What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-08-18 compared with 2020-08-19 · 124 added, 99 removed, 207 unchanged (52% of the section changed)

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Additional information on the comparability of the periods presented is as follows:

References herein to fiscal 2020, fiscal 2019 and fiscal 2018 are to the fiscal years ended June 25, 2020, June 27, 2019 and June 28, 2018, respectively.

References herein to fiscal 2021 are to the fiscal year ending June 24, 2021.

References herein to fiscal 2021, fiscal 2020 and fiscal 2019 are to the fiscal years for the 52 weeks ended June 24, 2021, June 25, 2020 and June 27, 2019, respectively.

References herein to fiscal 2022 are to the fiscal year for the 53 weeks ending June 30, 2022.

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

We distribute our products in the consumer, commercial ingredients and contract packaging distribution channels.

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business across key customers.

We will 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 e-commerce.

In addition, we intend to invest in our people and facilities in order to research, develop, market and sell new product offerings in fiscal 2021.

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

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, 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 recently due to this increased competition for market share.

We also face changing industry trends as consumer preferences shift to shopping in smaller store formats like grocery and online.

With restaurant closures, consumers are also doing more cooking and baking at home.

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

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

As these restrictions were loosened during the fourth quarter of fiscal 2020, we saw a gradual increase in demand from our foodservice, restaurant, convenience store and non-essential

retail customers.

However, if conditions deteriorate in the future and consumers are limited in their ability to purchase meals outside their homes, it will have a negative impact on the above customers, including the collectability of accounts receivables from these customers.

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

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

We believe this shortage in transportation capacity may continue in fiscal 2021 and may lead to increased transportation costs and 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, will continue to meet on a regular basis to discuss risks faced by the Company and mitigation strategies.

We will continue to follow recommendations made by state and federal regulators and health agencies to ensure the safety and health of our employees.

We have implemented a temporary work from home option for the majority of our office employees, staggered shifts and breaks, installed partitions on production lines and office space where social distancing could not be consistently maintained and installed thermal scanners to measure temperature for all employees upon arrival.

We will 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 and paid our essential production employees a 10% bi-weekly

bonus from the middle of March to the end of May.

Despite the challenges faced in responding to the pandemic, the Company donated approximately $0.7 million of inventory to food banks in response to COVID-19.

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

To date, none of our manufacturing facilities have been significantly impacted by this pandemic.

We have contingency plans in place if a manufacturing facility encounters a partial or full shut down.

We also face changing industry trends as consumer preferences evolve into shopping in smaller store formats like grocery, use of delivery apps for shopping and generally migrate more of their shopping online.

Additionally, in recent months we have faced challenges with shortages for shipping pallets, resin-based packaging, imported materials, transportation equipment and labor.

These shortages have impacted our operations and led to some cost increases.

We anticipate the industry will see pricing relief in some of these areas in the coming quarters, but others may remain elevated for a longer period of time.

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

If these shortages continue and we cannot secure adequate supplies to fulfill customer orders, it could have an unfavorable impact on net sales and our operations in fiscal year 2022.

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

We expect to maintain or exceed our current level of promotional and advertising activity for our brands while adjusting our focus to be more digital and e-commerce

driven to match consumer behavior.

We expect to increase our promotional and advertising activity to invest in transformation growth with an omnichannel approach behind our brands with valuable consumers to win in key categories including recipe nuts, nut flours, snack nuts, trail mix and snacking.

We continue to see strong e-commerce

and grocery performance across Orchard Valley Harvest

recipe and see additional opportunities to connect these brands to consumers’ desires for more functional snacking and baking and cooking ideas, respectively.

performance across our branded portfolio and plan to accelerate that growth across a variety of established and emerging platforms.

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

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

We will continue to face challenges in 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 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 the beginning of calendar 2021, consumers were 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 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 continued to work from home.

During the fourth quarter of fiscal 2021, as the COVID-19

vaccine became more widely distributed and accepted by the public, restrictions were again loosened and we saw a vast improvement in the quarterly comparison in our sales volume with our foodservice, restaurant, convenience store and non-essential

retail customers.

