SANFILIPPO JOHN B & SON INC (Form: 10-Q, Received: 02/01/2017 16:20:15)

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 29, 2016

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-19681

JOHN B. SANFILIPPO & SON, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		36-2419677
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1703 North Randall Road Elgin, Illinois		60123-7820
(Address of Principal Executive Offices)		(Zip Code)

(847) 289-1800

(Registrant’s Telephone Number,

Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of January 23, 2017, 8,668,038 shares of the Registrant’s Common Stock, $0.01 par value per share and 2,597,426 shares of the Registrant’s Class A Common Stock, $0.01 par value per share, were outstanding.

JOHN B. SANFILIPPO & SON, INC.

FORM 10-Q

FOR THE QUARTER ENDED DECEMBER 29, 2016

INDEX


	Page
PART I. FINANCIAL INFORMATION		3
Item 1. Financial Statements (Unaudited)		3
Consolidated Statements of Comprehensive Income for the Quarter and Twenty-Six Weeks Ended December 29, 2016 and December 24, 2015		3
Consolidated Balance Sheets as of December 29, 2016, June 30, 2016 and December 24, 2015		4
Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended December 29, 2016 and December 24, 2015		6
Notes to Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3. Quantitative and Qualitative Disclosures About Market Risk		24
Item 4. Controls and Procedures		24
PART II. OTHER INFORMATION		25
Item 1. Legal Proceedings		25
Item 1A. Risk Factors		25
Item 6. Exhibits		25
SIGNATURE		26

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except share and per share amounts)


	For the Quarter Ended						For the Twenty-six Weeks Ended
	December 29, 2016			December 24, 2015			December 29, 2016			December 24, 2015
Net sales	$	249,375		$	279,002		$	471,668		$	504,779
Cost of sales		205,986			233,991			391,804			426,563

Gross profit		43,389			45,011			79,864			78,216

Operating expenses:
Selling expenses		15,370			16,374			26,641			27,756
Administrative expenses		8,277			8,945			16,925			17,023

Total operating expenses		23,647			25,319			43,566			44,779

Income from operations		19,742			19,692			36,298			33,437

Other expense:
Interest expense including $201, $271, $391 and $544 to related parties		608			804			1,230			1,719
Rental and miscellaneous expense, net		299			346			709			868

Total other expense, net		907			1,150			1,939			2,587

Income before income taxes		18,835			18,542			34,359			30,850
Income tax expense		5,950			6,492			11,294			10,810

Net income	$	12,885		$	12,050		$	23,065		$	20,040
Other comprehensive income:
Amortization of prior service cost and actuarial loss included in net periodic pension cost		331			253			661			504
Income tax expense related to pension adjustments		(126	)		(99	)		(251	)		(197	)

Other comprehensive income, net of tax		205			154			410			307

Comprehensive income	$	13,090		$	12,204		$	23,475		$	20,347

Net income per common share-basic	$	1.14		$	1.07		$	2.04		$	1.79

Net income per common share-diluted	$	1.13		$	1.07		$	2.03		$	1.77

Cash dividends declared per share	$	2.50		$	2.00		$	5.00		$	2.00

The accompanying unaudited notes are an integral part of these consolidated financial statements.

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except share and per share amounts)


	December 29, 2016		June 30, 2016		December 24, 2015
ASSETS
CURRENT ASSETS:
Cash	$	2,031	$	2,220	$	3,026
Accounts receivable, less allowances of $6,400, $4,290 and $7,199		66,007		78,088		72,065
Inventories		182,653		156,573		185,279
Prepaid expenses and other current assets		6,841		5,292		6,965

TOTAL CURRENT ASSETS		257,532		242,173		267,335


PROPERTY, PLANT AND EQUIPMENT:
Land		9,285		9,285		9,285
Buildings		106,566		106,505		106,538
Machinery and equipment		193,859		188,748		185,399
Furniture and leasehold improvements		4,803		4,349		4,363
Vehicles		453		453		431
Construction in progress		1,483		832		2,167

		316,449		310,172		308,183
Less: Accumulated depreciation		206,751		200,416		195,565

		109,698		109,756		112,618
Rental investment property, less accumulated depreciation of $9,244, $8,847 and $8,451		19,650		20,047		20,443

TOTAL PROPERTY, PLANT AND EQUIPMENT		129,348		129,803		133,061


Cash surrender value of officers’ life insurance and other assets		10,091		9,227		9,681
Deferred income taxes		8,109		8,590		6,211
Intangible assets, net of accumulated amortization of $23,478, $22,721 and $21,865		611		1,369		2,225

TOTAL ASSETS	$	405,691	$	391,162	$	418,513

The accompanying unaudited notes are an integral part of these consolidated financial statements.

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except share and per share amounts)


	December 29, 2016			June 30, 2016			December 24, 2015
LIABILITIES & STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Revolving credit facility borrowings	$	12,427		$	12,084		$	13,932
Current maturities of long-term debt, including related party debt of $457, $407 and $391 and net of unamortized debt issuance costs of $60, $65 and $70		3,397			3,342			3,321
Accounts payable, including related party payables of $32, $113 and $84		90,787			43,719			83,322
Bank overdraft		2,652			811			1,344
Accrued payroll and related benefits		10,609			16,045			12,228
Other accrued expenses		7,957			7,193			8,189
Income taxes payable		2,009			—			—

TOTAL CURRENT LIABILITIES		129,838			83,194			122,336


LONG-TERM LIABILITIES:
Long-term debt, less current maturities, including related party debt of $10,825, $11,133 and $11,341 and net of unamortized debt issuance costs of $150, $179 and $210		26,925			28,704			30,380
Retirement plan		22,532			22,137			18,226
Other		6,695			5,934			6,456

TOTAL LONG-TERM LIABILITIES		56,152			56,775			55,062

TOTAL LIABILITIES		185,990			139,969			177,398


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY:
Class A Common Stock, convertible to Common Stock on a per share basis, cumulative voting rights of ten votes per share, $.01 par value; 10,000,000 shares authorized, 2,597,426 shares issued and outstanding		26			26			26
Common Stock, non-cumulative voting rights of one vote per share, $.01 par value; 17,000,000 shares authorized, 8,785,938, 8,725,715 and 8,712,340 shares issued		88			87			87
Capital in excess of par value		116,676			115,136			113,515
Retained earnings		110,130			143,573			133,218
Accumulated other comprehensive loss		(6,015	)		(6,425	)		(4,527	)
Treasury stock, at cost; 117,900 shares of Common Stock		(1,204	)		(1,204	)		(1,204	)

TOTAL STOCKHOLDERS’ EQUITY		219,701			251,193			241,115

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	405,691		$	391,162		$	418,513

The accompanying unaudited notes are an integral part of these consolidated financial statements.

JOHN B. SANFILIPPO & SON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


	For the Twenty-six Weeks Ended
	December 29, 2016			December 24, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	23,065		$	20,040
Depreciation and amortization		7,973			8,229
Loss on disposition of assets, net		53			258
Deferred income tax benefit		481			1,234
Stock-based compensation expense		1,428			1,292
Change in assets and liabilities:
Accounts receivable, net		12,067			3,587
Inventories		(26,080	)		12,718
Prepaid expenses and other current assets		(2,468	)		(1,321	)
Accounts payable		46,925			38,293
Accrued expenses		(4,672	)		(2,400	)
Income taxes payable		2,928			(1,176	)
Other long-term assets and liabilities		(115	)		453
Other, net		845			664

Net cash provided by operating activities		62,430			81,871


CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(6,672	)		(10,387	)
Proceeds from dispositions of assets		1			—
Other		47			(3	)

Net cash used in investing activities		(6,624	)		(10,390	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility		166,816			148,125
Repayments of revolving credit borrowings		(166,473	)		(195,346	)
Principal payments on long-term debt		(1,758	)		(1,685	)
Increase in bank overdraft		1,841			307
Dividends paid		(56,464	)		(22,486	)
Issuance of Common Stock under equity award plans		43			31
Tax benefit of equity award exercises		—			653

Net cash used in financing activities		(55,995	)		(70,401	)


NET (DECREASE) INCREASE IN CASH		(189	)		1,080
Cash, beginning of period		2,220			1,946

Cash, end of period	$	2,031		$	3,026

The accompanying unaudited notes are an integral part of these consolidated financial statements.

JOHN B. SANFILIPPO & SON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands, except where noted and per share data)

Note 1 – Basis of Presentation and Description of Business

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 subsidiaries, JBSS Ventures, LLC and Sanfilippo (Shanghai) Trading Co. Ltd. Our fiscal year ends on the final Thursday of June each year, and typically consists of fifty-two weeks (four thirteen-week quarters). Fiscal 2016 consisted of fifty-three weeks, with our fourth quarter containing fourteen weeks. Additional information on the comparability of the periods presented is as follows:

•

References herein to fiscal 2017 and fiscal 2016 are to the fiscal year ending June 29, 2017 and the fiscal year ended June 30, 2016, respectively.

