Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements. Our fiscal year ends on the final Thursday of June each year, and typically consists of fifty-two 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:
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References herein to fiscal 2025 are to the fiscal year ending June 26, 2025.
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References herein to fiscal 2024, fiscal 2023 and fiscal 2022 are to the fiscal years ended June 27, 2024, June 29, 2023 and June 30, 2022, respectively.
As used herein, unless the context otherwise indicates, the terms “we”, “us”, “our” or “Company” collectively refer to John B. Sanfilippo & Son, Inc. and our wholly-owned subsidiary, JBSS Ventures, LLC.
We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States. These nuts are sold under our Fisher, Orchard Valley Harvest, Squirrel Brand and Southern Style Nuts brand names and under a variety of private brands. Additionally, with our acquisition of certain snack bar assets in the second quarter of fiscal 2024, and our internally developed nutrition bar products, we offer our private brand customers a complete portfolio of snack bars. We market and distribute, and in most cases, manufacture or process, a diverse product line of food and snack products, including nutrition bars, snack bars, peanut butter, almond butter, cashew butter, candy and confections, snack and trail mixes, sunflower kernels, dried fruit, corn snacks, chickpea snacks, sesame sticks, other sesame snack products and baked cheese snack products under our brand names, including Just the Cheese, and under private brands. We distribute our products in the consumer, commercial ingredients and contract manufacturing distribution channels.
Our Long-Range Plan defines our future growth priorities. The Long-Range Plan focuses on growing our private brand business across key customers, as well as transforming Fisher, Orchard Valley Harvest and Squirrel Brand into leading brands while increasing distribution and diversifying our portfolio into high growth snacking segments. We will execute on our Long-Range Plan by providing private brand customer value-added solutions based on our extensive industry and consumer expertise with innovative products such as our newly developed product line of private brand nutrition bars which we introduced during fiscal 2023, and expanding our snack bar capabilities. 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 platforms. Our Long-Range Plan also contemplates increasing our sales through product innovation and targeted, opportunistic acquisitions, such as our acquisition of the Just the Cheese brand completed during fiscal 2023 and our acquisition of certain snack bar assets from Seller in September 2023. The assets acquired from Seller included inventory, a manufacturing facility and related equipment located in Lakeville, Minnesota, and product formulas (the “Lakeville Acquisition”). The Lakeville Acquisition expanded our ability to produce private brand snack bars and allows us to provide our private brand customers with a complete snack bar portfolio.
We will continue to focus our promotional and advertising activity to invest in our brands to achieve growth. We intend to execute on an omnichannel approach to win in key categories including recipe nuts, snack nuts, trail mix, snack bars and other snacking categories. We continue to see e-commerce growth across our branded portfolio and anticipate taking various actions with the goal of maintaining that growth across a variety of established and emerging e-commerce platforms. We continue to face the ongoing challenges and/or regulations specific to our business, such as food safety and regulatory matters, the maintenance and growth of our customer base for branded and private brand products and varying consumer demand for nut and nut-related products and snack bars in a challenging snack food environment.
Inflation and Consumer Trends
We face changing industry trends as consumers' purchasing preferences evolve. Due to the continued inflationary environment, we have seen higher selling prices at retail which recently have started to moderate for some products and decrease for other products. These higher prices across our categories and the broader food market, coupled with an actual or potential economic downturn and tightening of consumer finances due to inflation, reduced government support through programs such as SNAP or a variety of other macroeconomic reasons, are causing consumers to purchase fewer snack products. We have seen this through the decline in the recipe, snack nut and snack bar categories since fiscal 2023 and during fiscal 2024, as consumers shift their preferences to private brands or lower priced nuts or snack bars or purchase snack products outside the snack nut, trail mix and snack bar categories. With the inflationary environment, we are also seeing signs of consumers shifting to more value-focused retailers, such as mass merchandising retailers, club stores and dollar stores, not all of which we distribute or sell to. We have responded by focusing on our strengths, including our knowledge of the snack and trail nut categories, product innovation and judicious use of trade spending and pricing actions.
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Supply Chain and Transportation
In fiscal 2024 we faced periodic supply chain challenges related to certain raw material shortages, extended lead-times, supplier capacity constraints and inflationary pressures. While we do not have direct exposure to suppliers in Russia, Ukraine or Israel, the conflicts in these regions could continue to result in volatile commodity markets, supply chain disruptions and increased costs. Global supply chain pressures have eased compared to fiscal 2023, but we continue to see negative impacts related to macro-economics, geo-political unrest, growing political instability and climate-related events. Overall packaging and ingredient inflation appears to be leveling off compared to fiscal 2023 but is expected to remain above historical levels.
While we have seen stabilization in truckload capacity and volume at U.S. ports and improvements with driver hiring, there are still warehouse and dock staff shortages and fuel and energy concerns due to continued unrest abroad coupled with persistent inflation. Freight rates decreased in fiscal 2024 and fuel costs stabilized. We have seen continued trucking company bankruptcies which may cause continued instability in the transportation industry in fiscal 2025 as capacity outweighs demand. While there are indicators of transportation cost improvement, and despite our mitigation of some of the transportation shortages, we may continue to face an unpredictable transportation environment. There is no guarantee that our mitigation strategies will continue to be effective, that any transportation capacity easing will continue or that transportation prices will return to more normalized levels.
Our most significant ingredient requirements include cocoa products, dried fruits, sweeteners, vegetable oils, oats, flour and dairy. Many of these materials and costs are subject to price fluctuations from several factors, including fluctuating commodity markets, market conditions, demand for raw materials, weather, growing and harvesting conditions, climate change, energy costs, currency fluctuations, supplier capacities, governmental actions, import and export requirements (including tariffs), and on-going political instability and other factors beyond our control.
We have remained agile by proactively identifying risks, modifying inventory plans and diversifying our supplier base to mitigate risk of customer order shortages and maintain our supply chain. We continue to proactively manage our business in response to the evolving global economic environment and related uncertainty and intend to take steps to mitigate impacts to our supply chain. If these supply chain pressures continue, or we cannot obtain the transportation and labor services needed to fulfill customer orders, such shortages and supply chain issues could have an unfavorable impact on net sales and our operations in fiscal 2025. Furthermore, record cocoa prices have been fueled by speculation of a short crop in calendar 2024. Unprecedented high cocoa prices have led to a volatile market and will continue in fiscal 2025. Cocoa production was down significantly in Ghana and Ivory Coast due to a combination of inclement weather and crop disease. Despite higher cocoa prices, consumption remained strong, leading to predictions of a large production deficit. Additionally, as costs increase due to these issues or due to overall inflationary pressures, 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.
Climate Change Impacts
Climate change may have a long-term adverse impact on our business and results of operations. Global average temperatures are gradually increasing due to increased concentration of carbon dioxide and other greenhouse gases, which is projected to contribute to significant changes in global weather patterns, an increase in severity of natural disasters, and changes in agricultural productivity adding to price volatility. Changing weather patterns may limit the availability or increase the cost of natural resources and commodities, including cocoa, grains, sweeteners, and vegetable oils used to manufacture our products.
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, poor air quality and extreme temperatures can affect our ability to obtain adequate (or acceptable quality) inputs, including fruit and nut materials, and our ability to 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 present for normal development of the crops from which we derive the major raw materials we use in our products.
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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 trees can rest.
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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.
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Cashews require a minimum of approximately 2,000 hours of sunlight per year. Sunlight is especially critical during the flowering period.
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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.
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Cranberries require adequate snow and ice coverage during the winter to protect vines from freezing.
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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 material adverse impact on our business.
Annual Highlights
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Our net sales for fiscal 2024 increased $67.1 million, or 6.7%, to $1,066.8 million compared to fiscal 2023.
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Gross profit increased $2.5 million, while our gross profit margin, as a percentage of net sales, decreased to 20.1% in fiscal 2024 from 21.2% in fiscal 2023.
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Total operating expenses for fiscal 2024 increased $7.5 million, or 6.2%, to $129.0 million. Operating expenses, as a percentage of net sales, was 12.1% of net sales in both fiscal 2024 and fiscal 2023.
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Diluted earnings per share decreased approximately 4.6% compared to last fiscal 2023.
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Our strong financial position allowed us to pay cash dividends totaling $34.8 million during fiscal 2024.
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The total value of inventories on hand at the end of fiscal 2024 increased $23.6 million, or 13.7%, in comparison to the total value of inventories on hand at the end of fiscal 2023. This increase is primarily due to $21.8 million of additional inventory associated with the Lakeville acquisition. We have seen acquisition costs for all major tree nuts except walnuts decrease in the 2023 crop year (which falls into our 2024 fiscal year).
Results of Operations
The following table sets forth the percentage relationship of certain items to net sales for the periods indicated and the percentage increase or decrease of such items from fiscal 2024 to fiscal 2023 and from fiscal 2023 to fiscal 2022.
Percentage of Net Sales Percentage Change
Fiscal 2024 Compared to Fiscal 2023
Net Sales
Our net sales increased 6.7% to $1,066.8 million for fiscal 2024 from $999.7 million for fiscal 2023. The increase in net sales was primarily due to the Lakeville Acquisition, which closed on the first day of our second quarter and increased net sales by approximately $119.8 million. Sales volume, which is defined as pounds sold to customers, increased 12.3%, also due to the Lakeville Acquisition. The Lakeville Acquisition increased our sales volume by 48.5 million pounds, or 15.7%, over fiscal 2023. Excluding the impact of the Lakeville Acquisition, net sales decreased 5.3% to $946.9 million, which was primarily attributable to a 3.3% decline in sales volume. In addition to the decline in sales volume, a 2.0% decrease in weighted average selling price per pound also contributed to the decline in net sales, primarily from decreased selling prices.
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The following table summarizes sales by product type as a percentage of total gross sales. The information is based upon gross sales, rather than net sales, because certain adjustments from gross sales to net sales, such as promotional discounts, are not allocable to product type.
