluted 11,574,017 11,539,641 11,552,710 11,534,668 The following table presents a summary of anti-dilutive awards excluded from the computation of diluted earnings per share: For the Quarter Ended For the Thirty-Nine Weeks Ended March 25, 2021 March 26, 2020 March 25, 2021 March 26, 2020 Weighted average number of anti-dilutive awards: — 28,040 — 9,347 Weighted average exercise price per award: $ — $ 90.26 $ — $ 90.26 Note 8 – Stock-Based Compensation Plans The following is a summary of restricted stock unit (“RSU”) activity for the first thirty-nine weeks of fiscal 2021: Restricted Stock Units Shares Weighted Average Grant Date Fair Value Outstanding at June 25, 2020 166,879 $ 51.62 Activity: Granted 54,966 68.97 Vested (a) ( 55,826 ) 48.46 Forfeited ( 2,356 ) 70.58 Outstanding at March 25, 2021 163,663 $ 58.25 (a) The number of RSUs vested includes shares that were withheld on behalf of employees to satisfy the statutory income tax withholding requirements. 13 At March 25, 2021, there are 47,127 RSUs outstanding that are vested but deferred. The following table summarizes compensation expense charged to earnings for all equity compensation plans for the periods presented: For the Quarter Ended For the Thirty-Nine Weeks Ended March 25, 2021 March 26, 2020 March 25, 2021 March 26, 2020 Stock-based compensation expense $ 710 $ 702 $ 2,330 $ 2,190 As of March 25, 2021, there was $ 4,602 of total unrecognized compensation expense related to non-vested RSUs granted under our stock-based compensation plans. We expect to recognize that cost over a weighted average period of 1.6 years. Note 9 – Retirement Plan The Supplemental Employee Retirement Plan is an unfunded, non-qualified deferred compensation plan that will provide eligible participants with monthly benefits upon retirement, disability or death, subject to certain conditions. The monthly benefit is based upon each participant’s earnings and his or her number of years of service. The components of net periodic benefit cost are as follows: For the Quarter Ended For the Thirty-Nine Weeks Ended March 25, 2021 March 26, 2020 March 25, 2021 March 26, 2020 Service cost $ 236 $ 178 $ 708 $ 534 Interest cost 214 223 643 669 Amortization of prior service cost 120 239 359 718 Amortization of loss 296 104 887 312 Net periodic benefit cost $ 866 $ 744 $ 2,597 $ 2,233 The components of net periodic benefit cost other than the service cost component are included in the line item “Other expense” in the Consolidated Statements of Comprehensive Income. Note 10 – Accumulated Other Comprehensive Loss The table below sets forth the changes to accumulated other comprehensive loss (“AOCL”) for the thirty-nine weeks ended March 25, 2021 and March 26, 2020. These changes are all related to our defined benefit pension plan. For the Thirty-Nine Weeks Ended Changes to AOCL (a) March 25, 2021 March 26, 2020 Balance at beginning of period $ ( 8,630 ) $ ( 4,325 ) Other comprehensive income before reclassifications — — Amounts reclassified from accumulated other comprehensive loss 1,246 1,030 Tax effect ( 311 ) ( 258 ) Net current-period other comprehensive income 935 772 Impact of adopting ASU 2018-02 — ( 976 ) Balance at end of period $ ( 7,695 ) $ ( 4,529 ) (a) Amounts in parenthesis indicate debits/expense. 14 The reclassifications out of AOCL for the quarter and thirty-nine weeks ended March 25, 2021 and March 26, 2020 were as follows: Affected line item in the Consolidated Statements of Comprehensive Income Reclassifications from AOCL to earnings (b) For the Quarter Ended For the Thirty-Nine Weeks Ended March 25, 2021 March 26, 2020 March 25, 2021 March 26, 2020 Amortization of defined benefit pension items: Unrecognized prior service cost $ ( 120 ) $ ( 239 ) $ ( 359 ) $ ( 718 ) Other expense Unrecognized net loss ( 296 ) ( 104 ) ( 887 ) ( 312 ) Other expense Total before tax ( 416 ) ( 343 ) ( 1,246 ) ( 1,030 ) Tax effect 104 86 311 258 Income tax expense Amortization of defined pension items, net of tax $ ( 312 ) $ ( 257 ) $ ( 935 ) $ ( 772 ) (b) Amounts in parenthesis indicate debits to expense. See Note 9 – “Retirement Plan” above for additional details. Note 11 – Commitments and Contingent Liabilities We are currently a party to various legal proceedings in the ordinary course of business. While management presently believes that the ultimate outcomes of these proceedings, individually and in the aggregate, will not materially affect our Company’s financial position, results of operations or cash flows, legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur. Unfavorable outcomes could include substantial monetary damages in excess of any appropriate accruals, which management has established. Where such unfavorable final outcomes to occur, there exists the possibility of a material adverse effect on our financial position, results of operations and cash flows. Note 12 – Fair Value of Financial Instruments The Financial Accounting Standards Board (“FASB”) defines fair value as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels: Level 1 – Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities. Level 2 – Observable inputs other than quoted prices in active markets. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. Level 3 – Unobservable inputs for which there is little or no market data available. The carrying values of cash, trade accounts receivable and accounts payable approximate their fair values at each balance sheet date because of the short-term maturities and nature of these balances. The carrying value of our revolving credit facility borrowings approximates fair value at each balance sheet date because interest rates on this instrument approximate current market rates (Level 2 criteria), and because of the short-term maturity and nature of this balance. In addition, there has been no significant change in our inherent credit risk. 15 The following table summarizes the carrying value and fair value estimate of our current and long-term debt, excluding unamortized debt issuance costs: March 25, 2021 June 25, 2020 March 26, 2020 Carrying value of long-term debt: $ 15,694 $ 20,059 $ 21,918 Fair value of long-term debt: 16,250 20,186 22,946 The estimated fair value of our long-term debt was determined using a market approach based upon Level 2 observable inputs, which estimates fair value based on interest rates currently offered on loans with similar terms to borrowers of similar credit quality or broker quotes. In addition, there have been no significant changes in the underlying assets securing our long-term debt. Note 13 – Related Party Transaction In connection with the acquisition of the Squirrel Brand business in the second quarter of fiscal 2018, we incurred $ 11,500 of unsecured debt pursuant to a promissory note (the “Promissory Note”) to the principal owner and seller of the Squirrel Brand business, who was subsequently appointed as an executive officer of the Company and was considered a related party. Late in the second quarter of fiscal 2020, the employment of this executive officer with the Company ceased. He is no longer considered a related party, and therefore the outstanding bala n ce on the Promissory Note is not reflected as related party debt on our Consolidated Balance Sheet for any periods presented. There was no related party interest paid to this former executive officer during the thirty-nine weeks ended March 25 , 2021 or the quarter ended March 26 , 2020. Interest paid while the former executive officer was a related party was $ 127 for the thirty-nine weeks ended March 26 , 2020. Note 14 – Garysburg, North Carolina Facility On October 7, 2019 we experienced a fire at our peanut processing facility located in Garysburg, North Carolina. The fire occurred in our roasting room where all of the roasting equipment was destroyed. The fire also damaged some equipment in our packaging room and a portion of the roof. During fiscal 2020, the building and roof were repaired and brought back to their original condition. After evaluating our options with regard to our peanut production operations, the Company currently plans to cease all operations permanently at the Garysburg facility. We completed shelling of the 2019 peanut crop during the second quarter of this fiscal year and the facility will continue to be used to store and ship inshell peanuts through the remainder of fiscal 2021. During fiscal 2020 we manufactured and sold approximately 6 million pounds of inshell peanuts from this facility and plan to discontinue that product line at the end of the current fiscal year. We also expect to spend the remainder of the 2021 fiscal year cleaning and preparing the facility for sale or other utilization in our operations. Employee separation and related closure costs were immaterial for all periods presented. Insurance proceeds totaling $ 2,934 were received from the insurance carrier in fiscal 2020, and the final payment of $ 2,730 was received during the current third quarter. Insurance proceeds received for damage to capital equipment are recorded as investing activities on the Consolidated Statements of Cash Flows when received. Note 15 – Recent Accounting Pronouncements The following recent accounting pronouncements have been adopted in the current fiscal year: In August 2018, the FASB issued ASU No. 2018-15 “ Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract ”. The amendments in this Update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). ASU No. 2018-15 was adopted using the prospective method in the first quarter of fiscal 2021 and did not have a material impact on our Consolidated Financial Statements. 16 In August 2018, the FASB issued ASU No. 2018-14 “ Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans ”. The amendments in this Update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendments in this Update remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. ASU No. 2018-14 was adopted on a retrospective basis to all periods presented in the first quarter of fiscal 2021 and had no impact on our quarterly Consolidated Financial Statements. In January 2017, the FASB issued ASU No. 2017-04 “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The amendments in this Update eliminate the need for entities to calculate the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination, commonly referred to as “Step 2”. Under this amendment, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value. ASU No. 2017-04 was adopted in the first quarter of fiscal 2021 and did not have a material impact on our Consolidated Financial Statements. In June 2016, the FASB issued ASU No. 2016-13 “ Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ”. The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU No. 2016-13 was adopted using a modified retrospective transition method in the first quarter of fiscal 2021 and did not have a material impact on our Consolidated Financial Statements. There are no recent accounting pronouncements that have been issued and not yet adopted that are expected to have a material impact on our Consolidated Financial Statements. 17