•

References herein to the second quarter of fiscal 2017 and fiscal 2016 are to the quarters ended December 29, 2016 and December 24, 2015, respectively.

•

References herein to the first half or first twenty-six weeks of fiscal 2017 and fiscal 2016 are to the twenty-six weeks ended December 29, 2016 and December 24, 2015, respectively.

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 a variety of private brands and under the Fisher, Orchard Valley Harvest, Fisher Nut Exactly, and Sunshine Country brand names. We also market and distribute, and in most cases manufacture or process, a diverse product line of food and snack products, including peanut butter, almond butter, cashew butter, candy and confections, snacks and trail mixes, snack bites, sunflower kernels, dried fruit, corn snacks, sesame sticks and other sesame snack products under private brands and brand names. Our products are sold through three primary distribution channels to significant buyers of nuts, including food retailers in the consumer channel, commercial ingredient users and contract packaging customers.

The accompanying unaudited financial statements fairly present the consolidated statements of comprehensive income, consolidated balance sheets and consolidated statements of cash flows, and reflect all adjustments, consisting only of normal recurring adjustments which are necessary for the fair statement of the results of the interim periods. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

The interim results of operations are not necessarily indicative of the results to be expected for a full year. The balance sheet data as of June 30, 2016 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). Accordingly, these unaudited financial statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2016 Annual Report on Form 10-K for the fiscal year ended June 30, 2016.

Note 2 – Inventories

Inventories consist of the following:


	December 29, 2016		June 30, 2016		December 24, 2015
Raw material and supplies	$	107,735	$	56,005	$	80,549
Work-in-process and finished goods		74,918		100,568		104,730

Total	$	182,653	$	156,573	$	185,279

Note 3 – Credit Facility

On July 7, 2016, we entered into the Seventh Amendment to Credit Agreement (the “Seventh Amendment”) which extended the maturity date of the Credit Agreement from July 15, 2019 to July 7, 2021, and reduced by twenty-five basis points the interest rates charged for loan advances and letter of credit borrowings. The unused line fee was reduced to 0.25% per annum. The aggregate revolving loan commitment remained unchanged. In addition, the Seventh Amendment allows the Company to, without obtaining Bank Lender consent, (i) make up to one cash dividend or distribution on our stock per quarter, or (ii) purchase, acquire, redeem or retire stock in any fiscal quarter, in any case, in an amount not to exceed $60,000 in the aggregate per fiscal year, as long as no default or event of default exists and the excess availability under the Credit Agreement remains over $30,000 immediately before and after giving effect to any such dividend, distribution, purchase or redemption. The Seventh Amendment also permits an additional 5% of outstanding accounts receivable from a major customer to be included as eligible in the borrowing base calculation and reduced the amount available for letter of credit usage to $10,000.

At December 29, 2016, we had $101,398 of available credit under the Credit Facility which reflects borrowings of $12,427 and reduced availability as a result of $3,675 in outstanding letters of credit. As of December 29, 2016, we were in compliance with all covenants under the Credit Facility and Mortgage Facility.

Note 4 – Income Taxes

Upon adoption of ASU 2016-09, as described in Note 12 – “Recent Accounting Pronouncements”, we now recognize excess tax benefits as a component of income tax expense. During the twenty-six weeks ended December 29, 2016 excess tax benefits of $726 were recorded as a component of income tax expense and favorably impacted the effective tax rate by approximately 2.1%.

Note 5 – Earnings Per Common Share

The following table presents the reconciliation of the weighted average shares outstanding used in computing basic and diluted earnings per share:


	For the Quarter Ended				For the Twenty-six Weeks Ended
	December 29, 2016		December 24, 2015		December 29, 2016		December 24, 2015
Weighted average number of shares outstanding – basic		11,304,617		11,219,354		11,285,417		11,206,954
Effect of dilutive securities:
Stock options and restricted stock units		69,200		91,031		91,539		104,428

Weighted average number of shares outstanding – diluted		11,373,817		11,310,385		11,376,956		11,311,382

There was an insignificant amount of anti-dilutive awards excluded from the computation of diluted earnings per share for the current quarter and twenty-six week periods presented.

Note 6 – Stock-Based Compensation Plans

During the second quarter of fiscal 2017, there were 44,972 restricted stock units (“RSUs”) awarded to employees and non-employee members of the Board of Directors. The vesting period is generally three years for awards to employees and one year for awards to non-employee directors.

Stock option activity was insignificant during the first half of fiscal 2017.

The following is a summary of RSU activity for the first half of fiscal 2017:


Restricted Stock Units	Shares			Weighted Average Grant Date Fair Value
Outstanding at June 30, 2016		228,270		$	32.33
Activity:
Granted		44,972			61.37
Vested		(55,223	)		28.91
Forfeited		(2,500	)		25.32

Outstanding at December 29, 2016		215,519		$	39.35

At December 29, 2016, there are 75,927 RSUs outstanding that are vested but deferred.

The following table summarizes compensation expense charged to earnings for all equity compensation plans for the periods presented:


	For the Quarter Ended				For the Twenty-six Weeks Ended
	December 29, 2016		December 24, 2015		December 29, 2016		December 24, 2015
Stock-based compensation expense	$	878	$	826	$	1,428	$	1,292

As of December 29, 2016, there was $4,104 of total unrecognized compensation expense related to non-vested RSUs granted under our stock-based compensation plans. We expect to recognize that cost over a weighted average period of 1.6 years.

Note 7 – Special Cash Dividends

On November 1, 2016, our Board of Directors, after considering the financial position of our Company and other factors, declared a special cash dividend of $2.50 per share on all issued and outstanding shares of Common Stock and Class A Common Stock of the Company (the “2017 Special Dividend”). The 2017 Special Dividend of approximately $28,314 was paid on December 13, 2016 to stockholders of record as of the close of business on November 30, 2016.

On July 7, 2016, our Board of Directors, after considering the financial position of our Company and other factors, declared a special cash dividend of $2.50 per share on all issued and outstanding shares of Common Stock and Class A Common Stock of the Company (the “2016 Special Dividend”). The 2016 Special Dividend of approximately $28,150 was paid on August 4, 2016 to stockholders of record as of the close of business on July 21, 2016.

Note 8 – Retirement Plan

The Supplemental Employee Retirement Plan is an unfunded, non-qualified deferred compensation plan that will provide eligible participants with monthly benefits upon retirement, disability or death, subject to certain conditions. The monthly benefit is based upon each participant’s earnings and his or her number of years of service. Administrative expenses include the following net periodic benefit costs:


	For the Quarter Ended				For the Twenty-six Weeks Ended
	December 29, 2016		December 24, 2015		December 29, 2016		December 24, 2015
Service cost	$	158	$	122	$	316	$	245
Interest cost		202		212		405		422
Amortization of prior service cost		240		240		479		479
Amortization of loss		91		13		182		25

Net periodic benefit cost	$	691	$	587	$	1,382	$	1,171

Note 9 – Accumulated Other Comprehensive Loss

The table below sets forth the changes to accumulated other comprehensive loss (“AOCL”) for the twenty-six weeks ended December 29, 2016 and December 24, 2015. These changes are all related to our defined benefit pension plan.


Changes to AOCL ^(a)	For the Twenty-six Weeks Ended
Changes to AOCL ^(a)	December 29, 2016			December 24, 2015
Balance at beginning of period	$	(6,425	)	$	(4,834	)
Other comprehensive income before reclassifications		—			—
Amounts reclassified from accumulated other comprehensive loss		661			504
Tax effect		(251	)		(197	)

Net current-period other comprehensive income		410			307

Balance at end of period	$	(6,015	)	$	(4,527	)

^(a)	Amounts in parenthesis indicate debits/expense.

The reclassifications out of AOCL for the quarter and twenty-six weeks ended December 29, 2016 and December 24, 2015 were as follows:


Reclassifications from AOCL to earnings ^(b)	For the Quarter Ended						For the Twenty-six Weeks Ended						Affected line item in the Consolidated Statements of Comprehensive Income
Reclassifications from AOCL to earnings ^(b)	December 29, 2016			December 24, 2015			December 29, 2016			December 24, 2015
Amortization of defined benefit pension items:
Unrecognized prior service cost	$	(240	)	$	(240	)	$	(479	)	$	(479	)		Administrative expenses
Unrecognized net loss		(91	)		(13	)		(182	)		(25	)		Administrative expenses

Total before tax		(331	)		(253	)		(661	)		(504	)
Tax effect		126			99			251			197			Income tax expense

Amortization of defined pension items, net of tax	$	(205	)	$	(154	)	$	(410	)	$	(307	)

^(b)	Amounts in parenthesis indicate debits to expense. See Note 8 – “Retirement Plan” above for additional details.