Peanuts & Peanut Butter 17.9 % 19.0 %
The following table shows a comparison of net sales by distribution channel (dollars in thousands):
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Sales of branded products were approximately 18% and 21% of total consumer channel sales during fiscal 2024 and 2023, respectively. Fisher branded products were approximately 62% and 64% of branded sales during fiscal 2024 and 2023, 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 $86.6 million, or 11.0%, and sales volume increased 18.0% in fiscal 2024 compared to fiscal 2023 primarily due the Lakeville Acquisition. Excluding the Lakeville Acquisition, net sales decreased $29.7 million, or 3.8%, and sales volume decreased 1.7%. Private brand sales volume increased 22.0% driven by the Lakeville Acquisition. Excluding the Lakeville Acquisition, private brand sales volume decreased 1.4% due to decreased consumer spending at two mass merchandising retailers. These sales volume decreases were partially offset by increased distribution of seasonal items at a grocery store retailer. Sales volume of Fisher recipe nuts decreased 9.1% due to lower customer demand across mass merchandising and grocery store retailers and less merchandising activity at several grocery store retailers. Sales volume of Fisher snack nuts decreased 14.0% due to lost distribution as a mass merchandising retailer and decreased sales volume at several grocery store retailers which was partially offset by an increase in e-commerce sales volume. Sales volume of Southern Style Nuts decreased 20.2% due to reduced distribution and fewer promotional programs at a club store customer. The above decreases in sales volume were partially offset by a 9.0% increase in sales volume for Orchard Valley Harvest primarily due to enhanced distribution at a major customer in the non-food sector and new rotational distribution at a club store customer.
Net sales in the commercial ingredients distribution channel decreased 10.2% in dollars and sales volume decreased 1.9% in fiscal 2024 compared to fiscal 2023. Excluding the Lakeville Acquisition, sales volume decreased 3.2% due to competitive pricing pressure coupled with non-recurring peanut butter sales at a foodservice distributor that occurred in fiscal 2023 and a 5.8% decrease in sales volume of peanut crushing stock to peanut oil processors due to reduced peanut shelling.
Net sales in the contract manufacturing distribution channel decreased 7.6% in dollars and sales volume decreased 6.2% in fiscal 2024 compared to fiscal 2023 primarily due to decreased peanut distribution by a major customer due to decreased consumer demand. Partially offsetting the sales volume decrease was an increase in granola processed in our Lakeville facility for a major customer. Excluding this granola volume, net sales decreased 10.5% and sales volume decreased 15.1%.
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Gross Profit
Gross profit increased 1.2% to $214.1 million in fiscal 2024 from $211.6 million in fiscal 2023. Excluding the Lakeville Acquisition, gross profit decreased approximately 0.4%, or $0.9 million. The decrease in gross profit was mainly due to decreased selling prices and reduced sales volume. Our gross profit margin, as a percentage of sales, decreased to 20.1% for fiscal 2024 from 21.2% for fiscal 2023 due to the higher net sales base from the Lakeville Acquisition, which was partially offset by lower commodity acquisition costs for all major tree nuts.
Operating Expenses
Total operating expenses for fiscal 2024 increased $7.5 million to $129.0 million. Operating expenses as a percent of net sales were 12.1% for both fiscal 2024 and fiscal 2023. The increase is net of the $2.2 million net gain on bargain purchase that occurred in the second quarter of fiscal 2024 due to the Lakeville Acquisition.
Selling expenses for fiscal 2024 were $82.7 million, an increase of $5.9 million, or 7.7%, over the amount recorded for fiscal 2023. The increase was driven primarily by a $2.2 million increase in advertising and consumer insight research expense, a $2.1 million increase in compensation-related expenses, a $1.7 million increase in outside distribution expense, which was primarily due to the Lakeville Acquisition, and an increase in consulting expenses of $0.4 million. These increases were offset by a $0.5 million decrease in freight expense due to lower freight rates.
Administrative expenses for fiscal 2024 were $48.5 million, an increase of $3.9 million, or 8.7%, from the amount recorded for fiscal 2023. The increase was due to a $4.3 million increase in compensation-related expenses and an increase in charitable food donations of $0.8 million. These increases were partially offset by a $1.0 million loss on equity investment in fiscal 2023 that did not recur in fiscal 2024.
Income from Operations
Due to the factors discussed above, income from operations was $85.2 million, or 8.0% of net sales, for fiscal 2024, compared to $90.2 million, or 9.0% of net sales, for fiscal 2023.
Interest Expense
Interest expense was $2.5 million for fiscal 2024 compared to $2.2 million for fiscal 2023. The increase in interest expense was due to higher average debt levels, primarily due to the Lakeville Acquisition.
Rental and Miscellaneous Expense, Net
Net rental and miscellaneous expense was $1.3 million for both fiscal 2024 and fiscal 2023.
Pension Expense (Excluding Service Costs)
Pension expense (excluding service costs) was $1.4 million for both fiscal 2024 and fiscal 2023.
Income Tax Expense
Income tax expense was $19.7 million, or 24.6% of income before income taxes (the "Effective Tax Rate"), for fiscal 2024 compared to $22.5 million, or 26.4% of income before income taxes, for fiscal 2023 due to a decrease in state income tax expense.
Net Income
Net income was $60.2 million, or $5.19 per common share basic and $5.15 per common share diluted, for fiscal 2024, compared to $62.9 million, or $5.43 per common share basic and $5.40 per common share diluted, for fiscal 2023, due to the factors discussed above.
Fiscal 2023 Compared to Fiscal 2022
The discussion of our results of operations for the fiscal year ended June 29, 2023 compared to the fiscal year ended June 30, 2022 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended June 29, 2023 and such discussion is incorporated by reference herein.
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Liquidity and Capital Resources
General
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 brand programs, consummate and integrate business acquisitions, return cash to our stockholders through dividends, repay indebtedness and pay amounts owed under the Retirement Plan. 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. We anticipate that expected net cash flow generated from operations and amounts available pursuant to the Credit Facility will be sufficient to fund our operations for the next twelve months. Our available credit under our Credit Facility has allowed us to devote more funds to promote our products, increase 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, such as the Lakeville Acquisition and the acquisition of the Just the Cheese brand in fiscal 2023, 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. Current market trends in nut prices and crop estimates also impact nut procurement.
The following table sets forth certain cash flow information for the last two fiscal years (dollars in thousands):
Operating Activities. Net cash provided by operating activities was $101.7 million in fiscal 2024, a decrease of $23.0 million compared to fiscal 2023. The decrease in operating cash flow was due to changes in working capital, primarily for inventory compared to fiscal 2023. Net of the Lakeville Acquisition, inventory decreased $11.9 million in fiscal 2024 compared to a $32.2 million decrease in inventories in fiscal 2023.
Total inventories were $196.6 million at June 27, 2024, an increase of $23.6 million, or 13.7%, from the inventory balance at June 29, 2023. The increase was primarily due to the $21.8 million of additional inventory associated with the Lakeville Acquisition, higher quantities of inshell pecans and walnuts on hand, and higher commodity acquisition costs for walnuts. This increase was partially offset by lower quantities of finished goods and pecan meats and lower quantities and commodity acquisition costs for peanuts and cashews.
Raw nut and dried fruit input stocks, some of which are classified as work in process, increased 9.6 million pounds, or 19.4%, at June 27, 2024 compared to June 29, 2023. This increase was due to higher quantities of walnuts and pecans on hand due to increased procurement from a larger crop combined with softness in demand. The weighted average cost per pound of raw nut and dried fruit input stocks on hand at the end of fiscal 2024 decreased by 9.2% compared to the end of fiscal 2023, primarily due to higher quantities of inshell walnuts and pecans.
As of June 27, 2024, there are known purchase obligations of $256.3 million which are expected to be settled during fiscal 2025. 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 payments to former officers under our Supplemental Employee Retirement Plan (“SERP”). 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 4 — “Leases” and Note 15 — “Retirement Plan” of the Notes to Consolidated Financial Statements for additional information and future maturities.
Investing Activities. Cash used in investing activities was $87.3 million in fiscal 2024. The Lakeville Acquisition net purchase price was $59.0 million. Capital expenditures accounted for a $28.3 million use of cash in fiscal 2024.
Cash used in investing activities was $24.3 million in fiscal 2023. Capital expenditures accounted for a $20.7 million use of cash in fiscal 2023. The $3.5 million purchase price for the acquisition of the Just the Cheese brand also contributed to the increase in cash used for investing activities.
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We expect total capital expenditures for equipment purchases and upgrades for fiscal 2025 to be approximately $31.0 million. This includes all capital expenditures needed for our newly leased facility in Huntley, Illinois, facility maintenance, food safety enhancements and expansion needs for our snack bar business. 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.
Financing Activities. Cash used in financing activities was $15.8 million during fiscal 2024. We paid dividends totaling $34.8 million in fiscal 2024. We repaid $0.7 million of long-term debt during fiscal 2024. Partially offsetting this use of cash was a net increase in borrowings outstanding under our Credit Facility of $20.4 million during fiscal 2024 primarily due to the Lakeville Acquisition. See Note 7 — “Revolving Credit Facility” and Note 8 — “Long-Term Debt” of the Notes to Consolidated Financial Statements for additional information and future maturities.
Cash used in financing activities was $98.8 million during fiscal 2023. We paid dividends totaling $54.9 million in fiscal 2023. We repaid $3.2 million of long-term debt during fiscal 2023, $2.5 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 $40.4 million during fiscal 2023 primarily due to decreasing commodity acquisition costs and improved operating cash flows.
Financing Arrangements
On February 7, 2008, we entered into the Former Credit Agreement (as defined below) with a bank group (the “Bank Lenders”) providing a $117.5 million revolving loan commitment and letter of credit subfacility. Also on February 7, 2008, we entered into a Loan Agreement with an insurance company providing us with two term loans for an aggregate amount of $45.0 million (as amended, the “Mortgage Facility”). The Mortgage Facility was repaid in full in the third quarter of fiscal 2023 and the related mortgages on our owned real property located in Elgin, Illinois and Gustine, California have been released.
Credit Facility
On March 5, 2020, we entered into an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) which amended and restated our Credit Agreement dated as of February 7, 2008 (the “Former Credit Agreement”). The Amended and Restated Credit Agreement provided 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 extended the term of the Former Credit Agreement from July 7, 2021 to March 5, 2025.
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.
