What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-08-24 compared with 2021-08-18 · 115 added, 137 removed, 194 unchanged (57% of the section changed)

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weeks (four thirteen-week quarters).

However, the fiscal year ended June 30, 2022 consisted of fifty-three weeks with our fourth quarter containing fourteen weeks.

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

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.

References herein to fiscal 2023 are to the fiscal year ending June 29, 2023.

References herein to fiscal 2022, fiscal 2021 and fiscal 2020 are to the fiscal years ended June 30, 2022, June 24, 2021 and June 25, 2020, respectively.

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

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

Squirrel Brand, Southern Style Nuts

and Sunshine Country

Squirrel Brand

and Southern Style Nuts

brand names and under a variety of private brands.

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

The Company’s long-term objective to drive profitable growth, as identified in our Strategic Plan, includes continuing to grow Fisher,

Orchard Valley Harvest, Squirrel Brand

and Southern Style Nuts

into leading brands and providing integrated nut solutions to grow non-branded

business across key customers.

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 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 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.

During fiscal 2022, the Company created a Long-Range Plan to clarify our future growth priorities.

Our Long-Range Plan focuses on growing our non-branded

business across key customers, transforming Fisher,

Orchard Valley Harvest

and Squirrel Brand

into leading brands while increasing distribution and diversifying our portfolio into high growth snacking segments to accelerate growth with innovation and targeted, opportunistic acquisitions.

We plan to execute on our Long-Range Plan by providing non-branded

customer value-added solutions based on our extensive industry and consumer expertise.

We will grow our branded business by reaching new consumers via product expansion 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, including sales via e-commerce

We face a number of challenges in the future, which include recent widespread inflation, potential for economic downturn, supply chain challenges and the impacts of COVID-19.

We have also experienced a tightening in the labor market for those employed at our production facilities which has led to increased labor costs.

We face changing industry trends as consumer purchasing preferences evolve.

Due to the recent widespread inflation and increasing commodity acquisition costs, we have seen higher selling prices at retail.

With higher prices across our categories and the broader food market, consumers may purchase fewer snack products, shift their preferences to private brands or lower priced nuts or purchase snack products outside the nut and trail mix category.

With the inflationary environment, we are also seeing signs of consumers shifting to more value-focused channels, such as mass merchandising retailers, club stores and dollar stores.

platforms still showed growth during fiscal 2022 but at a lower rate than we saw during fiscal 2021.

Supply Chain and Transportation

In recent months we have faced challenges with shortages and cost increases for shipping pallets, packaging, imported ingredients, transportation and shipping availability.

The conflict in Ukraine has further exacerbated supply chain disruptions, especially related to sunflower oil used in roasting our nut products and aluminum which is used in certain of our product packaging.

We have also experienced supply chain issues related to a shortage in capacity in the transportation industry.

Compounding the associated driver shortage was an increase in demand driven by additional spending on consumer goods during fiscal 2021 and fiscal 2022, which led to periodic shortages of shipping containers, container chassis, space on container ships and trains and capacity constraints at U.S.

This tightening in transportation capacity began to ease during the third quarter of fiscal 2022 as inflation resulted in rising costs which drove down demand in the freight market.

However, intermodal capacity remains tight and ongoing labor negotiations with both port and rail workers by the operators of such port and rail centers may cause further disruptions.

In addition, fuel prices were at record highs during calendar 2022.

While we have mitigated some of the transportation shortages and maintained high service levels, we may continue to face an unpredictable transportation environment and there is no guarantee that our mitigation strategies will continue to be effective, or that any transportation capacity easing will continue or transportation prices will return to historic levels.

These shortages and related challenges have impacted our operations and resulted in increased expenses and manufacturing inefficiencies that have adversely impacted (and may continue to impact) our net income.

We anticipate pricing relief in some of these areas in the coming quarters if and as shortages decrease and supply chains normalize, but we expect that some costs may remain elevated or unpredictable for a longer period of time, particularly as the conflict in Ukraine continues.

