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 fiscal 2025 and continuing into fiscal 2027, 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. Due to the potential for unfavorable changes in foreign currency exchange rates, the ultimate cost of such equipment purchases could increase. In 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, nut products and other commodities or other input materials 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 2026 and 2025, respectively (dollars in thousands):

Operating Activities Net cash provided by operating activities was $94.8 million for the first thirty-nine weeks of fiscal 2026 compared to cash used of $6.0 million for the comparative period of fiscal 2025. The increase in operating cash flow was primarily due to changes in working capital, primarily decreased inventory and increased accrued expenses, and a higher net income.

Total inventories were $252.6 million at March 26, 2026, a decrease of $2.0 million, or 0.8%, from the inventory balance at June 26, 2025, and a decrease of $5.2 million, or 2.0%, from the inventory balance at March 27, 2025. The decrease in inventories at March 26, 2026 compared to June 26, 2025 was due primarily to lower on-hand quantities of bars, partially offset by higher commodity acquisition costs for pecans and higher on-hand quantities of pecans and peanuts. The decrease in inventories at March 26, 2026 compared to March 27, 2025 was due primarily to lower acquisition costs for walnuts and peanuts, as well as lower on-hand quantities of pecans, walnuts and almonds. These decreases were partially offset by the impact of higher pecan acquisition costs and increased on-hand quantities of peanuts.

Raw nut and dried fruit input stocks, some of which are classified as work-in-process, decreased 10.5 million pounds, or 15.3%, at March 26, 2026 compared to March 27, 2025 due to lower quantities of pecans, walnuts and almonds on hand. This reduction was offset partially by higher quantities of peanuts on hand. The weighted average cost per pound of raw nut input stocks on hand at the end of the third quarter of fiscal 2026 increased 10.5% compared to the end of the third quarter of fiscal 2025, primarily due to higher acquisition costs for pecans and almonds, partially offset by lower acquisition cost of walnuts and peanuts.

Investing Activities Cash used in investing activities was $67.5 million during the first thirty-nine weeks of fiscal 2026, compared to $37.3 million for the same period last year. Capital asset purchases were $69.0 million during the first thirty-nine weeks of fiscal 2026, compared to $37.2 million for the first thirty-nine weeks of fiscal 2025. Slightly 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 and $0.5 million received on sale of non-core equipment. We expect total capital expenditures for equipment purchases and upgrades for fiscal 2026 to be approximately $95.0 million based on current foreign currency exchange rates and tariff expectations. This includes substantially 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 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 $26.6 million during the first thirty-nine weeks of fiscal 2026, compared to cash provided of $44.1 million for the same period last year. Net repayments under our Credit Facility were $26.4 million during the first thirty-nine weeks of fiscal 2026, compared to net borrowings of $69.2 million for the first thirty-nine weeks of fiscal 2025. Equipment loan proceeds received were $29.7 million in the first thirty-nine weeks of fiscal 2026. Dividends paid in the first thirty-nine weeks of fiscal 2026 were approximately $4.8 million more than dividends paid in the same period last year.

Real Estate Matters

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 additional 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 March 26, 2026, the weighted average interest rate for the Credit Facility was 5.6%. 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 March 26, 2026, 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 26, 2026, we had $113.6 million of available credit under the Credit Facility. If this entire amount were borrowed at March 26, 2026, 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 March 26, 2026, $5.8 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 first half of fiscal 2027. 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 March 26, 2026, $38.9 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 and Tax Legislation” 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.