Note 10 – Commitments and Contingent Liabilities

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 Company’s 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 monetary 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 – 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:


Level 1	–	Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities.

Level 2	–	Observable inputs other than quoted prices in active markets. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

Level 3	–	Unobservable inputs for which there is little or no market data available.

The carrying values of cash, trade accounts receivable and accounts payable approximate their fair values at each balance sheet date because of the short-term maturities and nature of these balances.

The carrying value of our revolving credit facility borrowings approximates fair value at each balance sheet date 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:


	December 29, 2016		June 30, 2016		December 24, 2015
Carrying value of long-term debt:	$	30,532	$	32,290	$	33,981
Fair value of long-term debt:		31,124		35,479		36,980

The estimated fair value of our 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.

Note 12 – Recent Accounting Pronouncements

The following recent accounting pronouncements have been adopted in the current fiscal year:

In March 2016, the FASB issued ASU No. 2016-09 “Compensation-Stock Compensation (Topic 718)”. This ASU is part of the FASB’s simplification initiative. The areas for simplification in this update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, forfeitures, classification of awards as either equity or liabilities, statutory withholding requirements, and classification on the statement of cash flows. The Company early adopted this guidance during the first quarter of fiscal 2017. We now recognize forfeitures as they occur and excess tax benefits or deficiencies as a component of income tax expense. The cumulative adjustment for the impact of this change in accounting principle was immaterial. Cash flows related to excess tax benefits will prospectively be classified as operating activities in the Consolidated Statements of Cash Flows. Prior periods have not been adjusted. The Company anticipates increased volatility in income tax expense, mainly in the second quarter of each fiscal year, since historically most equity compensation granted in prior periods vests during that quarter.

In April 2015, the FASB issued ASU No. 2015-05 “Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement” . This update provides guidance to customers about whether a cloud computing arrangement includes a software license or service contract. This update became effective for the Company beginning the first quarter of fiscal 2017. The adoption of ASU 2015-05 did not have a material impact to the Consolidated Financial Statements.

In April 2015, the FASB issued ASU No. 2015-03 “Interest-Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs”. This update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 was effective for the Company beginning with the first quarter of fiscal 2017. The adoption of this standard required restatement of our Consolidated Balance Sheets. As a result, Other assets decreased approximately $244 and $280 as of June 30, 2016 and December 24, 2015, respectively, and these amounts were allocated within Current maturities of long term debt and Long term debt. Adoption of ASU 2015-03 did not have an effect on the Company’s results of operations or cash flows.

In February 2015, the FASB issued ASU No. 2015-02 “Consolidation (Topic 810): Amendments to the Consolidation Analysis” . This update focuses on a reporting company’s consolidation evaluation to determine whether it should consolidate certain legal entities. The guidance ASU 2015-02 became effective for the Company beginning with the first quarter of fiscal 2017. The adoption of ASU 2015-02 did not have any impact to the Consolidated Financial Statements.

In August 2014, the FASB issued ASU No. 2014-15 “ Presentation of Financial Statements—Going Concern (Topic 205-40) ”. The guidance requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 was effective for the Company beginning with the quarter ended September 29, 2016. The adoption of this guidance had no impact on our Consolidated Financial Statements.

The following recent accounting pronouncements have not yet been adopted:

In October 2016, the FASB issued ASU No. 2016-17 “Consolidation (Topic 810): Interests Held Through Related Parties That Are Under Common Control” . This update is amending ASU 2015-02 and affects reporting entities that are required to evaluate whether they should consolidate a variable interest entity in certain situations involving entities under common control. ASU 2016-17 will be effective for the Company in fiscal 2018 and will require retrospective application. The Company does not expect ASU 2016-17 to have any impact to the Consolidated Financial Statements.

In August 2016, the FASB issued ASU No. 2016-15 “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” . This update addresses eight specific cash flow issues with the objective of reducing the perceived diversity in practice. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments in this update should be applied using a retrospective transition method to each period presented. The Company does not expect a material impact to our statement of cash flows once ASU 2016-15 is adopted.

In February 2016, the FASB issued ASU No. 2016-02 “Leases (Topic 842)”. The primary goal of this update is to require the lessee to recognize all lease commitments, both operating and finance, by initially recording a lease asset and liability on the balance sheet at the lease commencement date. Additionally, enhanced qualitative and quantitative disclosures will be required. ASU 2016-02 is effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. This new guidance will be effective for the Company beginning in fiscal year 2020. This guidance must be adopted using a modified retrospective approach and early adoption is permitted. The Company is currently assessing the impact of this new guidance on its financial position, results of operations and disclosures and does not expect to early adopt.

In May 2014, the FASB issued ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” and created a new ASC Topic 606, Revenue from Contracts with Customers , and added ASC Subtopic 340-40, Other Assets and Deferred Costs — Contracts with Customers . The guidance in this update supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition , and most industry-specific guidance throughout the industry topics of the codification. Under the new guidance, 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 in exchange for those goods or services. Several other amendments have been subsequently released, each of which provide additional narrow scope clarifications or improvements. In August 2015, the FASB issued ASU No. 2015-14 “Revenue from Contracts with Customers, Deferral of the Effective Date” which deferred the effective date of ASU 2014-09 for one year. Consequently, this new revenue recognition guidance will be effective for the Company beginning in fiscal year 2019, which is our anticipated adoption date. We are currently evaluating the method of adoption.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

The following discussion and analysis should be read in conjunction with the unaudited 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). Fiscal 2016 consisted of fifty-three weeks, with our fourth quarter containing fourteen weeks. Additional information on the comparability of the periods presented is as follows:

•

References herein to fiscal 2017 and fiscal 2016 are to the fiscal year ending June 29, 2017 and the fiscal year ended June 30, 2016, respectively.

•

References herein to the second quarter of fiscal 2017 and fiscal 2016 are to the quarters ended December 29, 2016 and December 24, 2015, respectively.

•

References herein to the first half or first twenty-six weeks of fiscal 2017 and fiscal 2016 are to the twenty-six weeks ended December 29, 2016 and December 24, 2015, 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 subsidiaries, JBSS Ventures, LLC and Sanfilippo (Shanghai) Trading Co. Ltd. Our Company’s Credit Facility and Mortgage Facility, as defined below, are sometimes collectively referred to as “our financing arrangements.”

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 a variety of private brands and under the Fisher, Orchard Valley Harvest, Fisher Nut Exactly, and Sunshine Country brand names. We also market and distribute, and in most cases manufacture or process, a diverse product line of food and snack products, including peanut butter, almond butter, cashew butter, candy and confections, snacks and trail mixes, snack bites, sunflower kernels, dried fruit, corn snacks, sesame sticks and other sesame snack products under private brands and brand names. We distribute our products in the consumer, commercial ingredients and contract packaging distribution channels.

The Company’s long-term objective to drive profitable growth, as identified in our strategic plan (the “Strategic Plan”), includes continuing to grow Fisher and Orchard Valley Harvest into leading nut brands by focusing on consumers demanding quality nuts in the snacking, recipe and produce categories and providing integrated nut solutions to grow non-branded business at existing key customers in each distribution channel. We executed on our Strategic Plan in the second quarter of fiscal 2017 by expanding our distribution and product offerings for our Fisher recipe nuts and Orchard Valley Harvest produce nuts and by expanding distribution of peanuts and trail mixes to contract packaging customers.

We face a number of challenges in the future which include, among others, volatile commodity costs for certain tree nuts and intensified competition for market share from both private brand and name brand nut products. Acquisition costs for almonds and walnuts declined significantly during the second half of fiscal 2016. These declines in acquisition costs have resulted in lower selling prices for products that contain these nuts. Since sales of almonds and walnuts comprise a significant percentage of our total net sales, we anticipate that lower selling prices will continue to result in a significant reduction in net sales in future comparisons until the impact of lower retail prices ultimately drives increased sales volume for these products.

We will continue to focus on seeking profitable business opportunities to further utilize our additional production capacity at our primary manufacturing, processing and distribution facility located in Elgin, Illinois (the “Elgin Site”). We expect to maintain our recent level of promotional, sampling and advertising activity for our Fisher and Orchard Valley Harvest brands. We will continue to face the ongoing challenges specific to our business, such as food safety and regulatory issues and the maintenance and growth of our customer base. See the information referenced in Part II, Item 1A – “Risk Factors” of this report for additional information about our risks, challenges and uncertainties.

