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 nut and bar businesses, 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 or unexpected 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 throughout fiscal 2026, we will 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 these expenditures are payable to equipment vendors located in Europe, and most of those payments will be denominated in foreign currency. Depending on the level of tariffs in place at the time of delivery, and the potential for unfavorable changes in foreign currency exchange rates, the ultimate cost of such equipment purchases could increase significantly. During the fourth quarter of fiscal 2025, 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 or with 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 Equipment Loan (as defined below) 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 reinvest in the Company through capital expenditures, develop new products, pay cash dividends, consummate strategic investments and business acquisitions and explore other growth strategies outlined in our Long-Range Plan.

Cash flows from operating activities have historically been driven by net income but are also significantly influenced by inventory requirements, which can change based upon fluctuations in both quantities and market prices of the various nuts and nut products we buy and sell. 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 half of 2026 and 2025, respectively (dollars in thousands):

Operating Activities Net cash provided by operating activities was $94.6 million for the first twenty-six weeks of fiscal 2026 compared to $19.9 million for the comparative period of fiscal 2025. The increase in operating cash flow was due primarily to changes in working capital, primarily decreased inventory and accrued expenses, and a higher net income.

Total inventories were $235.4 million at December 25, 2025, a decrease of $19.2 million, or 7.5%, from the inventory balance at June 26, 2025, and an increase of $29.6 million, or 14.4%, from the inventory balance at December 26, 2024. The decrease in inventories at December 25, 2025 compared to June 26, 2025 was due primarily to lower commodity acquisition costs for walnuts and peanuts and lower on-hand quantities of bars and pecans, partially offset by higher commodity acquisition costs for pecans and almonds and higher on-hand quantities of walnuts and cashews. The increase in inventories at December 25, 2025 compared to December 26, 2024 was due primarily to higher commodity acquisition costs across all major nut types except for peanuts and inshell walnuts, as well as greater on-hand quantities of work in process and finished goods inventory to support forecasted demand.

Raw nut and dried fruit input stocks, some of which are classified as work-in-process, decreased 2.7 million pounds, or 4.5%, at December 25, 2025 compared to December 26, 2024 due to lower quantities of walnuts, almonds and cashews on hand. This reduction was offset partially by higher quantities of peanuts and pecans on hand. The weighted average cost per pound of raw nut input stocks on hand at the end of the second quarter of fiscal 2026 increased 11.8% compared to the end of the second quarter of fiscal 2025 due primarily to higher acquisition costs for all major tree nuts except for inshell walnuts, partially offset by lower acquisition cost of peanuts and lower on-hand quantities of almonds and cashews.

Investing Activities Cash used in investing activities was $46.3 million during the first twenty-six weeks of fiscal 2026, compared to $25.6 million for the same period last year. Capital asset purchases were $47.3 million during the first twenty-six weeks of fiscal 2026, compared to $25.5 million for the first twenty-six weeks of fiscal 2025. Partially offsetting the fiscal 2026 cash outflows for capital asset purchases was $1.1 million of net life insurance proceeds received from existing life insurance contracts. We expect total capital expenditures for equipment purchases and upgrades for fiscal 2026 to be approximately $112.0 million based on current foreign currency exchange rates 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 bars 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 an equipment loan financing arrangement 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 our equipment loan financing, will be sufficient to meet the cash requirements for planned capital expenditures.

Financing Activities Cash used in financing activities was $46.5 million during the first twenty-six weeks of fiscal 2026, compared to cash provided of $5.6 million for the same period last year. Net repayments under our Credit Facility were $47.6 million during the first twenty-six weeks of fiscal 2026, compared to net borrowings of $29.3 million for the first twenty-six weeks of fiscal 2025. Equipment loan proceeds received were $16.9 million in the first twenty-six weeks of fiscal 2026. Dividends paid in the first twenty-six weeks of fiscal 2026 were approximately $6.9 million less 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 81% 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 primarily utilized to store finished goods inventory and as a distribution center along with light manufacturing.

On January 15, 2026, the Company executed a 10 year lease for the remaining warehouse space of approximately 285,000 square feet at the Huntley location.

Financing Arrangements

Our Amended and Restated Credit Agreement dated March 5, 2020, as most recently amended on June 16, 2025, provides for a $150.0 million revolving loan commitment and letter of credit subfacility. The Credit Facility has an accrued interest rate based on SOFR plus an applicable margin based upon the borrowing base calculation, ranging from 1.35% to 1.85%. The Credit Facility allows the Company to pay up to $100.0 million in dividends per year, subject to meeting availability test, and is secured by a first priority lien over 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 December 25, 2025, the weighted average interest rate for the Credit Facility was 6.7%. 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 and refinancing of indebtedness (if such prepayment or refinancing, among other things, is of indebtedness under the equipment loan or 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 lenders under the Credit Facility 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 December 25, 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 December 25, 2025, we had $134.7 million of available credit under the Credit Facility. If this entire amount were borrowed at December 25, 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 and the base monthly lease amount increased to approximately $114,000. On December 30, 2025 we exercised the final remaining five-year renewal option which extended the lease term to September 2031. The base monthly lease payment will increase to approximately $121,000 beginning in October 2026. 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 December 25, 2025, $6.0 million of the debt obligation was outstanding.

Equipment Loan

On June 16, 2025, the Company entered into a financing agreement with Wells Fargo Bank, N.A. which allows the Company to finance up to $50.0 million for the purchase of equipment to further expand our production capabilities, increase our efficiency and further enhance our product offerings to our customers (the “Equipment Loan”). The Equipment Loan is provided under a master loan agreement and related equipment schedule(s) and is secured under a Security Agreement that provides for a first priority lien on all equipment and a second priority lien on our accounts receivable and inventory. The Company will be required to make sixty equal monthly payments comprised of principal and interest starting upon distribution of the final loan proceeds which is expected to occur in the fourth quarter of fiscal 2026. The fixed interest rate (SOFR plus an applicable margin of 1.49%) will be calculated at that point in time as well. The Equipment Loan contains a graded prepayment penalty if the loan is paid off within 36 months of commencement. The Company will make monthly interest-only payments of SOFR plus an applicable margin of 1.60% prior to the delivery and acceptance of the equipment and distribution of the final loan proceeds, which will be capitalized as part of the equipment acquisition cost. As of December 25, 2025, $26.2 million of the debt obligation under the Equipment Loan 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 26, 2025.

Recent Accounting Pronouncements

Refer to Note 14 – “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.