We are working, and will continue to work, with our vendors, customers and suppliers to source additional raw materials and packaging supplies and to remain flexible in obtaining the transportation and labor services we need.

If these shortages and other supply chain issues continue and we cannot secure adequate supplies to fulfill customer orders or cannot obtain the transportation and labor services we need, such shortages and supply chain issues could have an unfavorable impact on net sales and our operations in fiscal year 2023.

In addition, as costs increase due to these issues or due to inflationary pressures in general, there is an additional risk of not being able to pass (in part or in full) such potential cost increases onto our customers or in a timely manner.

If we cannot align costs with prices for our products, our operating performance could be adversely impacted.

We may continue to face challenges in our fiscal 2023 as a result of the COVID-19

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

During fiscal 2022, as various COVID-19

vaccines became more widely distributed and accepted by the public and indoor dining restrictions were again loosened, we saw a significant improvement in sales volume with our foodservice, restaurant, convenience store and non-essential

retail customers.

We will continue to focus our promotional and advertising activity to invest in our brands to achieve growth.

We intend to execute an omnichannel approach to win in key categories including recipe nuts, nut flours, snack nuts, trail mix and snacking.

We continue to see strong e-commerce

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

performance across our branded portfolio and anticipate taking various actions with the goal of accelerating 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

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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.

Below are some examples of essential weather conditions that must be present 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.

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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.

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

Annual Highlights

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.

Our net sales for fiscal 2022 increased $97.4 million, or 11.3%, to $955.9 million compared to fiscal 2021.

Gross profit increased $14.6 million, while our gross profit margin, as a percentage of net sales, decreased to 20.9% in fiscal 2022 from 21.5% in fiscal 2021.

Total operating expenses for fiscal 2022 increased $12.4 million, or 12.4%, to $112.2 million.

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

Operating expenses, as a percentage of net sales, increased slightly to 11.7% compared to 11.6% of net sales in fiscal 2021.

Diluted earnings per share increased approximately 3.1% compared to last fiscal year.

Our strong financial position allowed us to pay cash dividends of $34.5 million during fiscal 2022.

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.

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

At June 24, 2021 there are no amounts due to walnut growers.

The total value of inventories on hand at the end of fiscal 2022 increased $56.9 million, or 38.4%, in comparison to the total value of inventories on hand at the end of fiscal 2021.

We have seen acquisition costs for dried fruit and most major nut types increase in the 2021 crop year (which falls into our 2022 fiscal year).

Results of Operations

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Fiscal 2022 Compared to Fiscal 2021

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.

Our net sales increased 11.3% to $955.9 million for fiscal 2022 from $858.5 million for fiscal 2021.

The increase in net sales was primarily due to a 6.9% increase in sales volume, which is defined as pounds sold to customers, and a 4.2% increase in the weighted average selling price per pound.

The increase in the weighted average selling price resulted mainly from pricing actions taken due to an increase in commodity acquisition costs for peanuts, all major tree nuts except walnuts, dried fruits and other input costs due to inflationary conditions.

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

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Net sales in the consumer distribution channel increased 9.3% in dollars and 3.9% in sales volume in fiscal 2022 compared to fiscal 2021.

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.

The sales volume increase came primarily from an 8.9% increase in private brand sales volume driven by increases for trail and snack mixes and mixed nuts, which mainly resulted from new distribution at existing customers.

The increase was partially offset by the discontinuance of our inshell peanut product line, which occurred in the fourth quarter of fiscal 2021, and a decrease in peanut butter sales volume due to the planned downtime associated with the upgrade of our peanut butter line that occurred and was completed in the third quarter of the current fiscal year.

Sales volume for Fisher

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.

snack nuts decreased 32.9% primarily due to the discontinuance of our inshell peanut product line as mentioned above.