However, if vaccination rates stagnate or more contagious strains of COVID-19

develop, our sales to foodservice, restaurant and non-essential

retail customers may decrease.

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, which has led to periodic shortages of shipping container chassis and space on container ships and trains and capacity constraints at U.S.

This tightening in transportation capacity 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 continues to meet on a regular basis to discuss risks faced by the Company and mitigation strategies.

We continue to follow recommendations made by state and federal regulators and health agencies to ensure the safety and health of our employees as those recommendations change and evolve.

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

In addition, we extended personal time off for those employees who are ill or must self-quarantine and hosted several free, on-site

vaccination clinics for our employees and their family members.

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

To date, none of our manufacturing facilities have been significantly impacted by this pandemic.

However, recent surges in COVID-19

cases, especially in southern Vietnam from where most of our cashews are sourced and extensive lockdowns are in place, could have a negative impact on our operations if shipments of raw materials are delayed.

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

Climate Change Impacts

Similar to other commodity dependent businesses, extreme weather events from climate change can have an unfavorable impact on our business.

Floods, hurricanes, wildfires, tornadoes, blizzards, droughts, mudslides and extreme temperatures can affect our ability to obtain adequate (or acceptable quality) input fruit and nut material and manufacture products in our facilities.

These extreme weather events can also have an adverse impact on the transportation industry and supply chains upon which we rely.

Climate change can also result in unfavorable impacts that are unique to our business, especially for normal crop development.

Below are some examples of essential weather conditions that must be presen

t for normal development of the crops from which we derive the major raw materials we use in our products.

Almonds, pecans and walnuts require a minimum of approximately 200, 250 and 700 chilling hours, respectively, during the winter to allow for an adequate amount of dormancy time so the tress can rest.

Peanuts require adequate rainfall or access to water for irrigation for the period starting about 7 weeks after planting and ending about 15 weeks after planting.

Cashews require a minimum of approximately 2,000 hours of sunlight per year.

Sunlight is especially critical during the flowering period.

Almonds require bees for pollination.

For bees to pollinate effectively during the bloom period, temperatures cannot be less than about 55 degrees Fahrenheit, winds cannot exceed about 15 MPH, and there must be little or no rainfall during that period.

Cranberries require adequate snow and ice coverage during the winter to protect vines from freezing.

Raisins require hot days (about 93 – 100 degrees Fahrenheit) and cool nights (about 55 – 65 degrees Fahrenheit) during the growing season for optimum quality and sugar levels.

The non-occurrence

of these weather conditions and other essential weather conditions can result in smaller crops, crop failures, or quality failures, which can lead to increased acquisition costs and supply shortages.

Should climate changes significantly alter weather patterns, some of these needed input products may not be available at all, which would have a materially adverse impact on our business.

Annual Highlights

Our net sales for fiscal 2020 increased by $3.9 million, or 0.4%, to $880.1 million compared to fiscal 2019.

Gross profit increased by $17.5 million, and our gross profit margin, as a percentage of net sales, increased to 20.0% in fiscal 2020 from 18.1% in fiscal 2019.

Total operating expenses for fiscal 2020 decreased by $2.5 million, and our operating expenses, as a percentage of net sales, were 11.0% compared to 11.4% of net sales in fiscal 2019.

Our net sales for fiscal 2021 decreased $21.6 million, or 2.5%, to $858.5 million compared to fiscal 2020.

Gross profit increased $9.2 million, and our gross profit margin, as a percentage of net sales, increased to 21.5% in fiscal 2021 from 20.0% in fiscal 2020.

Total operating expenses for fiscal 2021 increased $2.6 million, or 2.7%, to $99.8 million.

Operating expenses, as a percentage of net sales, increased to 11.6% compared to 11.0% of net sales in fiscal 2020.

Diluted earnings per share increased approximately 10.2% compared to last fiscal year.

Our strong financial position allowed us to pay cash dividends of $57.5 million during fiscal 2021.

The total value of inventories on hand at the end of fiscal 2020 increased by $15.0 million, or 9.6%, in comparison to the total value of inventories on hand at the end of fiscal 2019.

We have seen acquisition costs for walnuts increase in the 2019 crop year (which falls into our current 2020 fiscal year).