On May 8, 2023, we entered into the First Amendment to our Amended and Restated Credit Agreement (the “First Amendment”), which replaced the London interbank offered rate (“LIBOR”) interest rate option with the Secured Overnight Financing Rate (“SOFR”). The First Amendment updated the accrued interest rate to a rate based on SOFR plus an applicable margin based upon the borrowing base calculation, ranging from 1.35% to 1.85%.
On September 29, 2023, we entered into the Second Amendment to our Amended and Restated Credit Agreement (the “Second Amendment”), which (among other things) increased the amount available to borrow under the Credit Facility to $150.0 million extended the maturity date to September 29, 2028 and allows the Company to pay up to $100 million in dividends per year, subject to meeting availability tests.
At our election, borrowings under the Credit Facility currently accrue interest at either (i) a rate determined pursuant to the administrative agent’s prime rate plus an applicable margin determined by reference to the amount of loans which may be advanced under the borrowing base calculation, ranging from 0.25% to 0.75% or (ii) a rate based upon SOFR plus an applicable margin.
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). If loan availability under the borrowing base calculation falls below $25.0 million, we will be required to maintain a specified fixed charge coverage ratio, tested on a monthly basis, until loan availability equals or exceeds $25.0 million for three consecutive months. All cash received from customers is required to be applied against the Credit Facility. The Bank Lenders have the option to accelerate and demand immediate repayment of our obligations under the Credit Facility in the event of default on the payments required under the Credit Facility, a change in control in the ownership of the Company, non-compliance with the financial covenant or upon the occurrence of other defaults by us under the Credit Facility. As of June 27, 2024, we were in compliance with all covenants under the Credit Facility, and we currently expect to be in compliance with the financial covenant in the Credit Facility for the foreseeable future. At June 27, 2024, we had $124.4 million of available credit under the Credit Facility. If this entire amount were borrowed at June 27, 2024, we would still be in compliance with all restrictive covenants under the Credit Facility.
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Selma Property
In September 2006, we sold our Selma, Texas properties (the “Selma Properties”) to two related party partnerships for $14.3 million and are leasing them back. 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 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. 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. Also, we have an option to purchase the Selma Properties from the owner 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. As of June 27, 2024, $7.1 million of the debt obligation was outstanding.
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Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The accounting policies as disclosed in the Notes to Consolidated Financial Statements are applied in the preparation of our financial statements and accounting for the underlying transactions and balances. The policies discussed below are considered by our management to be critical for an understanding of our financial statements because the application of these policies places the most significant demands on management’s judgment, with financial reporting results relying on estimation regarding the effect of matters that are inherently uncertain. Specific risks, if applicable, for these critical accounting policies are described in the following paragraphs. For a detailed discussion on the application of these and other accounting policies, see Note 1 — “Significant Accounting Policies” of the Notes to Consolidated Financial Statements.
Preparation of this Annual Report on Form 10-K requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates. See “Forward-Looking Statements” below.
Revenue Recognition
The Company records revenue based on a five-step model in accordance with Accounting Standards Codification (“ASC”) Topic 606. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for the goods or services. We sell our products under some arrangements which include customer contracts that fix the sales price for periods, which typically can be up to one year for some commercial ingredient customers. We also sell our products through specific programs consisting of promotion allowances, volume and customer rebates and marketing allowances, among others, to consumer and some commercial ingredient users. We recognize revenue as performance obligations are fulfilled, which occurs when control passes to our customers. We report all amounts billed to a customer in a sale transaction as revenue, including those amounts related to shipping and handling. We reduce revenue for estimated promotion allowances, volume and customer rebates and marketing allowances, among others. These reductions in revenue are considered variable consideration and are recorded in the same period the related sales are recorded. Such estimates are calculated using historical averages adjusted for any expected changes due to current business conditions and experience. See Note 3 — “Revenue Recognition” below for additional information on revenue recognition.
Retirement Plan
In order to measure the annual expense and calculate the liability associated with our SERP, management must make a variety of estimates including, but not limited to, discount rates, compensation increases and anticipated mortality rates. The estimates used by management are based on our historical experience as well as current facts and circumstances. We use a third-party specialist to assist management in appropriately measuring the expense associated with this employment-related benefit. Different estimates used by management could result in us recognizing different amounts of expense over different periods of time.
We recognize net actuarial gains or losses in excess of 10% of the plan’s projected benefit obligation into current period expense over the average remaining expected service period of active participants.
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 projected benefit cash flows for our pension plan. The hypothetical bond portfolio is comprised of high-quality fixed income debt securities (usually Moody’s Aa3 or higher) available at the measurement date. Based on this information, the discount rate selected by us for determination of pension expense was 5.12% for fiscal 2024, 4.68% for fiscal 2023, and 2.89% for fiscal 2022. A 25-basis point increase or decrease in our discount rate assumption for fiscal 2024 would have resulted in an immaterial change in our pension expense for fiscal 2024. For our year end pension obligation determination, we selected discount rates of 5.45% and 5.12% for fiscal years 2024 and 2023, respectively.
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Recent Accounting Pronouncements
Refer to Note 1 — “Significant Accounting Policies” of the Notes to Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.
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 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. We undertake no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors that affect the subject of these statements, except where expressly required to do so by law. We caution that such statements are qualified by important factors, including the factors described in Part I, Item 1A — “Risk Factors” and other factors, risks and uncertainties that are beyond our control, that could cause results to differ materially from our current expectations and/or those in the forward-looking statements, as well as the timing and occurrence (or nonoccurrence) of transactions and other factors, risk, uncertainties and events which may be further subject to circumstances beyond our control. Consequently, results actually achieved may differ materially from the expected results included in these statements.
Item 7A — Quantitative and Qualitative Disclosures About Market Risk
We are exposed to the impact of changes in interest rates, commodity prices of raw material purchases and foreign exchange. We have not entered into any arrangements to hedge against changes in market interest rates, commodity prices or foreign currency fluctuations.
We are unable to engage in hedging activity related to commodity prices, because there are no established futures markets for nuts; therefore, we can only attempt to pass on the commodity cost increases in the form of price increases to our customers. A hypothetical 1% increase in material costs, without a corresponding price increase, would have decreased gross profit approximately $6.1 million for fiscal 2024. See Part I, Item 1A — “Risk Factors” for a further discussion of the risks and uncertainties related to commodity prices of raw materials and the impact thereof on our business.
Approximately 28% of the dollar value of our total nut purchases for fiscal 2024 were made from foreign countries, and while these purchases were payable in U.S. dollars, the underlying costs may fluctuate with changes in the value of the U.S. dollar relative to the currency in the foreign country from where the nuts are purchased, or to other major foreign currencies such as the euro.
We are exposed to interest rate risk on our Credit Facility, our only variable rate credit facility, because we have not entered into any hedging instruments which fix the floating rate or offset an increase in the floating rate. A hypothetical 10% adverse change in weighted-average interest rates would have had approximately a $0.2 million impact on our net income and cash flows from operating activities for fiscal 2024.
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Item 8 — Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
To the Board of Directors and Stockholders of John B. Sanfilippo & Son, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of John B. Sanfilippo & Son, Inc. and its subsidiaries (the “Company”) as of June 27, 2024 and June 29, 2023, and the related consolidated statements of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended June 27, 2024, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of June 27, 2024, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 27, 2024 and June 29, 2023, and the results of its operations and its cash flows for each of the three years in the period ended June 27, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 27, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of the Projected Benefit Obligation related to the Supplemental Employee Retirement Plan (SERP)
As described in Note 15 to the consolidated financial statements, the Company’s projected benefit obligation related to the SERP is $26.9 million as of June 27, 2024. The SERP is an unfunded, non-qualified benefit plan that will provide eligible participants with monthly benefits upon retirement, disability or death, subject to certain conditions. Benefits paid to retirees are based on age at retirement, years of credited service, and average compensation. The most significant assumption related to the Company’s SERP is the discount rate used to calculate the actuarial present value of benefit obligations to be paid in the future.
The principal considerations for our determination that performing procedures relating to the valuation of the projected benefit obligation related to the SERP is a critical audit matter are (i) the significant judgment by management to determine the projected benefit obligation and the significant assumption related to discount rate, (ii) the significant auditor judgment, subjectivity and effort in evaluating management’s significant assumption related to the discount rate, and (iii) the audit effort included the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the Company’s determination of the projected benefit obligation related to the SERP, including the control over the development of the significant assumption related to the discount rate. These procedures also included, among others (i) testing management’s process for determining the projected benefit obligation, (ii) evaluating the appropriateness of the valuation method, (iii) testing the completeness and accuracy of underlying data used in the valuation of the projected benefit obligation, and (iv) evaluating the reasonableness of the discount rate. Evaluating management’s assumption related to the discount rate involved evaluating whether the assumption used by management is reasonable considering the consistency with external market data. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the valuation method and the reasonableness of the discount rate.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
August 21, 2024
We have served as the Company’s auditor since 1982.
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JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
June 27, 2024 and June 29, 2023
(dollars in thousands, except share and per share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 484 $ 1,948
Prepaid expenses and other current assets 12,078 6,812
PROPERTY, PLANT AND EQUIPMENT:
Furniture and leasehold improvements 5,423 5,275
OTHER LONG TERM ASSETS:
Operating lease right-of-use assets 27,404 6,427
The accompanying notes are an integral part of these consolidated financial statements.
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JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
June 27, 2024 and June 29, 2023
(dollars in thousands, except share and per share amounts)
LIABILITIES & STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Revolving credit facility borrowings $ 20,420 $ —
Current maturities of related party long-term debt, net 737 672
LONG-TERM LIABILITIES:
Long-term related party debt, less current maturities, net 6,365 7,102
Long-term operating lease liabilities, net of current portion 24,877 4,771
Long-term workers' compensation liabilities 7,673 7,321
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Accumulated other comprehensive income (loss) 1,044 (204 )
Treasury stock, at cost; 117,900 shares of Common Stock (1,204 ) (1,204 )
The accompanying notes are an integral part of these consolidated financial statements.