Without considering the impact of this discontinued product line, Fisher

snack nuts sales volume increased 4.8%.

Sales volume of Fisher

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

recipe nuts was relatively unchanged compared to fiscal 2021.

of Orchard Valley Harvest

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

products increased 11.9% primarily driven by increased distribution and promotional activity at a major customer in the non-food

sector, as this retailer continues to recover from COVID-19

restrictions, as well as regained distribution at a customer in the club channel.

These gains were partially offset by reduced merchandising activity and item discontinuance at a mass merchandising retailer.

Sales volume of Southern Style Nuts

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.

increased 4.4% due to increased distribution and promotional activity at a current club store customer, which was partially offset by reduced purchases as a result of higher selling prices at a mass merchandising retailer.

Net sales in the commercial ingredients distribution channel increased 29.8% in dollars and 23.5% in sales volume compared to fiscal 2021.

The increase in sales volume was due to a 34.6% increase in sales volume to foodservice customers, which was related to the continued recovery in the restaurant industry from the impacts of COVID-19

and new distribution at existing customers.

Net sales in the contract packaging distribution channel increased 7.4% in dollars and 7.7% in sales volume in fiscal 2022 compared to fiscal 2021.

The increase in sales volume was due to increased distribution, largely for peanuts, and new product offerings by a major customer in this channel, as well as business with a new customer.

Gross profit increased 7.9% to $199.6 million in fiscal 2022 from $185.0 million in fiscal 2021.

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 lower commodity acquisition costs for all major tree nuts and increased sales volume.

The increase in gross profit was mainly due to increased sales volume and related manufacturing efficiencies.

Our gross profit margin, as a percentage of sales, decreased to 20.9% for fiscal 2022 from 21.5% for fiscal 2021.

The decrease in gross profit margin was attributable to higher commodity acquisition costs for pecans, cashews and almonds and other inflationary cost increases for labor, freight and manufacturing supplies, which were largely offset by manufacturing efficiencies that resulted from increased sales volume.

Operating Expenses

Total operating expenses for fiscal 2022 increased $12.4 million to $112.2 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 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.

Operating expenses as a percent of net sales were 11.7% for fiscal 2022 compared to 11.6% for fiscal 2021.

Operating expenses as a percent of net sales increased slightly in fiscal 2022 due to an increase in total operating expenses which was largely offset by a higher net sales base.

The increase in total operating expenses was mainly due to increases in freight, advertising, consumer insight research and related consulting and sales broker commission expenses which was partially offset by a decrease in incentive compensation.

Selling expenses for fiscal 2022 were $76.9 million, an increase of $13.9 million, or 22.0%, over the amount recorded for fiscal 2021.

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.

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.

The increase was driven by a $5.7 million increase in freight expense due to higher freight rates and fuel prices compared to fiscal 2021, as well as an increase in sales made on a delivered basis, a $4.7 million increase in advertising, consumer insight research and related consulting expenses, and a $1.6 million increase in sales broker commission expense.

Administrative expenses for fiscal 2022 were $37.7 million, an increase of $0.9 million, or 2.4%, from the amount recorded for fiscal 2021.

The increase was due to a $3.3 million decrease in the gain on asset disposals, mainly resulting from an insurance settlement gain of $2.3 million in fiscal 2021 related to the fire that occurred in our Garysburg facility combined with losses on current year disposals.

This increase was largely offset by a $2.9 million decrease in compensation expense, primarily related to incentive compensation.

The $2.3 million gain on sale of facility is the result of the sale of our Garysburg, North Carolina facility that occurred in the first quarter of fiscal 2022.

Income from Operations

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Interest expense was $1.9 million for fiscal 2022 compared to $1.4 million for fiscal 2021.

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

The increase in interest expense resulted primarily from higher average short-term debt levels driven mainly by increased commodity acquisition costs.

Rental and Miscellaneous Expense, Net

Net rental and miscellaneous expense was $1.3 million for fiscal 2022 compared to $1.4 million for fiscal 2021.