We also continue to see declining acquisition costs for pecans and cashews.

The total value of inventories on hand at the end of fiscal 2021 decreased $24.1 million, or 14.0%, in comparison to the total value of inventories on hand at the end 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).

While we completed our procurement of the current year crop of inshell walnuts during the second quarter of fiscal 2021, the total payments to our walnut growers were not determined until the third quarter of fiscal 2021, which is typical.

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Fiscal 2021 Compared to Fiscal 2020

Our net sales increased 0.4% to $880.1 million for fiscal 2020 from $876.2 million for fiscal 2019.

Sales volume, measured as pounds sold to customers, increased by 6.1% for fiscal 2020 in comparison to sales volume for fiscal 2019.

The increase in net sales from the sales volume increase was largely offset by a 5.3% decrease in weighted average selling price per pound, as the majority of the sales volume increase was driven by growth in lower priced trail and snack mixes and peanuts.

Lower selling prices for pecans and cashews, which were due to lower commodity acquisition costs, also contributed to the decline in the weighted average selling price per pound.

Our net sales decreased 2.5% to $858.5 million for fiscal 2021 from $880.1 million for fiscal 2020.

The decrease in net sales was primarily due to a 4.0% decline in the weighted average selling price per pound, which was attributable to lower selling prices for tree nuts as a result of lower commodity acquisition costs.

The decline in the weighted average selling price per pound was partially offset by a 1.6% increase in sales volume, which is defined as pounds sold to customers.

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

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Sales of branded products were approximately 24% and 27% of total consumer channel sales during fiscal 2021 and 2020, respectively.

branded products were approximately 68% and 69% of branded sales during fiscal 2020 and 2019 respectively, with branded produce products accounting for most of the remaining branded product sales.

Net sales in the consumer distribution channel increased by 7.9% in dollars and 13.7% in sales volume in fiscal 2020 compared to fiscal 2019.

The sales volume increase was driven by increased sales of trail mixes and snack nuts with new and existing private brand customers.

branded products were approximately 66% and 68% of branded sales during fiscal 2021 and 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 1.8% in dollars and 6.4% in sales volume in fiscal 2021 compared to fiscal 2020.

The sales volume increase was driven by an 9.0% increase in sales volume for private brand products, specifically trail mixes, snack mixes and snack nuts, 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 was down slightly, decreasing by 1.2% compared to fiscal 2019.

snack nuts increased 12.0% due to increased promotional activity and increased sales of inshell peanuts to a major customer in preparation for our discontinuance of that product line.

Sales volume of Fisher

recipe nuts decreased 24.2% from lost distribution at a major customer in favor of private brand recipe nuts.

recipe nuts decreased 19.4% from lost distribution at three customers.

of Orchard Valley Harvest

products decreased 5.7% due to an unfavorable change in merchandising display placement at a major customer.

products decreased 10.3% due to lost distribution at two customers.

Sales volume of Southern Style Nuts

increased 28.1% due to distribution gains with new customers and increased promotional activity.

Net sales in the commercial ingredients distribution channel decreased by 16.0% in dollars and 6.9% in sales volume compared to fiscal 2019.

The decrease in sales volume was primarily due to decreases in foodservice from restaurant closures, a decline in air travel and the various nationwide stay at home orders as a result of COVID-19.

This sales volume decrease was partially offset by increased sales of peanut crushing stock to peanut oil processors.

Net sales in the contract packaging distribution channel decreased by 20.7% in dollars and 13.8% in sales volume in fiscal 2020 compared to fiscal 2019.

The decline in sales volume was primarily attributable to some lost business with one customer that increased its internal nut processing capacity, as well as the unfavorable impact of lower convenience store foot traffic due to the impact of COVID-19

on another customer’s purchasing activity in this channel.

decreased 7.7% due to the discontinuance of an item at a major customer and a reduction in merchandising and promotional activity, which was offset in part by distribution gains with new customers.

Net sales in the commercial ingredients distribution channel decreased 21.6% in dollars and 13.9% in sales volume compared to fiscal 2020.