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JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended June 27, 2024, June 29, 2023 and June 30, 2022
(dollars in thousands, except share and per share amounts)
Operating expenses:
Bargain purchase gain, net (2,226 ) — —
Gain on sale of facility, net — — (2,349 )
Other expense:
Other comprehensive income, net of tax:
Amortization of actuarial loss included in net periodic pension cost — 21 1,077
Net actuarial gain arising during the period 1,248 2,255 5,468
Net income per common share — basic $ 5.19 $ 5.43 $ 5.36
Net income per common share — diluted $ 5.15 $ 5.40 $ 5.33
Cash dividends declared per share $ 3.00 $ 4.75 $ 3.00
The accompanying notes are an integral part of these consolidated financial statements
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JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the years ended June 27, 2024, June 29, 2023 and June 30, 2022
(dollars in thousands, except per share amounts)
Accumulated
Class A Capital in Other
Common Stock Common Stock Excess of Retained Comprehensive Treasury
Shares Amount Shares Amount Par Value Earnings Loss (Income) Stock Total
Pension liability amortization, net of income tax expense of $378 1,077 1,077
Pension liability adjustment, net of income tax benefit of $1,922 5,468 5,468
Stock-based compensation expense 3,565 3,565
Pension liability amortization, net of income tax expense of $7 21 21
Pension liability adjustment, net of income tax expense of $752 2,255 2,255
Stock-based compensation expense 3,565 3,565
Pension liability adjustment, net of income tax expense of $415 1,248 1,248
Stock-based compensation expense 4,389 4,389
The accompanying notes are an integral part of these consolidated financial statements.
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JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended June 27, 2024, June 29, 2023 and June 30, 2022
(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Amortization of operating lease right-of-use assets 2,023 1,625 1,425
Loss (gain) on disposition of properties, net 558 281 (1,753 )
Deferred income tax (benefit) expense (704 ) (1,115 ) 551
Bargain purchase gain, net (2,226 ) — —
Loss on previously held equity interest — 1,000 —
Change in assets and liabilities, net of Acquisitions:
Prepaid expenses and other current assets (4,216 ) 1,471 285
Income taxes receivable/payable (1,944 ) (104 ) (1,841 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions, net (58,974 ) (3,500 ) —
Proceeds from dispositions of assets, net 2 1 3,950
Proceeds from the sale of life insurance policies — — 3,225
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (672 ) (3,154 ) (3,822 )
Increase (decrease) in bank overdraft 260 71 (879 )
Debt issue costs (316 ) — —
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,464 ) 1,533 (257 )
Cash and cash equivalents, beginning of period 1,948 415 672
Cash and cash equivalents, end of period $ 484 $ 1,948 $ 415
Supplemental disclosures of cash flow information:
The accompanying notes are an integral part of these consolidated financial statements.
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JOHN B. SANFILIPPO & SON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation and Description of Business
Our consolidated financial statements include the accounts of John B. Sanfilippo & Son, Inc., and our wholly-owned subsidiary, JBSS Ventures, LLC. Our fiscal year ends on the last Thursday of June each year, and typically consists of fifty-two 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. The accompanying consolidated financial statements and related footnotes are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States. These nuts are sold under our Fisher, Orchard Valley Harvest, Squirrel Brand and Southern Style Nuts brand names and under a variety of private brands. Additionally, with our acquisition of certain snack bar assets from TreeHouse Foods, Inc. (“Seller”) in the second quarter of fiscal 2024, and our internally developed nutrition bar products, we offer our private brand customers a complete portfolio of snack bars. We market and distribute, and in most cases, manufacture or process, a diverse product line of food and snack products, including nutrition bars, snack bars, peanut butter, almond butter, cashew butter, candy and confections, snack and trail mixes, sunflower kernels, dried fruit, corn snacks, chickpea snacks, sesame sticks, other sesame snack products and baked cheese snack products under our brand names, including Just the Cheese, and under private brands. Our products are sold through three primary distribution channels, including food retailers in the consumer channel, commercial ingredient users and contract manufacturing customers.
Management Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include reserves for customer deductions, the quantity of bulk inventories, the evaluation of recoverability of long-lived assets and the assumption used in estimating the annual discount rate utilized in determining the retirement plan liability. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on-hand and may periodically include money market instruments that are highly liquid investments. Cash and cash equivalents are carried at cost, which approximates fair value.
Accounts Receivable
Accounts receivable are stated at the amounts charged to customers, less allowances for doubtful accounts and reserves for estimated cash discounts and customer deductions. The allowance for doubtful accounts is calculated by specifically identifying customers that are credit risks and estimating the extent that other non-specifically identified customers will become credit risks. Account balances are charged off against the allowance when we conclude that it is probable the receivable will not be recovered. The reserve for estimated cash discounts is based on historical experience. The reserve for customer deductions represents known customer short payments and an estimate of future credit memos that will be issued to customers related to rebates and allowances for marketing and promotions based on agreed upon programs and historical experience.
Inventories
Inventories, which consist principally of inshell bulk-stored nuts, shelled nuts, dried fruit, processed and packaged nut products, snack bars and nutrition bars, are stated at the lower of cost (first-in, first-out) and net realizable value. Net realizable value is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Inventory costs are reviewed at least quarterly. Fluctuations in the market price of pecans, peanuts, walnuts, almonds, cashews and other nuts and ingredients may affect the value of inventory, gross profit and gross profit margin. When net realizable values move below costs, we record adjustments to write down the carrying values of inventories to the lower of cost (first-in, first-out) and net realizable value. The results of our shelling process can also result in changes to inventory costs, such as adjustments made pursuant to actual versus expected crop yields. We maintain significant inventories of bulk-stored inshell pecans, peanuts and walnuts. Quantities of inshell bulk-stored nuts are determined based on our inventory systems and are subject to quarterly physical verification techniques including observation, weighing and other methods. The quantities of each crop year bulk-stored nut inventories are generally shelled
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out over a ten to fifteen-month period, at which time revisions to any estimates, which historically averaged less than 1.0% of inventory purchases, are also recorded.
We enter into walnut purchase agreements with growers typically in our first fiscal quarter, under which they deliver their walnut crop to us during the fall harvest season (which typically occurs in our first and second fiscal quarters). Pursuant to our walnut purchase agreements, we determine the final price for this inventory after receipt and typically by the end of our third fiscal quarter. Since the ultimate purchase price to be paid is determined subsequent to receiving the walnut crop, we typically estimate the final purchase price for our first and second quarter interim financial statements based on crop size, quality, current market prices and other factors. Any such changes in estimates, which could be significant, are accounted for in the period of change by adjusting inventory on hand or cost of goods sold if the inventory has been sold. Changes in estimates may affect the ending inventory balances, as well as gross profit. There were no significant adjustments recorded in any of the periods presented.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Major improvements that extend the useful life, add capacity or add functionality are capitalized and charged to expense through depreciation. Repairs and maintenance costs are charged to expense as incurred. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts, and any gain or loss is recognized currently in operating income.
Depreciation expense for the last three fiscal years is as follows:
Cost is depreciated using the straight-line method over the following estimated useful lives:
Classification Estimated Useful Lives
Buildings 10 to 30 years
Machinery and equipment 5 to 10 years
Furniture and leasehold improvements 5 to 10 years
Vehicles 3 to 5 years
Computers and software 3 to 10 years
No interest costs were capitalized for the last three fiscal years due to the lack of any significant project requiring such capitalization.
Business Combinations
We use the acquisition method in accounting for acquired businesses. Under the acquisition method, our financial statements reflect the operations of an acquired business starting from the completion of the acquisition. The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of the acquisition. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.
Segment Reporting
We operate in a single reporting unit and operating segment that consists of selling various nut and nut related products and snack bars through three distribution channels.
Valuation of Long-Lived Assets and Other Intangible Assets
We review held and used long-lived assets, including our rental investment property and amortizable identifiable intangible assets (e.g., customer relationships and brand names), to assess recoverability from projected undiscounted cash flows whenever events or changes in facts and circumstances indicate that the carrying value of the assets may not be recoverable. When such events occur, we compare the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of the long-lived asset or asset group. The cash flows are based on our best estimate of future cash flows derived from the most recent business projections. If this comparison indicates there is an impairment, the carrying value of the asset is reduced to its estimated fair value.
We did not record any impairment of long-lived assets for the last three fiscal years.
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Intangible assets are initially recorded at fair value in business acquisitions, which include customer relationships, brand names, formulas and non-compete agreements and are amortized over their estimated useful lives. Certain assets are amortized on a accelerated basis based on the timing of expected future benefits.
See Note 6 — “Goodwill and Intangible Assets” below for additional information.
Goodwill
Goodwill currently represents the excess of the purchase price over the fair value of the net assets from our acquisition of Squirrel Brand, L.P. which closed in November 2017 and our acquisition of the Just the Cheese brand which closed in December 2022.
Goodwill is not amortized, but is tested annually as of the last day of each fiscal year for impairment, or whenever events or changes in circumstances indicate it is more likely than not that the carrying amount of the reporting unit is greater than its fair value. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include deterioration in general economic conditions, adverse changes in the markets in which we operate, increases in input costs that have negative effects on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others. The fair value that could be realized in an actual transaction may differ from that used to evaluate the impairment of goodwill.
In testing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (more than 50%) that the estimated fair value of our single reporting unit is less than its carrying amount. If we elect to perform a qualitative assessment and determine that an impairment is more likely than not, we are then required to perform a quantitative impairment test, otherwise no further analysis is required. We also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test.
Under the goodwill qualitative assessment, various events and circumstances that would affect the estimated fair value of our single reporting unit are identified (similar to impairment indicators above). During fiscal 2024, we performed a qualitative impairment test which showed no indicators of goodwill impairment.
Under the goodwill quantitative impairment test, the evaluation of impairment involves comparing the current fair value of our single reporting unit to its carrying value, including goodwill. We estimate the fair value using level 3 inputs as defined by the fair value hierarchy. The inputs used to estimate fair value include several subjective factors, such as estimates of future cash flows, estimates of our future cost structure, discount rates for our estimated cash flows, required level of working capital, assumed terminal value and time horizon of cash flow forecasts. Our market capitalization is also an estimate of fair value that is considered in our qualitative impairment analysis which is a level 1 input in the fair value hierarchy. If the carrying value of our single reporting unit exceeds its fair value, we recognize an impairment loss equal to the difference between the carrying value and estimated fair value.