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

Other Expense

Other expense consists of pension related expenses other than the service cost component and was $2.5 million and $2.3 million for fiscal 2021 and fiscal 2020, respectively.

Pension Expense (Excluding Service Costs)

Pension expense (excluding service costs) was $2.5 million for both fiscal 2022 and fiscal 2021.

Income Tax Expense

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Liquidity and Capital Resources

The primary uses of cash are to fund our current operations, fulfill contractual obligations, pursue our Strategic Plan through growing our branded and private label nut programs and repay indebtedness.

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

The primary uses of cash are to fund our current operations, fulfill contractual obligations, pursue our Long-Range Plan through growing our branded and private label nut programs and repay indebtedness.

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

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

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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, 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.

Our available credit under our Credit Facility has allowed us to devote more funds to promote our products, increase our consumer insight capabilities and promotional efforts, reinvest in the Company through capital expenditures, develop new products, pay cash dividends, consummate strategic investments and business acquisitions and explore other growth strategies outlined in our Long-Range 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 $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.

Net cash provided by operating activities was $19.6 million in fiscal 2022, a decrease of $85.1 million compared to fiscal 2021.

The decrease in operating cash flow was primarily due to an increased use of working capital for inventory compared to fiscal 2021 as a result of increasing commodity acquisition costs.

Inventories increased $56.9 million in fiscal 2022 compared to a $24.1 million decrease in inventories in fiscal 2021, which resulted in an additional usage of cash of $81.0 million.

Total inventories were $204.9 million at June 30, 2022, an increase of $56.9 million, or 38.4%, from the inventory balance at June 24, 2021.

The increase was primarily due to higher commodity acquisition costs for substantially all raw nut and dried fruit input stocks and higher quantities of finished goods on hand at year end.

This increase was partially offset by lower quantities of pecans and walnuts on hand at year end.

Raw nut and dried fruit input stocks, some of which are classified as work in process, decreased 3.0 million pounds, or 6.3%, at June 30, 2022 compared to June 24, 2021.

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.

The weighted average cost per pound of raw nut and dried fruit input stocks on hand at the end of fiscal 2022 increased by 39.7% compared to the end of fiscal 2021, primarily due to higher commodity acquisition costs for substantially all raw nut and dried fruit input stocks.

As of June 30, 2022, there are known purchase obligations of $258.9 million which are expected to be settled during fiscal 2023.

These purchase obligations primarily represent inventory purchase commitments;

however, these amounts exclude purchase commitments under walnut purchase agreements due to the uncertainty of pricing and quantity.

Additional contractual cash obligations include amounts owed for lease commitments and the Supplemental Employee Retirement Plan (“SERP”).

With the planned retirement of two SERP participants in fiscal 2023, there has been an increase in the benefits expected to be paid in the near term.

We believe 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 all contractual cash obligations.

See Note 3 — “Leases” and Note 14 — “Retirement Plan” of the Notes to Consolidated Financial Statements for additional information and future maturities.

Investing Activities.

Cash used in investing activities was $11.4 million in fiscal 2022.

Capital expenditures accounted for a $25.2 million use of cash in fiscal 2021, which was offset in part by $2.5 million of proceeds from insurance recoveries related to a fire in our Garysburg, North Carolina facility.

Capital expenditures accounted for a $17.8 million use of cash in fiscal 2022, which was offset in part by $4.0 million of cash proceeds resulting from the sale of our Garysburg, North Carolina facility and $3.2 million of cash proceeds resulting from the Sanfilippo family’s exercise of their contractual purchase option and our resulting sale of certain life insurance policies to the Sanfilippo family.

Cash used in investing activities was $23.0 million in fiscal 2021.

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 2023 to be approximately $18.0 million.

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We repaid $3.8 million of long-term debt during fiscal 2022, $3.3 million of which was related to the Mortgage Facility (as defined below).