The decrease in sales volume was primarily due to a 13.6% 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, despite the 117.1% increase in fourth quarter sales volume, resulted from a decline in air travel and nationwide restrictions on indoor restaurant dining, which were attributable to COVID-19.

Net sales in the contract packaging distribution channel decreased 9.3% in dollars and 8.2% in sales volume in fiscal 2021 compared to 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.

Gross profit increased 5.2% to $185.0 million in fiscal 2021 from $175.8 million in fiscal 2020.

Our gross profit margin, as a percentage of sales, increased to 21.5% for fiscal 2021 from 20.0% for fiscal 2020.

The increases in gross profit and gross profit margin were mainly attributable to the sales volume increase discussed above, as well as reduced spending per produced pound due to manufacturing efficiencies.

Lower commodity acquisition costs for cashews also contributed to the increase in gross profit.

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

Operating Expenses

Total operating expenses for fiscal 2020 decreased by $2.5 million to $97.2 million.

Total operating expenses for fiscal 2021 increased $2.6 million to $99.8 million.

Operating expenses as a percent of net sales were 11.6% for fiscal 2021 and 11.0% for fiscal 2020.

Operating expenses as a percent of net sales decreased in fiscal 2020 as a result of lower total operating expenses.

The decrease in total operating expenses was mainly due to decreases in advertising, freight, legal and consulting expenses, which were partially offset by an increase in payroll related and incentive compensation expense.

Selling expenses for fiscal 2020 were $59.3 million, a decrease of $2.4 million, or 4.0%, over the amount recorded for fiscal 2019.

The decrease was primarily driven by a $2.9 million decrease in advertising expense primarily related to TV and magazine advertising and a $2.0 million decrease in freight expense driven by lower rates, combined with an increase in customers using their own freight carriers to pick up their orders.

These decreases were partially offset by a $1.4 million increase in payroll related and incentive compensation expense and a $0.8 million increase in commission expense.

Operating expenses as a percent of net sales increased in fiscal 2021 as a result of a lower net sales base and an increase in total operating expenses.

The increase in total operating expenses was mainly due to increases in freight, research and consulting, and compensation related expenses, which were partially offset by an increase in the gain on asset disposals and decreases in advertising and travel expenses.

Selling expenses for fiscal 2021 were $63.0 million, an increase of $3.7 million, or 6.3%, over the amount recorded for fiscal 2020.

The increase was primarily driven by a $4.2 million increase in freight expense due to significantly higher freight rates compared to fiscal 2020 and, to a lesser extent, an increase in sales volume for our sales made on a delivered basis to customers, and a $1.1 million increase in consumer insight research and related consulting expense.

These increases were partially offset by a $1.3 million decrease in advertising expense primarily due to less radio advertising and a $0.4 million decrease in travel expense due to COVID-19

travel restrictions.

Administrative expenses for fiscal 2021 were $36.8 million, a decrease of $1.1 million, or 3.0%, from the amount recorded for fiscal 2020.

A $2.2 million decrease in legal and consulting fees related to an acquisition opportunity that we explored in fiscal 2019 but ultimately decided not to pursue was largely offset by a $2.1 million increase in payroll related and incentive compensation expense.

The decrease was due to a $1.9 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.

This decrease was partially offset by a $0.6 million increase in compensation related expenses.

Income from Operations

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Interest expense was $1.4 million for fiscal 2021 compared to $2.0 million for fiscal 2020.

The decrease in interest expense was due to lower average debt levels, as well as lower interest rates.

The decrease in interest expense was due to lower average debt levels.

Rental and Miscellaneous Expense, Net

Net rental and miscellaneous expense was $1.4 million for fiscal 2021 compared to $1.6 million for fiscal 2020.

The increase during fiscal 2020 was due to additional repair and maintenance expense.

The decrease during fiscal 2021 was due to less repair and maintenance expense.

Other Expense

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Income Tax Expense

Income tax expense was $18.6 million, or 25.6% of income before income taxes (the “Effective Tax Rate”), for fiscal 2020 compared to $13.0 million, or 24.7% of income before income taxes, for fiscal 2019.

