What changed in this filing

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Item 1. Business

2021-08-18 compared with 2020-08-19 · 73 added, 28 removed, 141 unchanged (42% of the section changed)

13 unchanged sentences

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 the Fisher, Orchard Valley Harvest, Squirrel Brand, Southern Style Nuts,

These nuts are sold under our Fisher

, Orchard Valley Harvest

, Squirrel Brand

, Southern Style Nuts

and Sunshine Country

brand names and under a variety of private brands.

We also market and distribute, and in most cases, manufacture or process, a diverse product line of food and snack products, including peanut butter, almond butter, cashew butter, candy and confections, snack and trail mixes, snack bites, sunflower kernels, dried fruit, corn snacks, chickpea snacks, sesame sticks and other sesame snack products under private brands and brand names.

Our products are sold through three primary distribution channels, including food retailers in the consumer channel, commercial ingredient users and contract packaging customers.

Our website is accessible to the public at http://www.jbssinc.com.

18 unchanged sentences

Through a deliberate strategy of focused capital expenditures and complementary acquisitions, we have built a generally vertically integrated nut processing operation that enables us to control almost every step of the process for pecans, peanuts and walnuts, including procurement from growers, shelling, processing, packaging and marketing.

Vertical integration allows us to enhance product quality and, in most crop years, purchase inshell pecans, peanuts and walnuts at lower costs as opposed to purchasing these nut meats from other shellers.

We believe that our generally vertically integrated business model typically works to our advantage in terms of cost savings and provides us with better insight into crop development.

Our generally vertically integrated model, however, can under certain circumstances result in reduced earnings or losses.

See Part I, Item 1A — “Risk Factors”.

Vertical integration allows us to enhance product quality and, in most crop years, purchase inshell pecans, peanuts and walnuts from growers at lower costs as opposed to purchasing these nut meats from other shellers.

We believe that our business model typically works to our advantage in terms of cost savings and provides us with better insight into crop development.

Our brands are some of the most well-recognized in the packaged food industry.

5 unchanged sentences

Our branded and private brand products are sold through the major distribution channels to

significant buyers of nuts, including food retailers, commercial ingredient users and contract packaging customers.

significant buyers of nuts, including food and other retailers (both brick and mortar and e-commerce),

commercial ingredient users and contract packaging customers.

Selling through multiple distribution channels allows us to generate multiple revenue opportunities for the nuts we process.

8 unchanged sentences

We sell our products domestically to retailers and wholesalers as well as to commercial ingredient and contract packaging customers.

We also sell certain of our products to foreign customers in the retail, contract packaging and commercial ingredient markets.

For more information about our revenues in our various distribution channels, see Part II, Item 8 — “Financial Statements and Supplementary Data”.

6 unchanged sentences

baking ingredients sold to retailers, wholesalers, and commercial ingredient customers;

bulk food products sold to retail and commercial ingredient users;

bulk food products sold to commercial ingredient users;

an assortment of sunflower kernels, pepitas, snack mixes, almond butter, cashew butter, candy and confections, corn snacks, chickpea snacks, sesame sticks and other sesame snack products sold to retail supermarkets, mass merchandisers and commercial ingredient users and a wide variety of toppings for ice cream and yogurt sold to commercial ingredient users.

2 unchanged sentences

The consumer channel supplies nut-based

products, including consumer-packaged and bulk products, to retailers including supermarket chains, wholesalers, supercenters, internet retailers and other retail outlets, across the United States.

products, including consumer-packaged products, to retailers including supermarket chains, wholesalers, supercenters, internet retailers and other retail outlets, across the United States.

We sell products through the consumer channel under our brand names, including the Fisher

8 unchanged sentences

Our contract packaging channel produces and packages nut-based

snacks for food manufacturers and marketers under their brand name.

snacks for other food manufacturers under their brand name.

We are dependent on a few significant customers for a majority of our total net sales, particularly in the consumer channel.

Net sales to Wal-Mart

accounted for approximately 33% of our net sales for fiscal 2020 and fiscal 2019 and 30% of our net sales for fiscal 2018.

Net sales to Target Corporation accounted for approximately 12% of our net sales for fiscal 2020, 10% of our net sales for fiscal 2019 and 13% our net sales for fiscal 2018.

Net sales to PepsiCo, Inc.

accounted for approximately 11% of our net sales for fiscal 2018.

accounted for approximately 34% of our net sales for fiscal 2021 and 33% of our net sales for fiscal 2020 and fiscal 2019.

Net sales to Target Corporation accounted for approximately 14% of our net sales for fiscal 2021, 12% of our net sales for fiscal 2020 and 10% of our net sales for fiscal 2019.

No other customer accounted for more than 10% of net sales for any period presented.

12 unchanged sentences

Private brand and commercial ingredient channel efforts are focused on category management, new product identification and introduction, brand awareness and merchandising support.

A significant portion of our branded marketing efforts are focused on consumer promotional campaigns that include advertisements (e.g., social media, magazine, newspaper, internet and television), product sampling and coupon offers.

A significant portion of our branded marketing efforts are focused on compelling consumer campaigns that include advertisements (e.g., television, online video, social and influencer activations and partnerships, search engine marketing and online display), product sampling and coupon offers.