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.

There was a net increase in borrowings outstanding under our Credit Facility of $31.8 million during fiscal 2022 primarily due to increasing commodity acquisition costs.

See Note 6 — “Revolving Credit Facility” and Note 7 — “Long-Term Debt” of the Notes to Consolidated Financial Statements for additional information and future maturities.

Cash used in financing activities was $82.6 million during fiscal 2021.

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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.

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.

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.

In addition, the Amended and Restated Credit Agreement included language for an alternate benchmark rate as an option as a replacement for LIBOR.

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 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.

At June 30, 2022, the weighted average interest rate for the Credit Facility was 3.41%.

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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As of June 30, 2022, we were in compliance with all covenants under the Mortgage Facility and a total principal amount of $2.5 million was outstanding.

The Mortgage Facility is expected to be fully repaid in fiscal 2023.

Selma Property

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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, 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.

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

At the end of each five-year renewal option, the base monthly lease amounts are reassessed, and the monthly payments increased to $114 beginning in September 2021.

One five-year renewal option remains.

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At June 30, 2022, $8.4 million of the debt obligation was outstanding.

Squirrel Brand Seller-Financed Note

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

Sheet Arrangements

As of June 24, 2021, we were not involved in any off-balance

sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K

promulgated by the SEC.

Contractual Cash Obligations

At June 24, 2021, we had the following contractual cash obligations for long-term debt (including scheduled interest payments), operating leases, the Credit Facility, purchase obligations, retirement plans and other long-term liabilities (amounts in this subsection in thousands):

Long-term debt obligations (1)

Minimum operating lease commitments

Revolving credit facility borrowings

Purchase obligations (2)

Retirement plans (3)

Total contractual cash obligations

See Note 7 — “Long-Term Debt” of the Notes to Consolidated Financial Statements for further detail on the Company’s long-term debt obligations.

The purchase obligations primarily represent inventory purchase commitments;

however, these amounts exclude purchase commitments under walnut purchase agreements due to the uncertainty of pricing and quantity.

Represents projected retirement obligations.

See Note 13 — “Employee Benefit Plans” and Note 14 — “Retirement Plan” of the Notes to Consolidated Financial Statements for further details.

Critical Accounting Policies and Estimates

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The most significant assumption for pension plan accounting is the discount rate.

We select a discount rate each year (as of our fiscal year-end

measurement date) for our plan based upon a hypothetical corporate bond portfolio for which the cash flows match the year-by-year

We select a discount rate each year (as of our fiscal year end measurement date) for our plan based upon a hypothetical corporate bond portfolio for which the cash flows match the

projected benefit cash flows for our pension plan.

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point increase or decrease in our discount rate assumption for fiscal 2022 would have resulted in an immaterial change in our pension expense for fiscal 2022.

For our year-end

pension obligation determination, we selected discount rates of 2.89% and 2.69% for fiscal years 2021 and 2020, respectively.

For our year end pension obligation determination, we selected discount rates of 4.68% and 2.89% for fiscal years 2022 and 2021, respectively.

Recent Accounting Pronouncements

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Forward-Looking Statements

The statements contained in this Annual Report on Form 10-K,

and in the Chief Executive Officer’s letter to stockholders accompanying the Annual Report on Form 10-K

The statements contained in this Annual Report on Form

and in the Chief Executive Officer’s letter to stockholders accompanying the Annual Report on Form

delivered to stockholders, that are not historical (including statements concerning our expectations regarding market risk) are “forward-looking statements.” These forward-looking statements may be followed (and therefore identified) by a cross reference to Part I, Item 1A — “Risk Factors” or may be otherwise identified by the use of forward-looking words and phrases such as “will”, “anticipates”, “intends”, “may”, “believes”, “should” and “expects”, and they are based on our current expectations or beliefs concerning future events and involve risks and uncertainties.

3 unchanged sentences

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 7. Management’s Discussion and Analysis