QUARTERLY HIGHLIGHTS

Our net sales of $249.4 million for the second quarter of fiscal 2017 decreased 10.6% from our net sales of $279.0 million for the second quarter of fiscal 2016. Net sales for the first twenty-six weeks of fiscal 2017 decreased by $33.1 million, or 6.6%, to $471.7 million from net sales of $504.8 million for the first twenty-six weeks of fiscal 2016.

Sales volume, measured as pounds sold to customers, decreased 2.9 million pounds, or 3.8% in the second quarter of fiscal 2017, compared to the second quarter of fiscal 2016. Sales volume increased 3.0 million pounds, or 2.2%, compared to the first twenty-six weeks of fiscal 2016.

Gross profit decreased by $1.6 million yet our gross profit margin, as a percentage of net sales, increased to 17.4% for the second quarter of fiscal 2017 compared to 16.1% for the second quarter of fiscal 2016. Gross profit increased by $1.6 million year to date and our gross profit margin increased to 16.9% from 15.5% for the first twenty-six weeks of fiscal 2017 compared to the first twenty-six weeks of fiscal 2016.

Total operating expenses for the second quarter of fiscal 2017 decreased by $1.7 million, or 6.6%, compared to the second quarter of fiscal 2016. As a percentage of net sales, total operating expenses in the second quarter of fiscal 2017 increased to 9.5% from 9.1% for the second quarter of fiscal 2016. For the first half of fiscal 2017, total operating expenses decreased by $1.2 million, but increased to 9.2% of net sales compared to 8.9% for the first half of fiscal 2016.

The total value of inventories on hand at the end of the second quarter of fiscal 2017 decreased by $2.6 million, or 1.4%, in comparison to the total value of inventories on hand at the end of the second quarter of fiscal 2016.

We have seen a significant increase in acquisition cost for pecans in the 2016 crop year (which falls into our current 2017 fiscal year), as well as an increase in cashew acquisition costs. Conversely, we have seen acquisition costs for domestic tree nuts such as almonds and walnuts decrease in the 2016 crop year. We have completed procurement of inshell walnuts during the first half of fiscal 2017. During the third quarter, we will determine the final prices to be paid to the walnut growers based upon current market prices and other factors such as crop size and export demand. We have estimated the liability to our walnut growers and our walnut inventory costs using currently available information. Any difference between our estimated liability and the actual final liability will be determined during the third quarter of fiscal 2017 and will be recognized in our financial results at that time.

Our Board of Directors, after considering the financial position of our Company and other factors, declared a special cash dividend on November 1, 2016. The special cash dividend of $2.50 per share on all issued and outstanding shares of Common Stock and Class A Common stock of the Company was paid on December 13, 2016. We paid approximately $28.3 million to our stockholders.

RESULTS OF OPERATIONS

Net Sales

Our net sales decreased 10.6% to $249.4 million in the second quarter of fiscal 2017 compared to net sales of $279.0 million for the second quarter of fiscal 2016. The decrease in net sales was primarily due to a 7.1% decrease in the weighted average sales price per pound which was driven by significantly lower selling prices for almonds and walnuts, due to lower acquisition costs for these commodities. Sales volume, which is defined as pounds sold to customers, decreased approximately 3.8% in the quarterly comparison. The sales volume decrease was driven mainly by a decrease in sales volume in the commercial ingredients distribution channel.

For the first twenty-six weeks of fiscal 2017 our net sales were $471.7 million, a decrease of $33.1 million, or 6.6%, compared to the same period of fiscal 2016. The decrease in net sales was primarily due to an 8.6% decrease in the weighted average sales price per pound for the same reasons cited above. The decrease in net sales was partially offset by a 2.2% increase in sales volume.

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 type.


	For the Quarter Ended						For the Twenty-six Weeks Ended
Product Type	December 29, 2016			December 24, 2015			December 29, 2016			December 24, 2015
Peanuts		13.9	%		12.2	%		14.2	%		12.9	%
Pecans		22.5			18.4			19.0			14.9
Cashews & Mixed Nuts		23.1			23.4			23.3			23.2
Walnuts		9.6			10.6			9.2			10.4
Almonds		14.1			20.6			16.4			21.7
Trail & Snack Mixes		12.2			10.2			13.0			12.1
Other		4.6			4.6			4.9			4.8

Total		100.0	%		100.0	%		100.0	%		100.0	%

The following table shows a comparison of net sales by distribution channel (dollars in thousands):


	For the Quarter Ended
Distribution Channel	December 29, 2016		December 24, 2015		Change			Percent Change
Consumer ⁽¹⁾	$	168,778	$	178,277	$	(9,499	)		(5.3	)%
Commercial Ingredients		40,325		63,202		(22,877	)		(36.2	)
Contract Packaging		40,272		37,523		2,749			7.3

Total	$	249,375	$	279,002	$	(29,627	)		(10.6	)%

(1)

Sales of branded products, primarily all Fisher brand, were approximately 47% and 42% of total consumer sales during the second quarter of fiscal 2017 and fiscal 2016, respectively.

The following table shows a comparison of net sales by distribution channel (dollars in thousands):


	For the Twenty-six Weeks Ended
Distribution Channel	December 29, 2016		December 24, 2015		Change			Percent Change
Consumer ⁽¹⁾	$	303,945	$	310,544	$	(6,599	)		(2.1	)%
Commercial Ingredients		91,045		124,157		(33,112	)		(26.7	)
Contract Packaging		76,678		70,078		6,600			9.4

Total	$	471,668	$	504,779	$	(33,111	)		(6.6	)%

(1)

Sales of branded products, primarily all Fisher brand, were approximately 43% and 38% of total consumer sales during the first twenty-six weeks of fiscal 2017 and fiscal 2016, respectively.

Net sales in the consumer distribution channel decreased by 5.3% in dollars and increased 2.2% in sales volume in the second quarter of fiscal 2017 compared to the second quarter of fiscal 2016. The sales volume increase was driven by increased sales of certain of our branded products. Sales volume for Fisher recipe nuts increased 14.8% due to distribution gains with new customers, the introduction of larger package sizes for walnuts, and increased promotional activity. A 10.4% increase in combined sales volume of Orchard Valley Harvest and Sunshine Country produce products also contributed to the sales volume increase. The increase in sales volume for our produce brands resulted from a 43.4% increase in sales volume for our Orchard Valley Harvest brand due to new item introductions, which was partially offset by a decline in sales volume for Sunshine Country produce products due to lost distribution. Sales volume for Fisher snack nuts decreased 12.3%, primarily as a result of decreased product display opportunities and lower promotional activity.

In the first twenty-six weeks of fiscal 2017, net sales in the consumer distribution channel decreased by 2.1% in dollars but increased 7.5% in sales volume, compared to the same period of fiscal 2016. Sales volume for Fisher recipe nuts increased 24.1% due to the reasons noted in the quarterly comparison. An increase in sales volume of 64.9% related to our branded produce products was driven by factors consistent with the quarterly comparison.

Net sales in the commercial ingredients distribution channel decreased by 36.2% in dollars and 29.1% in sales volume in the second quarter of fiscal 2017 compared to the second quarter of fiscal 2016. In the first twenty-six weeks of fiscal 2017, net sales in the commercial ingredients distribution channel decreased by 26.7% in dollars and 15.7% in sales volume compared to the same period of fiscal 2016. The sales volume decrease for both the quarterly and twenty-six week period was primarily due to lower sales of peanuts to other peanut shellers, the loss of an almond butter customer and decreased sales of bulk inshell walnuts to international customers.

Net sales in the contract packaging distribution channel increased by 7.3% in dollars and 13.7% in sales volume in the second quarter of fiscal 2017 compared to the second quarter of fiscal 2016. In the first twenty-six weeks of fiscal 2017, net sales in the contract packaging distribution channel increased by 9.4% in dollars and 10.4% in sales volume compared to the first twenty-six weeks of fiscal 2016. The sales volume increase for both the quarterly and twenty-six week period was primarily due to increased sales of trail mixes and peanuts to existing customers.

Gross Profit

Gross profit decreased by $1.6 million, or 3.6%, to $43.4 million for the second quarter of fiscal 2017 compared to the second quarter of fiscal 2016. Our gross profit margin, as a percentage of net sales, increased to 17.4% for the second quarter of fiscal 2017 compared to 16.1% for the second quarter of fiscal 2016. The decrease in gross profit was mainly attributable to reduced sales volume as discussed above. The increase in gross profit margin was primarily a result of lower acquisition costs for almonds, which was partially offset by higher commodity acquisition costs for pecans and cashews.

Gross profit increased by $1.6 million, or 2.1%, to $79.9 million for the first twenty-six weeks of fiscal 2017 compared to the first twenty-six weeks of fiscal 2016. Our gross profit margin increased to 16.9% for the first twenty-six weeks of fiscal 2017 compared to 15.5% for the first twenty-six weeks of fiscal 2016. The increase in gross profit and gross profit margin was primarily due to lower commodity acquisition costs for almonds and increased sales volume.

