SANFILIPPO JOHN B & SON INC

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, modernize and expand our equipment, 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. Beginning second quarter of fiscal 2025 and continuing into the next fiscal year, we plan to invest approximately $90.0 million in capital expenditures (and related expenses) to acquire and install equipment, and make related infrastructure improvements to expand our production capabilities, increase our efficiency and further enhance our product offerings to our customers. We intend to obtain an equipment loan to finance a portion of this capital investment, and for the remainder we intend to fund with borrowings under our Credit Facility and/or use available cash generated from our operations. We anticipate that expected net cash flow generated from operations and amounts available pursuant to the Credit Facility and the aforementioned equipment loan will be sufficient to fund our operations and capital expenditures 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 explore and pursue 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 first three quarters of 2025 and 2024, respectively (dollars in thousands):

Operating Activities Net cash used in operating activities was $6.0 million for the first thirty-nine weeks of fiscal 2025 compared to net cash provided by operating activities of $66.4 million for the comparative period of fiscal 2024. The decrease in operating cash flow was primarily due to changes in working capital, primarily inventory, and a lower net income.

Total inventories were $257.8 million at March 27, 2025, an increase of $61.2 million, or 31.2%, from the inventory balance at June 27, 2024, and an increase of $47.1 million, or 22.4%, from the inventory balance at March 28, 2024. The increase in inventories at March 27, 2025 compared to March 28, 2024 was primarily due to higher quantities and acquisition costs of finished goods, work-in-process and almonds. Additionally, higher commodity acquisition costs for walnuts and pecans contributed to the overall increase.

Raw nut and dried fruit input stocks, some of which are classified as work-in-process, decreased by 7.5 million pounds, or 9.9%, at March 27, 2025 compared to March 28, 2024 due to lower quantities of walnuts, peanuts and cashews on hand partially offset by higher quantities of almonds on hand. The weighted average cost per pound of raw nut input stocks on hand at the end of the third quarter of fiscal 2025 increased 33.9% compared to the end of the third quarter of fiscal 2024 primarily due to higher commodity acquisition costs for almost all major tree nuts.

Investing Activities Cash used in investing activities was $37.3 million during the first thirty-nine weeks of fiscal 2025 compared to $76.5 million for the same period last year. The decrease in cash used in investing activities was primarily due to the $59.0 million Lakeville Acquisition completed in the second quarter of fiscal 2024. Capital asset purchases were $37.2 million during the first thirty-nine weeks of fiscal 2025 compared to $17.5 million for the first thirty-nine weeks of fiscal 2024. We expect total capital expenditures for new equipment, including progress payments, facility and infrastructure upgrades and food safety enhancements to be approximately $55.0 million for fiscal 2025. A significant amount of the fiscal 2025 capital expenditures will be for the planned purchase of equipment to expand our production capabilities and related infrastructure improvements as described above. We expect to fund these capital purchases through a combination of borrowings under our existing Credit Facility, use of available cash from our operations and equipment loan financing expected to be finalized in the fourth quarter of fiscal 2025. Absent any additional material acquisitions or other significant investments, we believe that cash on hand, combined with cash provided by operations, borrowings available under the Credit Facility and equipment financing, will be sufficient to meet the cash requirements for planned capital expenditures.

Financing Activities Cash provided by financing activities was $44.1 million during the first thirty-nine weeks of fiscal 2025 compared to $8.5 million for the same period last year. Net borrowings under our Credit Facility were $69.2 million during the first thirty-nine weeks of fiscal 2025 compared to $32.1 million for the first thirty-nine weeks of fiscal 2024. Dividends paid in the first thirty-nine weeks of fiscal 2025 were approximately $1.2 million more than dividends paid in the same period last year.

Real Estate Matters

In August 2008, we completed the consolidation of our Chicago-based facilities into our Elgin headquarters (“Elgin Site”). The Elgin Site includes both an office building and a warehouse. We are currently attempting to find additional tenants for the available space in the office building at the Elgin Site. Until additional tenant(s) are found, we will not receive the benefit of rental income associated with such space. Approximately 84% of the rentable area in the office building is currently vacant. Approximately 29% of the rentable area has not been built-out. There can be no assurance that we will be able to lease the unoccupied space and further capital expenditures will likely be necessary to lease the remaining space.

In April 2024, the Company executed a 7.5 year lease for approximately 445,000 square feet of warehouse space. The warehouse is located in Huntley, IL near the Elgin Site and is utilized to store finished goods inventory and as a distribution center.

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.

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 (the “Former Credit Agreement”) with bank lenders. 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.

On May 8, 2023, we entered into the First Amendment to our Amended and Restated Credit Facility (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 Facility (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.

The Amended and Restated Credit Facility is secured by our accounts receivable and inventory.

Credit Facility

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 on SOFR plus an applicable margin as noted above.

At March 27, 2025, the weighted average interest rate for the Credit Facility was 5.9%. 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 March 27, 2025, 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 March 27, 2025, we had $55.7 million of available credit under the Credit Facility. If this entire amount were borrowed at March 27, 2025, we would still be in compliance with all restrictive covenants under the Credit Facility.

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 March 27, 2025, $6.6 million of the debt obligation was outstanding.

Critical Accounting Policies and Estimates

For information regarding our Critical Accounting Policies and Estimates, see the “Critical Accounting Policies and Estimates” section of “Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K for the fiscal year ended June 27, 2024.

Recent Accounting Pronouncements

Refer to Note 12 – “Recent Accounting Pronouncements” of the Notes to Consolidated Financial Statements, contained in Part I, Item 1 of this form 10-Q, for a discussion of recently issued and adopted accounting pronouncements.