SANFILIPPO JOHN B & SON INC

Previous wording

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:

Current wording

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

Previous wording

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.

Current wording

We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States, and we also manufacture and distribute a complete portfolio of private brand bars. These nuts are primarily sold under a variety of private brand names, as well as our Fisher, Orchard Valley Harvest, Squirrel Brand and Southern Style Nuts brand names. We market and distribute, and in most cases, manufacture or process, a diverse product line of food and snack products, including bars, peanut butter, almond butter, cashew butter, candy and confections, snack and trail mixes, granola, sunflower kernels, dried fruit, corn 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.

Previous wording

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 Harvestand 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.

Current wording

Our Long-Range Plan defines our future growth priorities and focuses on growing our private brand business across key customers, as well as transforming Fisher and Orchard Valley Harvest into leading brands while increasing distribution and diversifying our portfolio into high growth snacking categories. We will execute on our Long-Range Plan by providing our private brand customers value-added solutions and innovative products based on our extensive industry and consumer expertise, such as our newly developed product line of private brand nutrition bars. We will focus on growing 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 the acquisition of certain snack bar assets including inventory, product formulas, a manufacturing facility and related equipment located in Lakeville, Minnesota, (the “Lakeville Acquisition”) which we completed the first day of the second quarter of fiscal 2024. The Lakeville Acquisition expanded our ability to produce private brand bars, increased our overall production capabilities and allows us to provide our private brand customers with a complete bar portfolio. In addition, we also acquired additional bar production assets in the first quarter of fiscal 2025 that will expand our manufacturing capacity and support further growth in our bar business. Beginning in the second quarter of fiscal 2025 and continuing into the next fiscal year, we started to invest significant additional capital to purchase new equipment and make infrastructure improvements (and incur related expenses) to further expand our production capabilities, increase our efficiency and enhance our product offerings for our customers.

Previous wording

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.

Current wording

We focus our promotional and advertising activity to invest in our brands to achieve sales volume growth. We are executing an omnichannel approach to win in key categories including recipe nuts, snack nuts and trail mix. We continue to see e-commerce sales volume growth across our branded portfolio and anticipate taking various actions with the goal of maintaining that growth across a variety of established e-commerce platforms for our consumer channel. 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 and overall category growth for branded and private brand products and varying, decreasing or shifting consumer demand for snack nuts, trail mix and bars in a challenging snack food environment and against an uncertain macroeconomic backdrop.

Previous wording

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.

Current wording

We face changing industry trends as consumers' purchasing preferences evolve. We continue to see higher selling prices at retail across snack nuts and trail mix driven by higher commodity costs. These higher prices across our categories and the broader market, coupled with a potential economic downturn and tightening of consumer finances due to reduced government support through programs such as SNAP or a variety of other macroeconomic reasons, are causing consumers to purchase fewer branded and private label snack products. This declining demand is leading to sales volume declines for snack nuts, recipe nuts, trail mix and bars both for the Company and across the snack food industry. Consumers continue to shift their preferences to private brands or lower priced nuts or bars or purchase snack products outside the snack nut, trail mix and bar categories. We have also seen consumers shifting to more value-focused retailers, such as mass merchandising retailers and club stores, not all of which we distribute or sell to. Additionally, the increased use and/or prevalence of certain weight loss drugs, which may suppress a person’s appetite and/or impact a person's preferences, may impact the demand or consumption patterns of our products. We have responded by focusing on our strengths, including our knowledge of the snack nut and trail mix and bar categories, product innovation and judicious use of trade spending and pricing actions to support our products.

Previous wording

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.

Current wording

Global supply chain pressures have eased compared to past fiscal years, but intermittent challenges, delays and extended lead-times still exist for certain raw materials and inputs. Overall packaging and ingredient inflation appears to have moderated heading into fiscal 2026; however, there is still uncertainty within the supply chain surrounding near term impacts from the U.S. government's tariffs on imports from foreign countries. Approximately 2% of our material costs, primarily pepitas and pine nuts, are currently sourced from China and are currently subject to a combined 55% tariff. Cashews are also imported and those sourced from Vietnam, which represents the majority of such imports, are currently subject to a 20% tariff. Anyimport tariffs will increase the cost of certain raw materials we use in our business and our financial performance may be adversely impacted if we cannot pass on the cost increases in the form of price increases to our customers. While we do not have direct exposure to suppliers in Russia, Ukraine or Israel, the conflicts and prospects for conflict in these regions could continue to result in volatile commodity markets, supply chain disruptions and increased costs, including shipping costs. In addition, the ultimate impact of tariffs may be difficult to predict as their amount and duration is uncertain, making our planning process more difficult, and the threat of tariffs can also have adverse implications to our business and the business of our suppliers and customers.

Previous wording

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.

Current wording

Our most significant ingredient requirements include cocoa products, dried fruits, sweeteners, vegetable oils, rolled oats, flour and dairy. Many of these materials and their associated costs are subject to price fluctuations from several factors, including changing commodity markets, other 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 ongoing political instability and other factors beyond our control.