Operating Expenses

Total operating expenses for the second quarter of fiscal 2017 decreased by $1.7 million to $23.6 million. Operating expenses for the second quarter of fiscal 2017 increased to 9.5% of net sales from 9.1% of net sales for the second quarter of fiscal 2016 as a result of a lower sales base.

Selling expenses for the second quarter of fiscal 2017 were $15.4 million, a decrease of $1.0 million, or 6.1%, from the second quarter of fiscal 2016. The decrease was driven primarily by a $0.6 million decrease in advertising expenses and a $0.5 million decrease in compensation related expenses, partially offset by a $0.3 million increase in shipping expense due to an increase in delivered sales pounds.

Administrative expenses for the second quarter of fiscal 2017 were $8.3 million, a decrease of $0.7 million, or 7.5%, from the second quarter of fiscal 2016. The decrease was driven primarily by a $0.6 million decrease in compensation related expenses.

Total operating expenses for the first twenty-six weeks of fiscal 2017 decreased by $1.2 million, or 2.7%, to $43.6 million. Operating expenses increased to 9.2% of net sales for the first half of fiscal 2017 compared to 8.9% of net sales for the first half of fiscal 2016 as a result of a lower sales base.

Selling expenses for the first twenty-six weeks of fiscal 2017 were $26.6 million, a decrease of $1.1 million, or 4.0%, from the amount recorded for the first twenty-six weeks of fiscal 2016. The decrease was driven primarily by a $1.1 million decrease in sampling and advertising expense, a $0.8 million decrease in compensation related expenses, and a $0.5 million decrease in sales commissions expense. Partially offsetting these decreases was a $1.1 million increase in shipping expense due to an increase in delivered sales pounds.

Administrative expenses for the first twenty-six weeks of fiscal 2017 were $16.9 million, a decrease of $0.1 million, or 0.6%, compared to the same period of fiscal 2016.

Income from Operations

Due to the factors discussed above, income from operations was $19.7 million, or 7.9% of net sales, for the second quarter of fiscal 2017 compared to $19.7 million, or 7.1% of net sales, for the second quarter of fiscal 2016.

Due to the factors discussed above, income from operations increased to $36.3 million, or 7.7% of net sales, for the first twenty-six weeks of fiscal 2017 from $33.4 million, or 6.6% of net sales, for the first twenty-six weeks of fiscal 2016.

Interest Expense

Interest expense was $0.6 million for the second quarter of fiscal 2017 compared to $0.8 million in the second quarter of fiscal 2016. Interest expense decreased 28.4% to $1.2 million for the first twenty-six weeks of fiscal 2017 compared to the same period of fiscal 2016. The decrease in interest expense for both the quarterly and twenty-six week comparison was due primarily to lower debt levels.

Rental and Miscellaneous Expense, Net

Net rental and miscellaneous expense was $0.3 million for both the second quarter of fiscal 2017 and the second quarter of fiscal 2016. Net rental and miscellaneous expense was $0.7 million for the first twenty-six weeks of fiscal 2017 compared to $0.9 million for the first twenty-six weeks of fiscal 2016.

Income Tax Expense

Income tax expense was $6.0 million, or 31.6% of income before income taxes (the “Effective Tax Rate”), for the second quarter of fiscal 2017 compared to $6.5 million, or 35.0% of income before income taxes, for the second quarter of fiscal 2016. For the first twenty-six weeks of fiscal 2017, income tax expense was $11.3 million, or 32.9% of income before income taxes, compared to $10.8 million, or 35.0% of income before income taxes, for the comparable period last year. The effective tax rate for the quarterly and twenty-six week comparison was favorably impacted approximately 3.5% and 2.1%, respectively, by excess tax benefits that prior to the adoption of ASU 2016-09 were recorded in Capital in excess of par value on the Consolidated Balance Sheets.

Net Income

Net income was $12.9 million, or $1.14 per common share basic and $1.13 per common share diluted, for the second quarter of fiscal 2017, compared to $12.1 million, or $1.07 per common share (basic and diluted), for the second quarter of fiscal 2016.

Net income was $23.1 million, or $2.04 per common share basic and $2.03 per share diluted, for the first twenty-six weeks of fiscal 2017, compared to net income of $20.0 million, or $1.79 per common share basic and $1.77 per share diluted, for the first twenty-six weeks of fiscal 2016.

LIQUIDITY AND CAPITAL RESOURCES

General

The primary uses of cash are to fund our current operations, fulfill contractual obligations, pursue our Strategic Plan and repay indebtedness. Also, various uncertainties could result in additional uses of cash. The primary sources of cash are results of operations and availability under our Credit Agreement, dated February 7, 2008 and subsequently amended most recently in July 2016 (as amended, the “Credit Facility”), that provides a revolving loan commitment and letter of credit subfacility. 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 (especially our Fisher and Orchard Valley Harvest brands), reinvest in the Company through capital expenditures, develop new products, pay a special cash dividend the past five years, consummate business acquisitions and explore other growth strategies outlined in our Strategic 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 fiscal 2017 and 2016, respectively (dollars in thousands):


	December 29, 2016			December 24, 2015			$ Change
Operating activities	$	62,430		$	81,871		$	(19,441	)
Investing activities		(6,624	)		(10,390	)		3,766
Financing activities		(55,995	)		(70,401	)		14,406

Net (decrease) increase in cash	$	(189	)	$	1,080		$	(1,269	)

Operating Activities Net cash provided by operating activities was $62.4 million for the first twenty-six weeks of fiscal 2017 compared to $81.9 million for the comparative period of fiscal 2016. This decrease in cash was due primarily to a $26.1 million increase in inventories during the first half of fiscal 2017 compared to a $12.7 million decrease in inventories during the same six-month period last year.

Total inventories were $182.7 million at December 29, 2016, an increase of $26.1 million, or 16.7%, from the inventory balance at June 30, 2016, and a decrease of $2.6 million, or 1.4%, from the inventory balance at December 24, 2015. The increase at December 29, 2016 compared to June 30, 2016 was primarily due to larger quantities of pecans and walnuts on hand and higher acquisition costs for those commodities. The decrease in inventories at December 29, 2016 compared to December 24, 2015 was primarily driven by lower costs of finished goods due to lower acquisition costs for walnuts and almonds.

Raw nut and dried fruit input stocks, some of which are classified as work in process, increased by 0.8 million pounds, or 1.1%, at December 29, 2016 compared to December 24, 2015. The weighted average cost per pound of raw nut input stocks on hand at the end of the second quarter of fiscal 2017 increased 4.5% compared to the end of the second quarter of fiscal 2016 primarily due to larger quantities of pecans at higher acquisition costs than the prior year.

Accounts payable were $90.8 million at December 29, 2016, an increase of $47.1 million, or 107.7%, from the balance at June 30, 2016, and an increase of $7.5 million, or 9.0%, from the balance at December 24, 2015. The increase in accounts payable from June 30, 2016 to December 29, 2016 is due primarily to the receipt of the new walnut and pecan crops. The increase in accounts payable at December 29, 2016 compared to December 24, 2015 is mainly due to increased amounts due for larger quantities of pecan purchases at a higher acquisition cost than the comparative period.

Investing Activities Cash used in investing activities, primarily all for capital expenditures, was $6.6 million during the first twenty-six weeks of fiscal 2017 compared to $10.4 million for the same period last year. We expect total capital expenditures for new equipment, facility upgrades, and food safety enhancements for fiscal 2017 to be approximately $13.5 million. 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 planned capital expenditures.

Financing Cash used by financing activities was $56.0 million during the first twenty-six weeks of fiscal 2017 compared to $70.4 million for the same period last year. Net short term borrowings under our Credit Facility were $0.3 million during the first half of fiscal 2017 compared to net repayments of $47.2 million during the first half of fiscal 2016. The decrease in payments during the first half of fiscal 2017 was due to lower acquisition costs for walnuts and almonds, as well as the receipt of a significant quantity of pecans close to the current quarter-end. Partially offsetting that net increase in cash, we paid $56.5 million of dividends in the first half of fiscal 2017 compared to $22.5 million during the same period last year.

Real Estate Matters

In August 2008, we completed the consolidation of our Chicago-based facilities into the 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 69% of the office building is currently vacant and approximately 75% of the office building has been built-out. There can be no assurance that we will be able to lease the unoccupied space and further capital expenditures may be necessary to lease the remaining space.

Financing Arrangements

On February 7, 2008, we entered into the Credit Facility 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 (the “Mortgage Lender”) providing us with two term loans, one in the amount of $36.0 million (“Tranche A”) and the other in the amount of $9.0 million (“Tranche B”), for an aggregate amount of $45.0 million (the “Mortgage Facility”).