Our integrated marketing efforts for the Fisher

brand typically include sponsorships of chef influencers and professional sports franchises.

brand include partnerships with chefs and influencers, as well as professional baseball sponsorships.

Additionally, shipper display units are utilized in retail stores in an effort to gain additional temporary product placement and to drive sales volume.

4 unchanged sentences

Through participation in several trade associations, funding of industry research and sponsorship of educational programs, we support efforts to increase awareness of the health benefits, convenience and versatility of nuts as both a snack and a recipe ingredient among existing and future consumers of nuts.

In the future, we expect to participate and fund sustainability efforts in the industry through trade associations.

(vi) Competition

Our nuts and other snack food products compete against products manufactured and sold by numerous other companies in the snack food industry, some of whom are substantially larger and have greater resources than us.

In the nut industry, we compete with, among others, The Kraft Heinz Company (Planters brand) and numerous regional snack food processors.

In the nut industry, we compete with, among others, Hormel Foods Corp.

(Planters brand) and numerous regional snack food processors.

We also compete with the Diamond brand, among others.

Competitive factors in our markets include price, product quality, customer service, breadth of product line, brand name awareness, method of distribution and sales promotion.

Competitive factors in our markets include price, product quality, customer service, breadth of product line, brand name awareness, method of distribution, sales promotion, category management, service level compliance and innovation.

The combination of our generally vertically integrated operating model with respect to pecans, peanuts and walnuts, our product quality, product offering, brand strength, innovation, distribution model and our focus on nut and nut related products generally enable us to compete in each of these categories, but there can be no guarantee that our products will continue to be competitive with many of our larger competitors.

10 unchanged sentences

We are generally vertically integrated with respect to pecans, peanuts and walnuts and, unlike our major consumer distribution channel competitors who purchase nuts on the open market, we purchase a substantial portion of our pecans, peanuts and walnuts directly from growers.

However, there are risks associated with vertical integration, such as susceptibility to market price volatility for pecans, peanuts and walnuts.

See Part I, Item 1A — “Risk Factors”.

Due, in part, to the seasonal nature of the industry, we maintain significant inventories of peanuts, pecans and walnuts at certain times of the year, especially in the second and third quarters of our fiscal year.

1 unchanged sentence

See Part I, Item 1A — “Risk Factors”.

Until July 2017, we had purchased some of our packaging and labels from a related party.

We purchase other inventory items such as roasting oils, seasonings, plastic jars, labels, stand-up

bags, composite and clear-plastic cans and other packaging materials from other third parties.

Material costs, including tree nuts, peanuts, other commodities and other inventory items represented approximately 80% of our total cost of sales for fiscal 2020.

Material costs, including tree nuts, peanuts, other commodities, packaging and other edible ingredients represented approximately 78% of our total cost of sales for fiscal 2021.

(viii) Trademarks and Patents

12 unchanged sentences

We intend to protect our intellectual property rights vigorously.

(ix) Employees

As of June 25, 2020, we had approximately 1,370 full-time employees, including approximately 260 corporate staff employees.

(ix) Human Capital

As of June 24, 2021, we had approximately 1,300 full-time employees across our five locations.

We recognize that, in order for our company to be successful, our employees must be healthy, well-trained and motivated to do their best every day.

We are thus relentlessly focused on attracting, retaining and managing our employees.

The key aspects of our human resources program and objectives are as follows:

Health and Safety

As a producer, manufacturer and processer of nuts and nut-related

products, we are subject to extensive food and employee safety laws and regulations.

We place a high priority on employee health and safety as part of our continuous improvement culture.

Our total occupational injury rate continues to remain below the food manufacturing industry average.

We continue to enhance our safety programs by investing in systems and controls focused on injury and accident prevention.

During the 2021 fiscal year, we were able to increase significantly employee participation in our voluntary Safety Observation Program, and we implemented a cloud-based environmental health and safety platform that we believe will help us to better measure and monitor data in this area, as well as predict and prevent future safety risks.

In response to the COVID-19

pandemic, we implemented a number of health and safety protocols to protect our employees, and we regularly monitor such protocols for best practices and improvements.

In 2020, we instituted a COVID-19

task force to help oversee and promote the health and safety of our employees.

task force helped guide our establishment of policies and practices in accordance with guidance from the U.S.

Centers for Disease Control, federal, state and local governments, and other health authorities.

The actions we took to help ensure the safety and wellness of our employees include, among other things, requiring employees to practice social distancing at our facilities, checking employees’ temperatures, increasing the frequency of the sanitation of our facilities and equipment, supplying personal protective equipment to our employees, not reducing compensation for employees that are required to quarantine due to exposure to COVID-19,

working to educate our employees about vaccines and allowing our corporate staff to work from home.

We also hosted several free on-site

vaccination clinics for our employees and their family members.

We continue to monitor guidance and best practices to help ensure the health and safety of our employees.

Diversity and Inclusion:

We recognize that our business is stronger and more successful if supported by a diverse workforce.

Our goal is to maintain and promote diversity among our employees and foster an inclusive environment where differences are celebrated.