Previous wording

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.

Current wording

We have remained agile by proactively identifying risks, modifying inventory plans and diversifying our supplier base to mitigate risk to customer order shortages and our supply chain. We continue to proactively manage our business in response to the evolving global economic environment and related uncertainties and intend to take steps to further mitigate impacts to our supply chain as they develop. If unforeseen supply chain pressures emerge or worsen, or we cannot obtain the transportation and labor services needed to obtain raw materials or fulfill customer orders, such shortages and supply chain issues could have an unfavorable impact on net sales and our operations into fiscal 2026.

Previous wording

Our net sales for fiscal 2024 increased $67.1 million, or 6.7%, to $1,066.8 million compared to fiscal 2023.

Current wording

Our net sales for fiscal 2025 increased $40.5 million, or 3.8%, to $1,107.2 million compared to fiscal 2024.

Previous wording

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.

Current wording

Gross profit decreased $10.7 million and our gross profit margin, as a percentage of net sales, decreased to 18.4% in fiscal 2025 from 20.1% in fiscal 2024.

Previous wording

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.

Current wording

Total operating expenses for fiscal 2025 decreased $10.2 million, or 7.9%, to $118.8 million. Operating expenses, as a percentage of net sales, was 10.7% of net sales in fiscal 2025 compared to 12.1% of net sales in fiscal 2024.

Previous wording

Diluted earnings per share decreased approximately 4.6% compared to last fiscal 2023.

Current wording

Diluted earnings per share decreased approximately 2.3% compared to fiscal 2024.

Previous wording

Our strong financial position allowed us to pay cash dividends totaling $34.8 million during fiscal 2024.

Current wording

Our strong financial position allowed us to invest $50.7 million in property and equipment and pay cash dividends totaling $24.4 million during fiscal 2025.

Previous wording

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).

Current wording

The total value of inventories on hand at the end of fiscal 2025 increased $58.0 million, or 29.5%, in comparison to the total value of inventories on hand at the end of fiscal 2024. We have seen acquisition costs for walnuts increase significantly and all other tree nut increase modestly in the 2024 crop year (which falls into our 2025 fiscal year).

Previous wording

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.

Current wording

Our net sales increased 3.8% to $1,107.2 million for fiscal 2025 from $1,066.8 million for fiscal 2024. The increase in net sales was primarily due to the Lakeville Acquisition. Excluding the fiscal 2025 first quarter's impact of the Lakeville Acquisition, net sales remained relatively unchanged. Sales volume, which is defined as pounds sold to customers, increased 3.4%, also due to the Lakeville Acquisition. Excluding the impact of the Lakeville Acquisition, sales volume decreased 1.7%.

Previous wording

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.

Current wording

Sales of branded products were approximately 16% and 18% of total consumer channel sales during fiscal 2025 and 2024, respectively. Fisher branded products were approximately 63% and 62% of branded sales during fiscal 2025 and 2024, respectively, with Orchard Valley Harvest branded products accounting for the majority of the remaining branded product sales.

Previous wording

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.

Current wording

Net sales in the commercial ingredients distribution channel decreased 1.4% in dollars and sales volume increased 0.7% in fiscal 2025 compared to fiscal 2024. Excluding the fiscal 2025 first quarter's impact of the Lakeville Acquisition, net sales in the commercial ingredients channel decreased $1.8 million, or 1.6%, and sales volume increased 0.3%. The sales volume increase was due to higher sales from new distribution to a foodservice customer and higher sales of peanut crushing stock to peanut oil processors. This increase was largely offset by competitive pricing pressures.

Previous wording

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.

Current wording

Gross profit decreased 5.0% to $203.5 million in fiscal 2025 from $214.1 million in fiscal 2024. The decrease in gross profit was mainly attributed to increased commodity acquisition costs for substantially all major tree nuts, except pecans, as well as competitive pricing pressures and strategic pricing decisions, which were offset by increased production volume, lower manufacturing spending and improved manufacturing efficiencies, including for bars. Our gross profit margin, as a percentage of sales, decreased to 18.4% for fiscal 2025 from 20.1% for fiscal 2024 mainly due to factors mentioned previously.

Previous wording

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.

Current wording

Total operating expenses for fiscal 2025 decreased $10.2 million to $118.8 million. Operating expenses as a percent of net sales were 10.7% for fiscal 2025 compared to 12.1% for fiscal 2024. The decrease 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.

Previous wording

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.

Current wording

Selling expenses for fiscal 2025 were $78.9 million, a decrease of $3.8 million, or 4.5%, over the amount recorded for fiscal 2024. The decrease was driven primarily by a $4.6 million decrease in advertising and consumer insight research expense and a $5.2 million decrease in incentive compensation expense. These decreases were largely offset by a $4.2 million increase in rent expense related to our new Huntley, IL facility lease and a $1.7 million increase in compensation-related expenses.