The Credit Facility, as most recently amended in July 2016, is secured by substantially all of our assets other than machinery and equipment, real property, and fixtures and matures on July 7, 2021. The Mortgage Facility is secured by mortgages on essentially all of our owned real property located in Elgin, Illinois, Gustine, California and Garysburg, North Carolina (the “Encumbered Properties”).

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 upon the London interbank offered rate (“LIBOR”) plus an applicable margin based upon the borrowing base calculation, ranging from 1.25% to 1.75%.

At December 29, 2016, the weighted average interest rate for the Credit Facility was 3.15%. 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 (including a default under the Mortgage Facility). As of December 29, 2016, 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 29, 2016, we had $101.4 million of available credit under the Credit Facility. If this entire amount were borrowed at December 29, 2016, we would still be in compliance with all restrictive covenants under the Credit Facility.

Mortgage Facility

We are subject to interest rate resets for each of Tranche A and Tranche B. Specifically, on March 1, 2018 (the “Tranche A Reset Date” and the “Tranche B reset Date”) and every two years thereafter, the Mortgage Lender may reset the interest rates for each of Tranche A and Tranche B, respectively, in its sole and absolute discretion. If the reset interest rate for Tranche A is unacceptable to us and we (i) do not have sufficient funds to repay the amount due with respect to Tranche A on the Tranche A Reset Date, or (ii) are unable to refinance the amount due with respect to Tranche A on the Tranche A Reset Date, on terms more favorable than the reset interest rate, then our interest expense would increase.

The Mortgage Facility matures on March 1, 2023. Tranche A under the Mortgage Facility accrues interest at a fixed interest rate of 7.63% per annum, payable monthly. As mentioned above, such interest rate may be reset by the Mortgage Lender on the Tranche A Reset Date. Monthly principal payments in the amount of $0.2 million commenced on June 1, 2008. Tranche B under the Mortgage Facility accrues interest, as reset on March 1, 2016, at a floating rate of the greater of (i) one month LIBOR plus 3.50% per annum or (ii) 4.25%, payable monthly (the “Floating Rate”). The margin on such Floating Rate may be reset by the Mortgage Lender on each Tranche B Reset Date; provided, however, that the Mortgage Lender may also change the underlying index on each Tranche B Reset Date occurring on or after March 1, 2018. Monthly principal payments in the amount of $0.1 million commenced on June 1, 2008. We do not currently anticipate that any change in the Floating Rate or the underlying index will have a material adverse effect upon our business, financial condition or results of operations.

The terms of the Mortgage Facility contain covenants that require us to maintain a specified net worth of $110.0 million and maintain the Encumbered Properties. The Mortgage Lender is entitled to require immediate repayment of our obligations under the Mortgage Facility in the event we default in the payments required under the Mortgage Facility, non-compliance with the covenants or upon the occurrence of certain other defaults by us under the Mortgage Facility. As of December 29, 2016, we were in compliance with all covenants under the Mortgage 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. 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 December 29, 2016, $11.3 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 30, 2016.

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.

FORWARD LOOKING STATEMENTS

The statements contained in this report that are not historical (including statements concerning our expectations regarding market risk) are “forward looking statements.” These forward-looking statements may be generally identified by the use of forward-looking words and phrases such as “will”, “anticipates”, “intends”, “may”, “believes”, “should” and “expects” and are based on our current expectations or beliefs concerning future events and involve risks and uncertainties. We caution that such statements are qualified by important factors, including the factors referred to in Part II, Item 1A – “Risk Factors”, and other factors, risks and uncertainties that are beyond our control. Consequently, our actual results could differ materially. 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. Among the factors that could cause results to differ materially from current expectations are: (i) the risks associated with our vertically integrated model with respect to pecans, peanuts and walnuts; (ii) sales activity for our products, such as a decline in sales to one or more key customers, a decline in sales of private brand products or changing consumer preferences; (iii) changes in the availability and costs of raw materials and the impact of fixed price commitments with customers; (iv) the ability to pass on price increases to customers if commodity costs rise and the potential for a negative impact on demand for, and sales of, our products from price increases; (v) the ability to measure and estimate bulk inventory and fluctuations in the value and quantity of our nut inventories due to fluctuations in the market prices of nuts and bulk inventory estimation adjustments, respectively, (vi) our ability to appropriately respond to, or lessen the negative impact of, competitive and pricing pressures; (vii) losses associated with product recalls, product contamination, food labeling or other food safety issues, or the potential for lost sales or product liability if customers lose confidence in the safety of our products or in nuts or nut products in general, or are harmed as a result of using our products; (viii) our ability to retain key personnel; (ix) the effect of the actions and decisions of the group that has the majority of the voting power with regard to our outstanding common equity (which may make a takeover or change in control more difficult), including the effect of any agreements pursuant to which such group has pledged a substantial amount of its securities of the Company; (x) the potential negative impact of government regulations and laws and regulations pertaining to food safety, such as the Food Safety Modernization Act; (xi) uncertainty in economic conditions, including the potential for economic downturn; (xii) the timing and occurrence (or nonoccurrence) of other transactions and events which may be subject to circumstances beyond our control; (xiii) the adverse effect of labor unrest or disputes, litigation and/or legal settlements, including potential unfavorable outcomes exceeding any amounts accrued; (xiv) losses due to significant disruptions at any of our production or processing facilities; (xv) the inability to implement our Strategic Plan or realize efficiency measures including controlling medical and personnel costs; (xvi) technology disruptions or failures; (xvii) the inability to protect our intellectual property or avoid intellectual property disputes; (xviii) our ability to manage successfully the price gap between our private brand products and those of our branded competitors; and (xix) potential increased industry-specific regulation pending the U.S. Food and Drug Administration assessment of the risk of Salmonella contamination associated with tree nuts.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in our assessment of our sensitivity to market risk since our presentation set forth in Part I – Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2016.

Item 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of December 29, 2016. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 29, 2016, the Company’s disclosure controls and procedures were effective.

In connection with the evaluation by our management, including our Chief Executive Officer and Chief Financial Officer, there were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended December 29, 2016 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of legal proceedings, see Note 10 – “Commitments and Contingent Liabilities” in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors

In addition to the other information set forth in this report on Form 10-Q, you should also consider the factors, risks and uncertainties which could materially affect our Company’s business, financial condition or future results as discussed in Part I, Item 1A – “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2016. There were no significant changes to the risk factors identified on the Form 10-K for the fiscal year ended June 30, 2016 during the second quarter of fiscal 2017.

See Part I, Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in this Form 10-Q, and see Part II, Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016.

Item 6. Exhibits

The exhibits filed herewith are listed in the exhibit index that follows the signature page and immediately precedes the exhibits filed.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on February 1, 2017.


JOHN B. SANFILIPPO & SON, INC.

By		/ S / M ICHAEL J. V ALENTINE
		Michael J. Valentine
		Chief Financial Officer, Group President and Secretary

EXHIBIT INDEX

(Pursuant to Item 601 of Regulation S-K)


No.	Description	Location

3.1	Restated Certificate of Incorporation of the Company	Exhibit 3.1 to the Form 10-Q for the quarter ended March 24, 2005

3.2	Amended and Restated Bylaws of the Company	Exhibit 3.2 to the Form 10-K for the fiscal year ended June 25, 2015

*10.1	1998 Equity Incentive Plan	Exhibit 10 to the Form 10-Q for the quarter ended September 24, 1998

*10.2	First Amendment to the 1998 Equity Incentive Plan	Exhibit 10.35 to the Form 10-Q for the quarter ended December 28, 2000

*10.3	Form of Option Grant Agreement under the 1998 Equity Incentive Plan	Exhibit 10.57 to the Form 10-K for the fiscal year ended June 30, 2005

*10.4	Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number Two among Michael J. Valentine, as trustee of the Valentine Life Insurance Trust, Mathias Valentine, Mary Valentine and the Company, dated December 31, 2003	Exhibit 10.35 to the Form 10-Q for the quarter ended December 25, 2003

*10.5	Amendment, dated February 12, 2004, to Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number Two among Michael J. Valentine, as trustee of the Valentine Life Insurance Trust, Mathias Valentine, Mary Valentine and the Company, dated December 31, 2003	Exhibit 10.47 to the Form 10-Q for the quarter ended March 25, 2004

*10.6	Restated Supplemental Retirement Plan	Exhibit 10.16 to the Form 10-K for the fiscal year ended June 28, 2007

*10.7	2008 Equity Incentive Plan, as amended	Exhibit 10.24 to the Form 10-K for the fiscal year ended June 28, 2012