Elgin Rental Property
In April 2005, we acquired property to be used for the Elgin Site. Two buildings are located on the Elgin Site, one of which is an office building. Approximately 65% of the rentable area in the office building is currently vacant. Approximately 29% of the rentable area has not been built-out. The other building, a warehouse, was expanded and modified for use as our principal processing facility and headquarters. The allocation of the purchase price to the two buildings was determined through a third-party appraisal. The value assigned to the office building is included in rental investment property on the balance sheet. The value assigned to the warehouse building is included in the caption “Property, plant and equipment”.
The net rental expense from the office building is included in the caption “Rental and miscellaneous expense, net”. See Note 4 — “Leases” below for additional information.
Fair Value of Financial Instruments
Authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) defines fair value as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels:
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The carrying values of cash, cash equivalents, trade accounts receivable and accounts payable approximate their fair values at June 27, 2024 and June 29, 2023 because of the short-term maturities and nature of these balances.
The carrying value of our Credit Facility (as defined in Note 7 — “Revolving Credit Facility” below) borrowings approximates fair value at June 27, 2024 because interest rates on this instrument approximate current market rates (Level 2 criteria), the short-term maturity and nature of this balance. In addition, there has been no significant change in our inherent credit risk.
The following table summarizes the carrying value and fair value estimate of our current and long-term debt, excluding unamortized debt issuance costs:
Carrying value of current and long-term debt: $ 7,102 $ 7,774
Fair value of current and long-term debt: 6,496 7,421
The estimated fair value of our current and long-term debt was determined using a market approach based upon Level 2 observable inputs, which estimates fair value based on interest rates currently offered on loans with similar terms to borrowers of similar credit quality or broker quotes. In addition, there have been no significant changes in the underlying assets securing our long-term debt.
Revenue Recognition
The Company records revenue based on a five-step model in accordance with ASC Topic 606, Revenue from Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for the goods or services. We sell our products under some arrangements which include customer contracts that fix the sales price for periods, which typically can be up to one year for some commercial ingredient customers. We also sell our products through specific programs consisting of promotion allowances, volume and customer rebates and marketing allowances, among others, to consumer and some commercial ingredient users. We recognize revenues as performance obligations are fulfilled, which occurs when control passes to our customers. We report all amounts billed to a customer in a sale transaction as revenue, including those amounts related to shipping and handling. We reduce revenue for estimated promotion allowances, volume and customer rebates and marketing allowances, among others. These reductions in revenue are considered variable consideration and are recorded in the same period the related sales are recorded. Such estimates are calculated using historical averages adjusted for any expected changes due to current business conditions and experience. See Note 3 — “Revenue Recognition” below for additional information on revenue recognition.
Significant Customers and Concentration of Credit Risk
The highly competitive nature of our business provides an environment for the loss of customers and the opportunity to gain new customers. We are subject to concentrations of credit risk, primarily in trade accounts receivable, and we attempt to mitigate this risk through our credit evaluation process, collection terms and through geographical dispersion of sales. Sales to two customers exceeded 10% of net sales during fiscal 2024, fiscal 2023 and fiscal 2022. In total, sales to these two customers represented approximately 52%, 51% and 49% of our net sales in fiscal 2024, fiscal 2023 and fiscal 2022, respectively. In total, net accounts receivable from these customers were 47% and 45% of net accounts receivable at June 27, 2024 and June 29, 2023, respectively.
Marketing and Advertising Costs
Marketing and advertising costs, including consumer insight research and related consulting expenses, are incurred to promote and support branded products primarily in the consumer distribution channel. These costs are generally expensed as incurred, recorded in selling expenses and were as follows for the last three fiscal years:
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Shipping and Handling Costs
Shipping and handling costs, which include freight and other expenses to prepare finished goods for shipment, are included in selling expenses. Shipping and handling costs for the last three fiscal years were as follows:
Research and Development Expenses
Research and development expense represents the cost of our research and development personnel and their related expenses and is charged to selling expenses as incurred. Research and development expenses for the last three fiscal years were as follows:
Stock-Based Compensation
We account for stock-based employee compensation arrangements in accordance with the provisions of ASC Topic 718, Compensation — Stock Compensation, by calculating compensation cost based on the grant date fair value. We then amortize compensation expense over the vesting period. The grant date fair value of restricted stock units (“RSUs”) and performance share units (“PSUs”) is generally determined based on the market price of our Common Stock on the date of grant. Forfeitures are recognized as they occur, and excess tax benefits or tax deficiencies are recognized as a component of income tax expense.
Income Taxes
We account for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been reported in our financial statements or tax returns. Such items give rise to differences in the financial reporting and tax basis of assets and liabilities. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets if it is more likely than not that all or a portion of the asset will not be realized. In estimating future tax consequences, we consider all expected future events other than changes in tax law or rates.
We record liabilities for uncertain income tax positions based on a two-step process. The first step is recognition, where we evaluate whether an individual tax position has a likelihood of greater than 50% of being sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation processes. For tax positions that are currently estimated to have a less than 50% likelihood of being sustained, no tax benefit is recorded. For tax positions that have met the recognition threshold in the first step, we perform the second step of measuring the benefit to be recorded. The actual benefits ultimately realized may differ from our estimates. In future periods, changes in facts, circumstances, and new information may require us to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in results of operations and financial position in the period in which such changes occur.
We recognize interest and penalties accrued related to unrecognized tax benefits in the “Income tax expense” caption in the Consolidated Statement of Comprehensive Income.
We evaluate the realization of deferred tax assets by considering our historical taxable income and future taxable income based upon the reversal of deferred tax liabilities. As of June 27, 2024, we believe that our deferred tax assets are fully realizable.
Earnings per Share
Basic earnings per common share are calculated using the weighted average number of shares of Common Stock and Class A Stock outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock.
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The following table presents the reconciliation of the weighted average shares outstanding used in computing basic and diluted earnings per share:
Effect of dilutive securities:
There were no anti-dilutive awards excluded from the computation of diluted earnings per share for any periods presented.
Comprehensive Income
We account for comprehensive income in accordance with ASC Topic 220, Comprehensive Income. This topic establishes standards for reporting and displaying comprehensive income and its components in a full set of general-purpose financial statements. The topic requires that all components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. This topic also requires all non-owner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. This guidance also requires presentation by the respective line items of net income, either on the face of the statement where net income is presented or in the notes and information about significant amounts required under U.S. GAAP to be reclassified out of accumulated other comprehensive income in their entirety. For amounts not required to be reclassified in their entirety to net income, we provide a cross-reference to other disclosures that offer additional details about those amounts.
Recent Accounting Pronouncements
The following recent accounting pronouncements have not yet been adopted:
In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280)”. The amendments in this update modify the disclosure requirements by expanding the disclosures required for reportable segments in annual and interim consolidated financial statements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments require that any entity that has a single reportable segment provide all the disclosures required either in this update or already existing in Topic 280. The amendments are effective public entities for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments will be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the impact of this update but do not expect it to have a material impact on our Consolidated Financial Statements.
In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments in this update enhance the transparency and decision usefulness of income tax disclosures primarily related to the rate reconciliation and income taxes paid by jurisdiction. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments will be applied prospectively, but may be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the impact of this update but do not expect it to have a material impact on our Consolidated Financial Statements.
NOTE 2 — LAKEVILLE ACQUISITION
On September 29, 2023, we completed the acquisition of certain snack bar assets from the Seller. The acquired assets include inventory, a manufacturing facility and related equipment located in Lakeville, Minnesota, and product formulas (the “Lakeville Acquisition”). The initial purchase price was approximately $61,546 in cash, subject to certain post-closing adjustments. Following the closing, we received payments from the Seller of $2,572 for purchase price adjustments related to the actual inventory and fixed assets acquired, for a revised purchase price of $58,974, net. The purchase price for the Lakeville Acquisition was primarily funded from borrowings under the Credit Facility (defined in Note 7 - Revolving Credit Facility below).
The Lakeville Acquisition accelerates our strategy within the growing snack bar category and diversifies our product offerings. It also allows us to offer private brand customers a complete portfolio of snack bars, including fruit and grain, crunchy, protein, sweet and salty and chewy bars that complement internally developed nutrition bars. The Lakeville Acquisition has been accounted for as a business combination in accordance with ASC Topic 805, “Business Combinations”.
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The following table summarizes the amounts allocated to the fair values of certain assets acquired at the acquisition date:
Property, plant and equipment 25,600
Identifiable intangible assets:
Product formulas 850
Total assets acquired $ 61,950
Property, plant and equipment represent a manufacturing facility and related equipment located in Lakeville, Minnesota. The fair value for the property was primarily determined using a market approach. The fair values for the machinery and equipment were determined using a combination of the direct and indirect cost approaches, along with the market approach. All building and equipment assets are being depreciated on a straight-line basis over their estimated remaining useful lives as determined in accordance with our accounting policies.
The product formulas asset represents the value of these formulas designed to replicate the taste, texture and appearance of branded snack bars. The fair value of the product formulas was determined using the income approach through a relief from royalty method analysis. We are amortizing formulas over a weighted average life of 5.4 years.
There were no recognized or unrecognized material contingencies associated with the acquired business.
The $61,950 fair value of the identifiable assets acquired exceeded the total purchase price of $58,974. Accordingly, this acquisition resulted in a bargain purchase and we recognized a gain of $2,226, net of taxes, which is reported in the caption “Bargain purchase gain, net” in our consolidated financial results for the year ended June 27, 2024. We believe the Lakeville Acquisition resulted in a bargain purchase gain because the Seller was motivated to divest such snack bars business, as its performance no longer supported the Seller's long-term growth targets.
Net sales of $119,837 from the closing date of the Lakeville Acquisition on September 29, 2023 are included in our consolidated financial results for fiscal 2024. The closing date of the Lakeville Acquisition was on the first day of our second fiscal quarter. The Company also incurred acquisition-related costs of $856 for fiscal 2024 which are included in Administrative expenses.