Previous wording

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.

Current wording

Due to the factors discussed above, income from operations was $84.7 million, or 7.7% of net sales, for fiscal 2025, compared to $85.2 million, or 8.0% of net sales, for fiscal 2024.

Previous wording

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.

Current wording

Interest expense was $3.6 million for fiscal 2025 compared to $2.5 million for fiscal 2024. The increase in interest expense was due to higher average debt levels.

Previous wording

Net rental and miscellaneous expense was $1.3 million for both fiscal 2024 and fiscal 2023.

Current wording

Net rental and miscellaneous expense was $1.8 million for fiscal 2025 and $1.3 million for fiscal 2024.

Previous wording

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.

Current wording

Income tax expense was $18.9 million, or 24.3% of income before income taxes, for fiscal 2025 compared to $19.7 million, or 24.6% of income before income taxes, for fiscal 2024.

Previous wording

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.

Current wording

Net income was $58.9 million, or $5.06 per common share basic and $5.03 per common share diluted, for fiscal 2025, compared to $60.2 million, or $5.19 per common share basic and $5.15 per common share diluted, for fiscal 2024, due to the factors discussed above.

Previous wording

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.

Current wording

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. Beginning in the 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, excluding any applicable tariffs, 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. Approximately half of this project expenditure is payable to vendors located in Europe. Furthermore, the large majority of those payments will be denominated in foreign currency. Depending on the level of tariffs in place at the time of delivery and unfavorable changes in foreign currency exchange rates, the ultimate cost of such equipment purchases could increase significantly. We obtained an equipment loan to finance a portion of this capital investment, and intend to fund the remainder 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 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 other growth strategies outlined in our Long-Range Plan.

Previous wording

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.

Current wording

Operating Activities. Net cash provided by operating activities was $30.5 million in fiscal 2025, a decrease of $71.1 million compared to fiscal 2024. The decrease in operating cash flow was due to changes in working capital, primarily for inventory, compared to fiscal 2024.

Previous wording

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.

Current wording

Raw nut and dried fruit input stocks, some of which are classified as work in process, decreased 5.0 million pounds, or 8.4%, at June 26, 2025 compared to June 27, 2024. This decrease was due to lower quantities of walnuts and pecans on hand due to increased shelling driven by demand of certain sizes and inventory levels. The weighted average cost per pound of raw nut and dried fruit input stocks on hand at the end of fiscal 2025 increased by 30.4% compared to the end of fiscal 2024, due to higher acquisition costs for almost all major tree nuts.

Previous wording

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.

Current wording

As of June 26, 2025, there are known purchase obligations of $303.3 million which are expected to be settled during fiscal 2026. These purchase obligations primarily represent inventory and capital equipment purchase commitments; however, these amounts exclude purchase commitments under walnut purchase agreements due to the uncertainty of pricing and quantity.

Previous wording

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.

Current wording

Investing Activities. Cash used in investing activities was $50.8 million in fiscal 2025. Capital expenditures accounted for a $50.7 million use of cash in fiscal 2025.

Previous wording

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.

Current wording

We expect total capital expenditures for equipment purchases and upgrades for fiscal 2026 to be approximately $104.0 million based on current foreign currency and tariff expectations. This includes all capital expenditures needed for the planned purchase of equipment to expand our production capabilities and related infrastructure improvements as described above, facility maintenance, food safety enhancements and expansion needs for our bar business. 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 obtained 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.

Previous wording

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.

Current wording

Financing Activities. Cash provided by financing activities was $20.4 million during fiscal 2025. There was a net increase in borrowings under our Credit Facility of $37.2 million in fiscal 2025 due to increasing commodity acquisition costs and capital investment. Equipment loan proceeds received were $9.3 million in fiscal 2025. We paid dividends totaling $24.4 million in fiscal 2025. We repaid $0.7 million of long-term debt during fiscal 2025. 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.

Previous wording

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.

Current wording

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. There was a net increase in borrowings outstanding under our Credit Facility of $20.4 million during fiscal 2024 primarily due to the Lakeville Acquisition.

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

The terms of the Credit Facility contain covenants that, among other things, require us to restrict investments, indebtedness, liens, 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 26, 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 June 26, 2025, we had $86.9 million of available credit under the Credit Facility. If this entire amount were borrowed at June 26, 2025, we would still be in compliance with all restrictive covenants under the Credit Facility.

Previous wording

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.

Current wording

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. No gain or loss was recorded on the Selma Properties transaction. 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. As of June 26, 2025, $6.4 million of the debt obligation was outstanding.

Previous wording

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.

Current wording

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 5.45% for fiscal 2025, 5.12% for fiscal 2024, and 4.68% for fiscal 2023. A 25-basis point increase or decrease in our discount rate assumption for fiscal 2025 would have resulted in an immaterial change in our pension expense for fiscal 2025. For our year end pension obligation determination, we selected discount rates of 5.49% and 5.45% for fiscal years 2025 and 2024, respectively.