Our fiscal 2020 Effective Tax Rate is greater than fiscal 2019 due to a larger state tax rate, as a result of the lower Federal benefit received since the corporate tax rate was reduced to a flat 21%.

Income tax expense was $20.1 million, or 25.2% of income before income taxes, for fiscal 2021 compared to $18.6 million, or 25.6% of income before income taxes, for fiscal 2020.

Net income was $59.7 million, or $5.19 basic and $5.17 diluted per common share, for fiscal 2021, compared to $54.1 million, or $4.72 basic and $4.69 diluted per common share, for fiscal 2020, due to the factors discussed above.

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Also, various uncertainties could result in additional uses of cash.

The primary sources of cash are results of operations and availability under our Credit Agreement, dated February 7, 2008 and subsequently amended and restated in March 2020 (as amended and restated, the “Credit Facility”), that provides a revolving loan commitment and letter of credit subfacility.

Despite the current COVID-19

pandemic, 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.

The primary sources of cash are results of operations and availability under our Credit Facility.

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.

See Part I, Item 1A — “Risk Factors” above.

Our available credit under our Credit Facility has allowed us to devote more funds to promote our products (especially our Fisher

and Orchard Valley Harvest

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

Our available credit under our Credit Facility has allowed us to devote more funds to promote our products, increase our consumer insight capabilities and efforts, consummate strategic investments and business acquisitions, such as the 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.

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Operating Activities.

Net cash provided by operating activities was $63.6 million in fiscal 2020, a decrease of $19.8 million compared to fiscal 2019.

The decrease in operating cash flow was due to an increased use of working capital for inventory, which was partially offset by a $14.6 million increase in net income driven by increased sales and improved profitability compared to fiscal 2019.

Inventories increased $15.0 million in fiscal 2020 compared to a $17.3 million decrease in inventories in fiscal 2019 which resulted in a net unfavorable change in cash of $32.3 million.

Total inventories were $172.1 million at June 25, 2020, an increase of $15.0 million, or 9.6%, from the inventory balance at June 27, 2019.

The increase was primarily due to increased quantities on hand for peanuts, cashews and almonds and higher acquisition costs for peanuts and walnuts, which was partially offset by lower acquisition costs for pecans.

Raw nut and dried fruit input stocks, some of which are classified as work in process, increased by 10.4 million pounds, or 22.9%, at June 25, 2020 compared to June 27, 2019.

The weighted average cost per pound of raw nut and dried fruit input stocks on hand at the end of fiscal 2020 fell by 7.0% compared to the end of fiscal 2019, primarily due to higher quantities of peanuts on hand compared to tree nuts, as well as lower commodity acquisition costs for cashews and pecans.

Net cash provided by operating activities was $104.7 million in fiscal 2021, an increase of $41.1 million compared to fiscal 2020.

The increase in operating cash flow was due to a decreased use of working capital for inventory, combined with a $5.6 million increase in net income driven by lower commodity acquisition costs for all major tree nuts compared to fiscal 2020.

Inventories decreased $24.1 million in fiscal 2021 compared to a $15.0 million increase in inventories in fiscal 2020 which resulted in a net favorable change in cash of $39.1 million.

Total inventories were $148.0 million at June 24, 2021, a decrease of $24.1 million, or 14.0%, from the inventory balance at June 25, 2020.

The decrease was primarily due to lower commodity acquisition costs for all major tree nuts and decreased quantities of peanuts, pecans and finished goods on hand, which was partially offset by increased quantities of walnuts on hand.

Raw nut and dried fruit input stocks, some of which are classified as work in process, decreased 8.6 million pounds, or 15.3%, at June 24, 2021 compared to June 25, 2020.

The weighted average cost per pound of raw nut and dried fruit input stocks on hand at the end of fiscal 2021 fell by 11.9% compared to the end of fiscal 2020, primarily due to lower commodity acquisition costs for all major tree nuts.

Investing Activities.

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Cash used in investing activities was $14.0 million in fiscal 2020.

Capital expenditures accounted for a $15.1 million use of cash in fiscal 2019.

Capital expenditures accounted for a $15.0 million use of cash in fiscal 2020, which was offset in part by $1.1 million of proceeds from insurance recoveries related to the fire noted above.