In the 2021 fiscal year, we launched our Diversit y, Equity a

nd Inclusion Council, consisting of a team of employees from different functional areas, to provide oversight and enhance our diversity and inclusion initiatives.

Training, Development and Promotion:

We believe that training, developing, and promoting our employees is an important part of our vibrant employee culture.

These measures enhance our performance and are an important component of employee satisfaction.

We offer training to our employees on a variety of subjects related to professional development, workplace fundamentals, business, computer applications and industry specific subjects such as our Nutology-101

We also conduct annual mandatory training for all employees covering food safety, workplace safety and various regulatory and compliance related subjects.

In the 2021 fiscal year, approximately 15% of our employees received promotions and a promotion-related salary increase.

Employee Rewards and Satisfaction:

Through our Sanfilippo Value Added (SVA) and Total Team Performance (TTP) incentive programs, we provide annual cash bonus opportunities to motivate and reward our employees and align their interests with those of our stockholders.

Employees participate in the SVA or TTP program, not both.

Approximately 20% of our employees participate in the SVA program and approximately 80% participate in the TTP program.

In addition to the SVA and TTP incentive programs, we offer annual sales incentives to our sales and marketing employees and annual monetary leadership awards to our top performers across all functions.

We are also proud to offer a comprehensive and competitive benefits package designed to meet the diverse needs of our employees at every stage of life, including a company-sponsored healthcare program and 401(k) program with a generous company matching contribution.

Among other things, we periodically conduct employee surveys to monitor employee satisfaction, engagement and concerns.

Codes of Conduct;

Oversight of Concerns:

We maintain codes of conduct and ethics policies designed to promote ethical conduct of our employees and agents and have implemented a robust program to address employee concerns and complaints, which includes an anonymous incident reporting system, periodic employee surveys and suggestion boxes that can result in monetary awards.

Our employees are made aware of such reporting system through various communication methods, including assurances against retaliation.

We regularly monitor best practices in this area to ensure our policies and practices are updated as appropriate.

(x) Seasonality

4 unchanged sentences

Our working capital requirements generally peak during the third quarter of our fiscal year.

Because the time between order and shipment is usually less than three weeks, we believe that any backlog as of a particular date is not material to an understanding of our business as a whole.

(xii) Operating Hazards and Uninsured Risks

(xi) Government Regulations, Operating Hazards and Uninsured Risks

The sale of food products for human consumption involves the risk of injury to consumers as a result of product contamination or spoilage, including the presence of shell fragments, foreign objects, insects, foreign substances, pathogens, chemicals, aflatoxin and other hazards, agents or residues introduced during the growing, storage, handling or transportation phases.

We (i) maintain what we believe to be rigid quality control standards and food safety systems that is evident in our Safe Quality Food (“SQF”) certification at each manufacturing facility, (ii) generally inspect our nut and other food products by visual examination, screening, metal detectors or electronic monitors at various stages of our shelling and processing operations, (iii) work with the United States Department of Agriculture (“USDA”) in its inspection of peanuts shipped to and from our peanut shelling facilities, (iv) maintain robust environmental pathogen programs, (v) seek to comply with the Nutrition Labeling and Education Act by labeling each product that we sell with labels that disclose the nutritional value and content of each of our products and (vi) assure compliance with the United States Food and Drug Administration (“FDA”) Food Safety Modernization Act (“FSMA”) through our comprehensive Food Safety Plans which include following Current Good Manufacturing Practices and control biological, chemical and physical hazards through our Process, Sanitation, Allergen and Supply Chain Preventative Controls;

We (i) maintain what we believe to be rigid quality control standards and food safety systems that is evident in our annual Safe Quality Food (“SQF”) certification at each manufacturing facility, (ii) generally inspect our nut and other food products by visual examination, screening, metal detectors or electronic monitors at various stages of our shelling and processing operations, (iii) work with the United States Department of Agriculture (“USDA”) in its inspection of peanuts shipped to and from our peanut shelling facilities, (iv) maintain robust environmental pathogen programs, (v) seek to comply with the Nutrition Labeling and Education Act by labeling each product that we sell with labels that disclose the nutritional value and content of each of our products and (vi) assure compliance with the United States Food and Drug Administration (“FDA”) Food Safety Modernization Act (“FSMA”) through our comprehensive Food Safety Plans which include following Current Good Manufacturing Practices and control biological, chemical and physical hazards through our Process, Sanitation, Allergen and Supply Chain Preventative Controls;

however, no assurance can be given that some nut or other food products sold by us may not contain or develop harmful substances.

In order to mitigate this risk, we strive to select high-quality nut suppliers and currently maintain product liability and contaminated product insurance at amounts we believe are adequate in light of our operations.

A portion of our annual capital expenditure budget is allocated for compliance with government-mandated food safety standards.

Compliance with food safety standards and other government regulations may have an impact on our operations and earnings, particularly if we fail to satisfy such standards or regulations and our products are recalled, harm our consumers or harm our Company’s reputation and standing as a leader of branded and private brand nut products.

See Part I, Item 1A — “Risk Factors”.

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-K

Item 1. Business