*10.8	Form of Employee Restricted Stock Unit Award Agreement under 2008 Equity Incentive Plan	Exhibit 10.1 to the Form 8-K filed on November 12, 2009

*10.9	Form of Non-Employee Director Restricted Stock Unit Award Agreement under 2008 Equity Incentive Plan	Exhibit 10.1 to the Form 8-K filed on November 8, 2010

*10.10	Form of Indemnification Agreement	Exhibit 10.01 to the Form 8-K filed on May 5, 2009

*10.11	2014 Omnibus Incentive Plan	Exhibit 4.1 to the Registration Statement on Form S-8 filed on October 28, 2014 (File No. 333-199637)

*10.12	Amendment No. 1 to the 2014 Omnibus Incentive Plan	Exhibit 10.12 to the Form 10-K for the year ended June 30, 2016

*10.13	Form of Non-Employee Director Restricted Stock Unit Award Agreement (non-deferral) under 2014 Omnibus Plan (fiscal 2015 awards cycle)	Exhibit 10.35 to the Form 10-Q for the quarter ended September 25, 2014

*10.14	Form of Non-Employee Director Restricted Stock Unit Award Agreement (deferral) under 2014 Omnibus Plan (fiscal 2015 awards cycle)	Exhibit 10.36 to the Form 10-Q for the quarter ended September 25, 2014

*10.15	Form of Employee Restricted Stock Unit Award Agreement under 2014 Omnibus Plan (fiscal 2015 awards cycle)	Exhibit 10.37 to the Form 10-Q for the quarter ended September 25, 2014

*10.16	Form of Non-Employee Director Restricted Stock Unit Award Agreement (non-deferral) under 2014 Omnibus Plan (fiscal 2016 and 2017 awards cycle)	Exhibit 10.38 to the Form 10-Q for the quarter ended December 24, 2015


No.	Description	Location

*10.17	Form of Non-Employee Director Restricted Stock Unit Award Agreement (deferral) under 2014 Omnibus Plan (fiscal 2016 and 2017 awards cycle)	Exhibit 10.39 to the Form 10-Q for the quarter ended December 24, 2015

*10.18	Form of Employee Restricted Stock Unit Award Agreement under 2014 Omnibus Plan (fiscal 2016 awards cycle)	Exhibit 10.40 to the Form 10-Q for the quarter ended December 24, 2015

*10.19	Form of Employee Restricted Stock Unit Award Agreement under 2014 Omnibus Plan (fiscal 2017 awards cycle)	Filed herewith

*10.20	Retirement Agreement and General Release with Walter “Bobby” Tankersley, effective August 25, 2016	Exhibit 10.19 to the Form 10-K for the year ended June 30, 2016

*10.21	Amended and Restated Sanfilippo Value Added Plan, dated August 20, 2015	Exhibit 10.11 to the Form 10-K for the year ended June 25, 2015

10.22	Credit Agreement, dated as of February 7, 2008, by and among the Company, the financial institutions named therein as lenders, Wells Fargo Foothill, LLC (“WFF”), as the arranger and administrative agent for the lenders, and Wachovia Capital Finance Corporation (Central), in its capacity as documentation agent	Exhibit 10.1 to the Form 8-K filed on February 8, 2008

10.23	Security Agreement, dated as of February 7, 2008, by the Company in favor of WFF, as administrative agent for the lenders	Exhibit 10.2 to the Form 8-K filed on February 8, 2008

10.24	Loan Agreement, dated as of February 7, 2008, by and between the Company and Transamerica Financial Life Insurance Company (“TFLIC”)	Exhibit 10.3 to the Form 8-K filed on February 8, 2008

**10.25	First Amendment to Credit Agreement, dated as of March 8, 2010, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and administrative agent and Burdale Financial Limited, as a lender	Exhibit 10.1 to the Form 8-K filed on March 12, 2010

10.26	Second Amendment to Credit Agreement, dated as of July 15, 2011, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender	Exhibit 10.1 to the Form 8-K filed on July 18, 2011

10.27	Third Amendment to Credit Agreement, dated as of October 31, 2011, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender	Exhibit 10.34 to the Form 10-Q for the quarter ended September 29, 2011


10.28	Consent and Fourth Amendment to Credit Agreement, dated as of January 22, 2013, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender	Exhibit 99.1 to the Form 8-K filed on February 4, 2013

10.29	Consent and Fifth Amendment to Credit Agreement, dated as of December 16, 2013, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, for itself and as agent/nominee for Southwest Georgia Farm Credit, FLCA, as a lender	Exhibit 99.1 to the Form 8-K filed on December 17, 2013

10.30	Sixth Amendment to Credit Agreement, dated as of September 30, 2014, by and among the Company, Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and administrative agent, and Southwest Georgia Farm Credit, ACA, as lender.	Exhibit 10.1 to the Form 8-K filed on October 3, 2014

10.31	Seventh Amendment to Credit Agreement, dated as of July 7, 2016, by and among John B. Sanfilippo & Son, Inc., Wells Fargo Capital Finance, LLC (f/k/a WFF), as a lender and the administrative agent, and Southwest Georgia Farm Credit, ACA, as a lender.	Exhibit 99.2 to the Form 8-K filed on July 7, 2016

10.32	First Amendment to Security Agreement, dated as of September 30, 2014, by the Company in favor of Wells Fargo Capital Finance, LLC (f/k/a WFF), as administrative agent for the lenders	Exhibit 10.2 to the Form 8-K filed on October 3, 2014

31.1	Certification of Jeffrey T. Sanfilippo pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended	Filed herewith

31.2	Certification of Michael J. Valentine pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended	Filed herewith

32.1	Certification of Jeffrey T. Sanfilippo pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended	Filed herewith

32.2	Certification of Michael J. Valentine pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended	Filed herewith

101.INS	XBRL Instance Document	Filed herewith

101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith

101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith

* Indicates a management contract or compensatory plan or arrangement.

** Confidential treatment has been requested for portions of this exhibit. These portions have been omitted and submitted separately to the Securities and Exchange Commission.

Exhibit 10.19

[Employee RSU]

John B. Sanfilippo & Son, Inc. 2014 Omnibus Incentive Plan

Restricted Stock Unit Award Agreement

[Insert Date]

[Insert Name of Participant]

In accordance with the terms of the John B. Sanfilippo & Son, Inc. 2014 Omnibus Incentive Plan (the “Plan”), pursuant to action of the Compensation Committee (the “Committee”) of the Board of John B. Sanfilippo & Son, Inc. (the “Company”), the Company hereby grants to you (the “Recipient”), subject to the terms and conditions set forth in this Restricted Stock Unit Award Agreement (including Annex A hereto), Restricted Stock Units (“RSUs”), as set forth below.

Unless otherwise specified, capitalized terms used herein or in Annex A shall have the meanings specified in the Plan. The terms and conditions of the Plan are incorporated by reference and govern except to the extent that, when permitted by the Plan, this RSU Award Agreement provides otherwise.

Each RSU corresponds to one Share and is an unfunded and unsecured promise by the Company to deliver such Share on a future date as set forth herein. Until such delivery, you only have the rights of a general unsecured creditor of the Company and not as a stockholder with respect to the Shares underlying your RSUs.


Number of RSUs Granted:		[#]

Date of Grant:		[xx/xx/xxxx]

Period of Restriction:		Date of Grant through [xx/xx/xxxx]

Share Payment Date:		Each RSU will convert to the right to receive one Share on the day following the date the Period of Restriction ends (including due to accelerated vesting as contemplated in Annex A) with respect to that RSU, with the Share being delivered to the Recipient as soon as administratively possible thereafter (but no later than 60 days thereafter), or such other date(s) as are specified by the Recipient in a valid deferral election filed with the Company or as may be required pursuant to Section 3 of Annex A.

[Employee RSU]


Dividend Equivalents:		If a valid deferral election is made by the Recipient, then during the period from the first day after the Period of Restriction through the Share Payment Date, each RSU shall include a right to Dividend Equivalents, if any, in respect of such period and for which the applicable record date occurs during such period. Such Dividend Equivalents shall be paid to the Recipient on a current basis (less applicable withholding). “Dividend Equivalents” are a right to receive an amount equal to the dividends or property distributions that would have been made in respect of each Share underlying an RSU (other than dividends or distributions of securities to the extent covered in Section 4.4 of the Plan).

RSUs are subject to forfeiture as provided herein (including Annex A) and the Plan.

Further terms and conditions of your Award of RSUs are set forth in Annex A, which is an integral part of this RSU Award Agreement.

By accepting this Award, you hereby acknowledge the receipt of a copy of this RSU Award Agreement including Annex A, and a copy of the Plan and agree to be bound by all terms and provisions hereof (including Annex A) and thereto.

Tom Fordonski

Senior Vice President, Human Resources

John B. Sanfilippo & Son, Inc.