The following reflects the unaudited pro forma results of operations of the Company as if the Lakeville Acquisition had taken place at the beginning of fiscal 2023. This pro forma information does not purport to represent what the Company’s actual results would have been if the Lakeville Acquisition had occurred as of the date indicated or what such results would be for any future periods.
Pro forma diluted earnings per share $ 4.95 $ 4.98
These unaudited pro forma results have been calculated after applying our accounting policies and adjusting the results of the Lakeville Acquisition to reflect elimination of transaction costs and the bargain purchase gain and to record additional interest expense and cost of sales that would have been incurred, assuming the fair value adjustment to inventory had been applied from July 1, 2022, net of related income taxes in respect of pro forma net income and diluted earnings per share performance. The impact to the above pro forma information of incremental depreciation and amortization expense is insignificant and therefore excluded from the calculation of pro forma results.
Since the Lakeville Acquisition, we continue to operate in a single reportable operating segment that consists of selling various nut and nut-related products and snacks through three sales distribution channels. Revenues from the Lakeville Acquisition are primarily in our consumer distribution channel.
NOTE 3 — REVENUE RECOGNITION
We recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. For each customer contract, a five-step process is followed in which we identify the contract, identify performance obligations, determine the transaction price, allocate the contract transaction price to the performance obligations, and recognize the revenue when (or as) the performance obligation is transferred to the customer.
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Nature of Products
We manufacture and sell the following:
•
branded products under our own proprietary brands to retailers on a national basis;
•
private brand products to retailers, such as supermarkets, mass merchandisers, and specialty retailers, for resale under the retailers’ own or controlled labels;
•
private brand and branded products to the foodservice industry, including foodservice distributors and national restaurant operators;
•
branded products under co-manufacturing agreements to other major branded companies for their distribution; and
•
products to our industrial customer base for repackaging in portion control packages and for use as ingredients by other food manufacturers.
When Performance Obligations Are Satisfied
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations are primarily for the delivery of raw and processed recipe and snack nuts, nut butters, trail mixes and snack and nutrition bars.
Our customer contracts do not include more than one performance obligation. If a contract were to contain more than one performance obligation, we are required to allocate the contract’s transaction price to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by directly observable data.
Revenue recognition is generally completed at a point in time when product control is transferred to the customer. For virtually all of our revenues, control transfers to the customer when the product is shipped or delivered to the customer based upon applicable shipping terms, as the customer can then direct the use and obtain substantially all of the remaining benefits from the asset at that point in time. Therefore, the timing of our revenue recognition requires little judgment.
The performance obligations in our contracts are satisfied within one year, and typically much less. As such, we have not disclosed the transaction price allocated to remaining performance obligations for any periods presented.
Significant Payment Terms
Our customer contracts identify the product, quantity, price, payment and final delivery terms. Payment terms usually include early pay discounts. We grant payment terms consistent with industry standards. On a limited basis some payment terms may be extended; however, no payment terms beyond six months are granted at contract inception. The average customer payment is received within approximately 30 days of the invoice date. As a result, we do not adjust the promised amount of consideration for the effects of a significant financing component because the period between our transfer of a promised good or service to a customer and the customer’s payment for that good or service will be six months or less.
Shipping
All shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are included in selling expense.
Variable Consideration
Some of our products are sold through specific incentive programs consisting of promotional allowances, volume and customer rebates, in-store display incentives and marketing allowances, among others, to consumer and some commercial ingredient customers. The ultimate cost of these programs is dependent on certain factors such as actual purchase volumes or customer activities and is dependent on significant management judgment when determining estimates. The Company accounts for these programs as variable consideration and recognizes a reduction in revenue (and a corresponding reduction in the transaction price) in the same period as the underlying program based upon the terms of the specific arrangements.
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Trade promotions, consisting primarily of customer pricing allowances, merchandising funds and consumer coupons, are also offered through various programs to customers and consumers. A provision for estimated trade promotions is recorded as a reduction of revenue (and a reduction in the transaction price) in the same period when the sale is recognized. Revenues are also recorded net of expected customer deductions which are provided for based upon past experiences. Evaluating these estimates requires management judgment.
We generally use the most likely amount method to determine the variable consideration. We believe there will not be significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. The Company reviews and updates its estimates and related accruals of variable consideration and trade promotions at least quarterly based on the terms of the agreements and historical experience. Any uncertainties in the ultimate resolution of variable consideration due to factors outside of the Company’s influence are typically resolved within a short timeframe, therefore, no additional constraint on the variable consideration is required.
Product Returns
While customers generally have the right to return defective or non-conforming products, past experience has demonstrated that product returns have generally been immaterial. Customer remedies may include either a cash refund or an exchange of the returned product. As a result, the right of return and related refund liability for non-conforming or defective goods is estimated and recorded as a reduction in revenue, if necessary.
Contract Balances
Contract assets or liabilities result from transactions with revenue recorded over time. If the measure of remaining rights exceeds the measure of the remaining performance obligations, the Company records a contract asset. Conversely, if the measure of the remaining performance obligations exceeds the measure of the remaining rights, the Company records a contract liability. There was no contract asset balance for any periods presented. The Company generally does not have material deferred revenue or contract liability balances arising from transactions with customers.
Contract Costs
The Company does not incur significant fulfillment costs requiring capitalization.
Disaggregation of Revenue
Revenue disaggregated by distribution channel is as follows:
For the Year Ended
NOTE 4 — LEASES
We lease warehouse space, equipment used in the transportation of goods in our warehouses and a limited number of automobiles. Our leases generally do not contain any explicit guarantees of residual value and, with the exception of the Huntley warehouse, generally do not contain non-lease components. Our leases for warehouse transportation equipment generally require the equipment to be returned to the lessor in good working order.
Through a review of our contracts, we determine if an arrangement is a lease at inception and analyze the lease to determine if it is operating or finance. Operating lease right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental collateralized borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Implicit rates are used when readily determinable. None of our leases currently contain options to extend the term. In the event of an option to extend the term of a lease, the lease term used in measuring the liability would include options to extend or terminate the lease if it is reasonably certain that the Company will exercise
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that option. Lease expense for operating lease payments is recognized on a straight-line basis over the respective lease term. Our leases have remaining terms of up to 7.6 years.
It is our accounting policy not to apply lease recognition requirements to short-term leases, defined as leases with an initial term of 12 months or less. As such, leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheets. We have also made the policy election to not separate lease and non-lease components for all leases.
The following table provides supplemental information related to operating lease right-of-use assets and liabilities:
June 27,2024 June 29,2023 Affected Line Item in ConsolidatedBalance Sheet
Assets
Total lease right-of-use assets $ 27,404 $ 6,427
Liabilities
Current:
Operating leases $ 2,623 $ 1,729 Other accrued expenses
Noncurrent:
Operating leases 24,877 4,771 Long-term operating lease liabilities
The following tables summarize the Company’s total lease costs and other information arising from operating lease transactions:
(a)
Includes short-term leases which are immaterial.
(b)
Variable lease costs consist of sales tax and lease overtime charges.
Supplemental cash flow and other information related to leases was as follows:
Operating cash flows information:
Non-cash activity:
Weighted Average Remaining Lease Term (in years) 6.6 4.4
Weighted Average Discount Rate 6.8 % 6.7 %
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Maturities of operating lease liabilities as of June 27, 2024 are as follows:
Fiscal Year Ending
Total lease payments 34,776
Less imputed interest (7,276 )
Present value of operating lease liabilities $ 27,500
At June 27, 2024, the Company has additional operating leases of approximately $739 that have not yet commenced and therefore are not reflected in the Consolidated Balance Sheet and tables above. The leases are scheduled to commence in the first quarter of fiscal 2025 with an initial lease term ranging from 3 to 6 years.
Lessor Accounting
We lease office space in our four-story office building located in Elgin, Illinois. As a lessor, we retain substantially all of the risks and benefits of ownership of the investment property and under Topic 842: Leases we continue to account for all of our leases as operating leases. Lease agreements may include options to renew. We accrue fixed lease income on a straight-line basis over the terms of the leases. There is generally no variable lease consideration and an immaterial amount of non-lease components such as recurring utility and storage fees. Leases between related parties are immaterial.
Leasing revenue is as follows:
Lease income related to lease payments $ 2,010 $ 1,651 $ 1,665
The future minimum, undiscounted fixed cash flows under non-cancelable tenant operating leases for each of the next five years and thereafter is presented below.
Fiscal Year Ending
NOTE 5 — INVENTORIES
Inventories consist of the following:
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NOTE 6 – GOODWILL AND INTANGIBLE ASSETS
Intangible assets subject to amortization consist of the following:
Product formulas 850 —
Less accumulated amortization:
Product formulas (121 ) —
Non-compete agreements (279 ) (273 )
Customer relationships relate to the Just the Cheese brand acquisition completed in fiscal 2023, the Squirrel Brand acquisition completed in fiscal 2018 and the Orchard Valley Harvest (“OVH”) acquisition completed in fiscal 2010. The customer relationships resulting from the OVH acquisition are fully amortized. The brand names consist primarily of the Squirrel Brand and Southern Style Nuts brand names acquired in fiscal 2018 and the Fisher brand name, which we acquired in a 1995 acquisition. The Fisher brand name is fully amortized. The remainder of the brand name relates to Just the Cheese brand acquisition completed in fiscal 2023 and the OVH acquisition, which is fully amortized. Product formulas relate to the Lakeville Acquisition completed in fiscal 2024.
Total amortization expense related to intangible assets, which is classified in administrative expense in the Consolidated Statement of Comprehensive Income, was as follows for the last three fiscal years:
Expected amortization expense the next five fiscal years is as follows:
Fiscal Year Ending
Our net goodwill at June 30, 2022 was comprised of $9,650 from the Squirrel Brand acquisition completed in fiscal 2018. Our net goodwill at June 27, 2024 includes an additional $2,100 from the Just the Cheese brand acquisition completed in fiscal 2023. The changes in the carrying amount of goodwill during the two fiscal years ended June 27, 2024 are as follows:
Accumulated impairment losses (8,766 )
Goodwill acquired during fiscal 2023 2,100
Goodwill acquired during fiscal 2024 —
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NOTE 7 — REVOLVING CREDIT FACILITY
On March 5, 2020, we entered into an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”), which amended and restated our Credit Agreement dated as of February 7, 2008 (the “Former Credit Agreement”) with a bank group (the “Bank Lenders”). The Amended and Restated Credit Agreement provided for a $117,500 senior secured revolving credit facility (the “Credit Facility”) with the same borrowing capacity, interest rates and applicable margin as the Former Credit Agreement and extended the term of the Former Credit Agreement from July 7, 2021 to March 5, 2025. The Credit Facility is secured by our accounts receivable and inventory.