We expect total capital expenditures for equipment purchases and upgrades, facility maintenance and food safety enhancements for fiscal 2022 to be approximately $18.0 million.

The projected increase in capital expenditures from historical amounts is due to a strategic investment for a new product line.

Absent any material acquisitions or other significant investments, we believe that cash on hand, combined with cash provided by operations and borrowings available under the Credit Facility, will be sufficient to meet the cash requirements for capital expenditures.

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We repaid $5.3 million of long-term debt during fiscal 2021, $3.1 million of which was related to the Mortgage Facility (as defined below).

There was a net increase in borrowings outstanding under our Credit Facility of $27.0 million during fiscal 2020 which occurred, in part, as a result of the increase in inventory.

There was a net decrease in borrowings outstanding under our Credit Facility of $18.4 million during fiscal 2021 which occurred, in part, as a result of the decrease in inventory.

Cash used in financing activities was $49.6 million during fiscal 2020.

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We repaid $7.7 million of long-term debt during fiscal 2020, $3.0 million of which was related to the Mortgage Facility.

There was a net decrease in borrowings outstanding under our Credit Facility of $31.3 million during fiscal 2019 which occurred, in part, as a result of the decrease in inventory and increased profitability.

There was a net increase in borrowings outstanding under our Credit Facility of $27.0 million during fiscal 2020 which occurred, in part, as a result of the increase in inventory.

Financing Arrangements

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The Amended and Restated Credit Agreement provides for a $117.5 million senior secured revolving credit facility with the same borrowing capacity, interest rates and applicable margin as the Former Credit Agreement and extends the term of the Former Credit Agreement from July 7, 2021 to March 5, 2025.

See Note 6 — “Revolving Credit Facility” of the Notes to Consolidated Financial Statements for further details.

The Amended and Restated Credit Facility is secured by substantially all of our assets other than machinery and equipment, real property and fixtures and matures on March 5, 2025.

The Mortgage Facility is secured by mortgages on essentially all of our owned real property located in Elgin, Illinois, Gustine, California and Garysburg, North Carolina (the “Encumbered Properties”).

At June 25, 2020, the weighted average interest rate for the Credit Facility was 2.40%.

The Mortgage Facility is secured by mortgages on essentially all of our owned real property located in Elgin, Illinois and Gustine, California (the “Encumbered Properties”).

At June 24, 2021, 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 borrowing levels against the Credit Facility and projected positive cash flow for July.

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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The selling price was determined by an independent appraiser to be the fair market value which also approximated our carrying value.

The lease for the Selma Properties has a ten-year

The provisions of the arrangement are not eligible for sale-leaseback accounting, and the $14.3 million was recorded as a debt obligation.

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

The lease for the Selma Properties had an initial ten-year

term at a fair market value rent with three five-year renewal options.

In September 2015, we exercised two of the five-year renewal options which extended the lease term to September 2026.

The lease extension also reduced the monthly lease payment on the Selma Properties, beginning in September 2016, to reflect then current market conditions.

The lease extension also reduced the monthly lease payment on the Selma Properties, beginning in September 2016, to reflect then current market conditions, and the payments are reassessed at the end of each five-year renewal option.

The monthly payments will increase, beginning in September 2021, based on the change in the consumer price index in accordance with the lease.

One five-year renewal option remains.

Also, we have an option to purchase the Selma Properties from the lessor at 95% (100% in certain circumstances) of the then fair market value, but not less than the original $14.3 million purchase price.

The provisions of the arrangement are not eligible for sale-leaseback accounting, and the $14.3 million was recorded as a debt obligation.

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

At June 24, 2021, $8.9 million of the debt obligation was outstanding.

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In November 2017 we completed the Squirrel Brand

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

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

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

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

We can pre-pay

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

At June 25, 2020, the principal amount of $1.6 million of the Promissory Note was outstanding.

The Acquisition was financed by a combination of cash (drawn under the Credit Facility) and a three-year seller-financed note of $11.5 million, which was repaid in full during the second quarter of fiscal 2021.

Sheet Arrangements

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What changed 10-K

Item 7. Management’s Discussion and Analysis