On May 8, 2023, we entered into the First Amendment to our Amended and Restated Credit Agreement (the “First Amendment”), which replaced the London interbank offered rate interest rate option with the secured overnight financing rate (“SOFR”). The First Amendment updated the accrued interest rate to a rate based on SOFR plus an applicable margin based upon the borrowing base calculation, ranging from 1.35% to 1.85%.
On September 29, 2023, we entered into the Second Amendment to our Amended and Restated Credit Agreement (the “Second Amendment”), which (among other things) increased the amount available to borrow under the Credit Facility to $150,000, extended the maturity date to September 29, 2028 and allows the Company to pay up to $100,000 in dividends per year, subject to meeting availability tests.
At June 27, 2024 the weighted average interest rate for the Credit Facility was 8.06%. At June 29, 2023 there were no borrowings on the line of credit under the Credit Facility and thus no applicable interest rate on the borrowings. At June 27, 2024 and June 29, 2023, our unused letters of credit were $4,857 and $5,810, respectively. The terms of the Credit Facility contain covenants that require us to restrict investments, indebtedness, acquisitions and certain sales of assets, cash dividends, redemptions of capital stock and prepayment of indebtedness (if such prepayment, among other things, is of a subordinate debt). If loan availability under the Borrowing Base Calculation falls below $25,000, we will be required to maintain a specified fixed charge coverage ratio, tested on a monthly basis. All cash received from customers is required to be applied against the Credit Facility. The Bank Lenders are entitled to require immediate repayment of our obligations under the Credit Facility in the event of default on the payments required under the Credit Facility, a change in control in the ownership of the Company, non-compliance with the financial covenant or upon the occurrence of certain other defaults by us under the Credit Facility. As of June 27, 2024, we were in compliance with the financial covenant under the Credit Facility and we currently expect to be in compliance with the financial covenant in the Credit Facility for the next twelve months. At June 27, 2024, we had $124,437 of available credit under the Credit Facility, which reflects borrowings of $20,420 and reduced availability as a result of $5,143 in outstanding letters of credit. We would still be in compliance with all restrictive covenants under the Credit Facility if this entire amount were borrowed.
NOTE 8 — LONG-TERM DEBT
Long-term debt consists of the following:
Less: Current maturities (737 ) (672 )
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In September 2006, we sold our Selma, Texas properties (the “Selma Properties”) to two related party partnerships for $14,300 and are leasing them back. 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, Texas properties had an initial ten-year term at a fair market value rent with three five-year renewal options. In September 2015, we signed a lease renewal which exercised two five-year renewal options and extended the term of our Selma lease to September 18, 2026. 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. Also, we currently have the option to purchase the properties from the lessor at 95% (100% in certain circumstances) of the then fair market value, but not to be less than the $14,300 purchase price. The financing obligation is being accounted for similar to the accounting for a capital lease, whereby the purchase price was recorded as a debt obligation, as the provisions of the arrangement are not eligible for sale-leaseback accounting.
Aggregate maturities of long-term debt are as follows:
Fiscal Year Ending
NOTE 9 — INCOME TAXES
The provision for income taxes is based entirely on income before income taxes earned in the United States, and is as follows for the last three fiscal years:
For the Year Ended
Current:
Deferred:
Total deferred (benefit) expense (704 ) (1,115 ) 551
The reconciliations of income taxes at the statutory federal income tax rate to income tax expense reported in the Consolidated Statements of Comprehensive Income for the last three fiscal years are as follows:
Federal statutory income tax rate 21.0 % 21.0 % 21.0 %
State income taxes, net of federal benefit 3.8 4.9 3.7
Research and development tax credit (0.9 ) (0.3 ) (0.4 )
Bargain purchase gain (0.6 ) — —
Share-based compensation (0.4 ) 0.1 (0.7 )
Uncertain tax positions 0.2 0.1 0.1
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Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement basis and the tax basis of assets and liabilities using enacted statutory tax rates applicable to future years. Deferred tax assets and liabilities are comprised of the following:
Deferred tax assets (liabilities):
Accounts receivable $ 417 $ 346
Goodwill and intangible assets 797 1,474
Research related expenditures 3,505 1,549
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the character necessary during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income and tax-planning strategies in making this assessment. If or when recognized, the tax benefits relating to any reversal of the valuation allowance will be recognized as a reduction of income tax expense.
For the years ending June 27, 2024 and June 29, 2023, unrecognized tax benefits and accrued interest and penalties were $692 and $448. Accrued interest and penalties related to uncertain tax positions are not material for any periods presented. Interest and penalties within income tax expense were not material for any period presented. The total gross amounts of unrecognized tax benefits were $733 and $463 at June 27, 2024 and June 29, 2023, respectively.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
Gross increases — tax positions in prior year 146 32 1
Settlements (104 ) (36 ) —
Gross increases — tax positions in current year 311 127 110
Lapse of statute of limitations (83 ) (50 ) (47 )
Unrecognized tax benefits, that if recognized, would affect the annual effective tax rate on income from continuing operations, are as follows:
During fiscal 2024, the change in unrecognized tax benefits due to statute expiration was not material. We do not anticipate that total unrecognized tax benefits will significantly change in the next twelve months.
We file income tax returns with federal and state tax authorities within the United States of America. Our federal tax returns are open for audit for fiscal 2021 through 2023. Our Illinois tax return is under audit for fiscal 2022. Our Illinois tax return for fiscal 2023 is open for audit. Our California tax returns for fiscal 2020 through 2023 are open for audit. No other tax jurisdictions are material to us.
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NOTE 10 — COMMITMENTS AND CONTINGENCIES
Litigation
We are currently a party to various legal proceedings in the ordinary course of business. While management presently believes that the ultimate outcomes of these proceedings, individually and in the aggregate, will not materially affect our financial position, results of operations or cash flows, legal proceedings are subject to inherent uncertainties, and unfavorable outcomes could occur. Unfavorable outcomes could include substantial money damages in excess of any appropriate accruals, which management has established. Were such unfavorable final outcomes to occur, there exists the possibility of a material adverse effect on our financial position, results of operations and cash flows.
NOTE 11 — STOCKHOLDERS’ EQUITY
Our Class A Common Stock, $.01 par value (the “Class A Stock”), has cumulative voting rights with respect to the election of those directors which the holders of Class A Stock are entitled to elect, and 10 votes per share on all other matters on which holders of our Class A Stock and Common Stock are entitled to vote, with the exception of election of the directors for which the holders of Common Stock are eligible to elect. In addition, each share of Class A Stock is convertible at the option of the holder at any time into one share of Common Stock and automatically converts into one share of Common Stock upon any sale or transfer other than to related individuals or certain other events as set forth in our Restated Certificate of Incorporation. Each share of our Common Stock, $.01 par value (the “Common Stock”) has noncumulative voting rights of one vote per share. The Class A Stock and the Common Stock are entitled to share equally, on a share-for-share basis, in any cash dividends declared by the Board of Directors, and the holders of the Common Stock are entitled to elect 25%, rounded up to the nearest whole number, of the members comprising the Board of Directors. During fiscal 2017, our Board of Directors adopted a dividend policy under which it intends to pay an annual cash dividend on our Common Stock and Class A Stock during the first quarter of each fiscal year.
NOTE 12 — STOCK-BASED COMPENSATION PLANS
At our annual meeting of stockholders on November 2, 2023, our stockholders approved a new equity incentive plan (the “2023 Omnibus Plan”) under which awards of options and other stock-based awards may be made to employees, officers or non-employee directors of our Company. A total of 747,065 shares of Common Stock are authorized for grants of awards thereunder, which may be in the form of options, restricted stock, RSUs, stock appreciation rights (“SARs”), performance shares, PSUs, Common Stock or dividends and dividend equivalents. As of June 27, 2024, there were 691,107 shares of Common Stock that remained authorized for future grants of awards, subject to the limitations set below. Under the terms of the 2023 Omnibus Plan, the total number of shares of Common Stock with respect to which options or SARs may be granted in any calendar year to any participant may not exceed 500,000 shares (this limit applies separately with respect to each type of award). Additionally, for awards of restricted stock, RSUs, performance shares or other stock-based awards that are intended to qualify as performance-based compensation: (i) the total number of shares of Common Stock that may be granted in any calendar year to any participant may not exceed 250,000 shares (this limit applies separately to each type of award) and (ii) the maximum amount that may be paid to any participant for awards that are payable in cash or property other than Common Stock in any calendar year is $5,000. During fiscal 2017, the Board of Directors adopted an equity grant cap which further restricted the number of awards that could be made to any one participant or in the aggregate. The equity grant cap limited the number of awards to 250,000 awards to all participants and 20,000 awards to any one participant in a fiscal year. Except as set forth in the 2023 Omnibus Plan, RSUs have vesting periods of three years for awards to employees and one year for awards to non-employee members of the Board of Directors. PSUs have a vesting period of three years and performance goals that must be achieved in order to vest. We issue new shares of Common Stock upon the vesting of RSUs and PSUs.
The fair value of RSUs and PSUs are generally determined based on the market price of our Common Stock on the date of grant. The fair value of RSUs and PSUs granted for the years ended June 27, 2024, June 29, 2023 and June 30, 2022 was $4,805, $4,769 and $4,065, respectively.
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The following is a summary of RSU and PSU activity for the year ended June 27, 2024:
Restricted Stock Units Shares Weighted-AverageGrant-DateFair Value
(a)
Includes 8,031 PSUs (based on reaching target performance) with performance conditions for which the performance criteria had yet to be achieved. The PSUs vest three years from the grant date, with the number of shares earned (ranging from 0% to 200% of the target award) depending on the extent to which we achieve certain performance metrics measured over a three-year period. The final number of shares that will eventually be earned and vest (if any) has not yet been determined as of June 27, 2024.
(b)
The number of RSUs vested includes shares that were withheld on behalf of employees to satisfy statutory tax withholding requirements.
At June 27, 2024 there were 25,800 RSUs outstanding that were vested but deferred. At June 29, 2023 there were 38,907 RSUs outstanding that were vested but deferred. The non-vested RSUs and PSUs at June 27, 2024 will vest over a weighted-average period of 1.3years. The fair value of RSUs that vested for the years ended June 27, 2024, June 29, 2023 and June 30, 2022 was $3,838, $2,978 and $3,274, respectively.
The following table summarizes compensation cost charged to earnings for all equity compensation plans and the total income tax benefit recognized for the last three fiscal years:
Compensation cost charged to earnings $ 4,389 $ 3,565 $ 3,565
At June 27, 2024, there was $5,003 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under our stock-based compensation plans. We expect to recognize that cost over a weighted-average period of 1.3years.
NOTE 13 — CASH DIVIDENDS
Our Board of Directors declared and we paid the following cash dividends in fiscal 2024 and fiscal 2023:
Declaration Date Record Date Dividend PerShare(a) TotalAmount Payment Date
(a)
The dividends declared on July 7, 2022 and July 18, 2023 include both the annual and special dividend declared on such date.
On July 17, 2024, our Board of Directors declared a special cash dividend of $1.25 per share and a regular annual cash dividend of $0.85 per share on all issued and outstanding shares of Common Stock and Class A Stock of the Company. Refer to Note 19 — “Subsequent Event” below.
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NOTE 14 — EMPLOYEE BENEFIT PLANS
We maintain a contributory plan established pursuant to the provisions of section 401(k) of the Internal Revenue Code. The plan provides retirement benefits for all nonunion employees meeting minimum age and service requirements. We currently match 100% of the first three percent contributed by each employee and 50% of the next two percent contributed, up to certain maximums specified in the plan. Expense for the 401(k) plan was as follows for the last three fiscal years:
Starting in fiscal 2023 we now offer a non-qualified deferred compensation plan to provide executives with the opportunity to accumulate assets for retirement on a tax-deferred basis (the “Plan”). Participants in the Plan can defer up to 80% of their base salary and up to 100% of performance-based compensation. The compensation deferred under this Plan is credited with earnings and losses as determined by the rate of return of reference investments selected by the participants. Participants are fully vested in their respective deferrals and earnings. We may also make discretionary contributions, which vest three years from the crediting date, at full vesting age, or other events as defined and described in the Plan. We invest in corporate owned life insurance contracts (“COLI”) on the lives of designated individuals that are held in a Rabbi Trust (“Trust”) to fund the Plan obligations. The Trust is the owner and beneficiary of such insurance contracts. Our promise to pay amounts deferred under this Plan is an unsecured obligation. Participant’s benefits can be paid out as a lump sum or in annual installments over a term of up to 10 years. The COLI investments are recorded at cash surrender value. The cash surrender value of the life insurance contracts was $1,214 and $282 at June 27, 2024 and June 29, 2023, respectively, and are included in Other Long Term Assets in the accompanying Consolidated Balance Sheets. The balances due to participants in the Plan were $1,261 and $304 as of June 27, 2024 and June 29, 2023, respectively, and are included in the caption “Other” within Long Term Liabilities in the accompanying Consolidated Balance Sheets. Matching contribution expense was $246 and $106 for the years ended June 27, 2024 and June 29, 2023, respectively.
Virtually all of our salaried employees participate in our Sanfilippo Value Added Plan (as amended, the “SVA Plan”), which is a cash incentive plan (an economic value added-based program) administered by our Compensation and Human Resources Committee. We accrue expense related to the SVA Plan in the annual period that the economic performance underlying such performance occurs. This method of expense recognition properly matches the expense associated with improved economic performance with the period the improved performance occurs on a systematic and rational basis. The SVA Plan payments, if any, are paid to participants in the first quarter of the following fiscal year in which they are earned.
NOTE 15 — RETIREMENT PLAN
The Supplemental Employee Retirement Plan (“SERP”) is an unfunded, non-qualified benefit plan that will provide eligible participants with monthly benefits upon retirement, disability or death, subject to certain conditions. Benefits paid to retirees are based on age at retirement, years of credited service, and average compensation. We use our fiscal year end as the measurement date for the obligation calculation. Accounting guidance in ASC Topic 715, Compensation — Retirement Benefits, requires the recognition of the funded status of the SERP on the Consolidated Balance Sheet. Actuarial gains or losses, prior service costs or credits and transition obligations that have not yet been recognized are recorded as a component of “Accumulated Other Comprehensive Income (Loss)”.
The following table presents the changes in the projected benefit obligation for the fiscal years ended:
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 28,017 $ 29,511
Projected benefit obligation at end of year $ 26,862 $ 28,017
The accumulated benefit obligation, which represents benefits earned up to the measurement date, was $24,952 and $25,277 at June 27, 2024 and June 29, 2023, respectively.
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Components of the actuarial (gain) loss are presented below for the fiscal years ended:
Actuarial Gain
Change in assumed pay increases $ 1,418 $ (70 ) $ 1,698
Change in mortality assumptions — — 75
The components of the net periodic pension cost are as follows for the fiscal years ended:
Recognized loss amortization — 28 1,455
The most significant assumption related to our SERP is the discount rate used to calculate the actuarial present value of benefit obligations to be paid in the future.
We used the following assumptions to calculate the benefit obligation of our SERP as of the following dates:
Average rate of compensation increases 6.11% 4.50%
We used the following assumptions to calculate the net periodic costs of our SERP as follows for the fiscal years ended:
Rate of compensation increases 4.50% 4.50% 3.38%
The assumed discount rate is based, in part, upon a discount rate modeling process that considers both high quality long-term indices and the duration of the SERP relative to the durations implicit in the broader indices. The discount rate is utilized principally in calculating the actuarial present value of our obligation and periodic expense pursuant to the SERP. To the extent the discount rate increases or decreases, our SERP obligation is decreased or increased, respectively.
The following table presents the benefits expected to be paid in the next ten fiscal years:
Fiscal Year
At June 27, 2024 and June 29, 2023, the current portion of the SERP liability was $708 and $1,364, respectively, and recorded in the caption “Accrued payroll and related benefits” on the Consolidated Balance Sheets.
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The following table presents the components of accumulated other comprehensive income (loss) that have not yet been recognized in net pension expense:
Unrecognized net gain (loss) $ 1,623 $ (41 )
Net amount unrecognized $ 1,044 $ (204 )
NOTE 16 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The table below sets forth the changes to accumulated other comprehensive income (loss) for the last two fiscal years. These changes are all related to our defined benefit pension plan.
Balance at beginning of period $ (204 ) $ (2,480 )
Other comprehensive income before reclassifications 1,663 3,007
Amounts reclassified from accumulated other comprehensive loss — 28
Net current-period other comprehensive income 1,248 2,276
Balance at end of period $ 1,044 $ (204 )
(a)
Amounts in parenthesis indicate debits/expense.
The reclassifications out of accumulated other comprehensive income (loss) for the last two fiscal years were as follows:
Amortization of defined benefit pension items:
Unrecognized net loss — (28 ) Pension expense (excluding service costs)
Tax effect — 7 Income tax expense
Amortization of defined pension items, net of tax $ — $ (21 )
(b)
Amounts in parenthesis indicate debits to expense. See Note 15 — “Retirement Plan” above for additional details.
NOTE 17 — PRODUCT TYPE SALES MIX
The following table summarizes sales by product type as a percentage of total gross sales. The information is based upon gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product types, for the fiscal year ended:
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NOTE 18 — VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
The following table details the activity in various allowance and reserve accounts.
Allowance for doubtful accounts $ 283 $ 114 $ (79 ) $ 318
Allowance for doubtful accounts $ 267 $ 54 $ (38 ) $ 283
NOTE 19 — SUBSEQUENT EVENT
On July 17, 2024, our Board of Directors declared a special cash dividend of $1.25 per share and a regular annual cash dividend of $0.85 per share on all issued and outstanding shares of Common Stock and Class A Stock of the Company (the “August 2024 Dividends”). The August 2024 Dividends will be paid on September 11, 2024 to stockholders of record as of the close of business on August 20, 2024.
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Item 9 — Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A — Controls and Procedures
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our CEO and CFO concluded that, as of June 27, 2024, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and reported to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our CEO and CFO, we carried out an evaluation of the effectiveness of our internal control over financial reporting as of June 27, 2024, based on the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of June 27, 2024.
The effectiveness of our internal control over financial reporting as of June 27, 2024 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report contained in this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial reporting that occurred during the fourth fiscal quarter ended June 27, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that the Disclosure Controls and Procedures or our Internal Control over Financial Reporting will prevent or detect all errors and all fraud. A control, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control’s objectives will be met. Further, the design of a control must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all internal controls, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any control is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control, misstatements due to error or fraud may occur and may not be detected.
Item 9B — Other Information
Rule 10b5-1 Trading Arrangement
During the three months ended June 27, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).
Item 9C — Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable
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PART III
Item 10 — Directors, Executive Officers and Corporate Governance
The Sections entitled “Nominees for Election by The Holders of Common Stock,” “Nominees for Election by The Holders of Class A Stock”, “Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance — Board Meetings and Committees — Audit Committee” and “Corporate Governance — Independence of the Audit Committee” of our Proxy Statement for the 2024 Annual Meeting and filed pursuant to Regulation 14A are incorporated herein by reference. Other certain information relating to the directors and executive officers of the Company is included immediately before Part II of this Report.
We have adopted a Code of Ethics applicable to the principal executive, financial and accounting officers (“Code of Ethics”) and a separate Code of Conduct applicable to all employees and directors generally (“Code of Conduct”). The Code of Ethics and Code of Conduct are available on our website at http://www.jbssinc.com.
Item 11 — Executive Compensation
The Sections entitled “Compensation of Directors and Executive Officers”, “Compensation Discussion and Analysis”, “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” of our Proxy Statement for the 2024 Annual Meeting are incorporated herein by reference.