Recipient:

Print Name:

[Employee RSU]

Annex A

Restricted Stock Unit Award Agreement

Further Terms and Conditions of Award. It is understood and agreed that the Award of RSUs evidenced by the RSU Award Agreement to which this is annexed is subject to the following additional terms and conditions:

Termination of Service. Upon the Recipient’s Termination of Service, all unvested RSUs (RSUs for which the Period of Restriction has not lapsed) shall be treated as follows:

Death or Disability – If the Recipient’s Termination of Service is on account of death or Disability, then all of the unvested RSUs shall immediately become nonforfeitable and the restrictions with respect to such RSUs shall lapse as of the date of death or the date the Committee determines that the Disability occurred, as applicable.

Normal Retirement with Proper Advance Notice – Notwithstanding Section 13(b) of the Plan, if the Recipient’s Termination of Service is on account of Normal Retirement (as defined below) and the Recipient provided at least 365 days advance written notice of the date of such Normal Retirement to the Senior Vice President, Human Resources, then all unvested RSUs shall immediately become nonforfeitable and the restrictions with respect to such RSUs shall lapse as of the date of such Termination of Service. For the purposes of this RSU Award Agreement, “Normal Retirement” shall mean the Recipient’s Termination of Service, other than death or Disability, after the date the Recipient has (i) been continuously employed by the Company or any Subsidiary of the Company for at least seven (7) years and (ii) achieved the age of at least 62.

Early Retirement with Proper Advance Notice – Notwithstanding Section 13(b) of the Plan, if the Recipient’s Termination of Service is on account of Early Retirement (as defined below) and the Recipient provided at least 365 days advanced written notice of the date of such Early Retirement to the Senior Vice President, Human Resources, then the restrictions with respect to such RSUs shall lapse as of the date of such Termination of Service with respect to the number of RSUs subject to this RSU Award Agreement multiplied by a fraction (which shall not be greater than 1), the numerator of which is the number of whole months that have elapsed from the Date of Grant to the date of Termination of Service and the denominator of which is 36. The remainder of the RSUs shall be forfeited and canceled as of the date of the Participant’s Termination of Service. For the purposes of this RSU Award Agreement, “Early Retirement” shall mean the Recipient’s Termination of Service, other than death or Disability, after the date the Recipient has (i) been continuously employed by the Company or any Subsidiary of the Company for at least ten (10) years and (ii) achieved the age of at least 55.

[Employee RSU]

Normal Retirement or Early Retirement without Proper Advance Notice – If the Recipient’s Termination of Service is on account of Normal Retirement or Early Retirement and the Recipient failed to provide at least 365 days advance written notice of the date of such Normal Retirement or Early Retirement to the Senior Vice President, Human Resources, then all unvested RSUs shall be forfeited as of the end of the day of such Termination of Service unless the Committee, in its sole discretion, determines that all or some portion of such unvested RSUs shall become nonforfeitable and the restrictions with respect to such RSUs shall lapse as of the date of Normal Retirement or Early Retirement.

Any Other Reason – If the Recipient’s Termination of Service is on account of any other reason, then all unvested RSUs shall be forfeited as of the end of the day of such Termination of Service.

Share Payment Date Deferral. If the Recipient makes a valid deferral election with respect to the RSUs in accordance with the requirements of Code Section 409A and as prescribed by the Committee, then the Shares underlying the RSUs for which restrictions have lapsed shall be paid out in accordance with such deferral election.

Six-Month Delay Due to Code Section 409A. Notwithstanding anything else herein to the contrary, if Recipient is a “specified employee” for purposes of Code Section 409A at the time of the Recipient’s Termination of Service and if an exception under Code Section 409A does not apply, any payment to the Recipient under this RSU Award Agreement that is payable on account of a Termination of Service (other than death or Disability) shall be delayed until six (6) months after the Recipient’s Termination of Service (other than death or Disability) as required by Code Section 409A. Normal and Early Retirements with proper notice may be subject to this six-month delay.

Fractional Shares. If any calculation of Shares to be awarded or to be forfeited or to be released from restrictions or limitations would result in a fraction, any fraction of 0.5 or greater will be rounded to one, and any fraction of less than 0.5 will be rounded to zero.

Tax Withholding. With respect to the minimum statutory tax withholding required upon the date the Period of Restriction ends, the Company may satisfy such withholding requirements by withholding from other wages, compensation and amounts otherwise owed to the Recipient or, at the written election of the Participant, by withholding Shares upon the date that the restrictions lapse to such RSUs, in whole or in part, but only with regard to that portion of the RSUs for which the Period of Restriction has ended.

Ratification of Actions. By accepting the RSU Award or other benefit under the Plan, the Recipient and each person claiming under or through him shall be conclusively deemed to have indicated the Recipient’s acceptance and ratification of, and consent to, any action taken under the Plan or the RSU Award by the Company, the Board or the Committee.

Notices. Any notice hereunder to the Company shall be addressed to its Senior Vice President, Human Resources, and any notice hereunder to Recipient shall be addressed to him or her at the address contained in the Company’s records, subject to the right of either party to designate at any time hereafter in writing some other address.

[Employee RSU]

Nontransferability. Recipient may not sell, transfer, assign, pledge or otherwise dispose of the RSUs covered by this RSU Award Agreement, other than by will or by the laws of descent and distribution.

No Employment Rights. This RSU Award Agreement does not provide Recipient with any rights to continued employment with the Company or a Subsidiary. The Company and its Subsidiaries reserve the right to terminate Recipient’s employment at any time, with or without cause.

10.

Trade Secrets and Confidential Information. Recipient shall not at any time directly or indirectly, either during or after the term of employment with the Company, divulge any Trade Secrets (as defined below) or any Confidential Information (as defined below) to any other person or business entity, nor use or permit the use of any Trade Secrets or any Confidential Information, other than on behalf of the Company and pursuant to the discharge of the responsibilities of Recipient as an employee. Upon the cessation of Recipient’s employment with the Company under any circumstances, Recipient shall promptly tender to the Company all documents, lists, records, cellular devices, computers, computer stored media and data (with accompanying passwords) and any other items, and reproductions thereof, of any kind in Recipient’s possession or control containing Trade Secrets or Confidential Information. Recipient agrees to carefully guard (a) the Trade Secrets and Confidential Information and (b) similar information owned by others which Recipient knows the Company is obligated by contract or other duty to keep confidential.

Trade Secrets – As used herein, the term “Trade Secrets” shall include any information that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons or business entities who can obtain economic value from its disclosure or use. As used herein, Trade Secrets shall not include information which is known, or shall become known through no fault of the Recipient, to the public or generally known within the industry of businesses comparable to the Company. All Trade Secrets imparted to Recipient by the Company, or otherwise obtained by Recipient, at any time, relating to the Company’s business operations, product data, customer or prospect lists or information, procurement data or practices, customer specification information and related data, pricing and cost data, marketing information, computer programs, business strategies, information regarding products under research and development, recipes, product formulae, manufacturing processes and any other such proprietary and confidential information is revealed and entrusted to Recipient in confidence, solely in connection with and for the purpose of employment on behalf of the Company. Recipient agrees that Trade Secrets are and remain the sole property of the Company.

Confidential Information – As used herein, the term “Confidential Information” shall include Trade Secrets and all other confidential and/or proprietary information that does not rise to the level of Trade Secrets that is imparted, revealed and/or entrusted to Recipient by the Company in confidence. Confidential Information that is not Trade Secrets includes, but is not limited to, information regarding the Company’s operations, procurement processes, product information regarding products under research and development, methods of doing business,

[Employee RSU]

supplier and grower information, and accounting and legal information. As used herein, Confidential Information shall not include any information that is (a) generally known within the industry of businesses comparable to the Company or to the public, other than as a result of the breach of this RSU Award Agreement by Recipient or any breach of confidentiality obligations or other duties by third parties, (b) made legitimately available to Recipient by a third party without breach of any confidentiality obligation or other duty, or (c) required by law or legal process to be disclosed; provided that Recipient shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment. All Confidential Information imparted to Recipient by the Company, or otherwise obtained by Recipient, at any time, is revealed and entrusted to Recipient in confidence, solely in connection with and for the purpose of employment on behalf of the Company. Recipient agrees that Confidential Information is and remains the sole property of the Company.

Notice of Immunity – Pursuant to the Defend Trade Secrets Act of 2016, Recipient understands that: Recipient shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of Trade Secrets that are made in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, in each case, solely for the purpose of reporting or investigating a suspected violation of law. Recipient shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of Trade Secrets that are made in a complaint or other document that is filed in a lawsuit or other proceeding, if such filing is made under seal. Recipient who files a lawsuit for retaliation by the Company for reporting a suspected violation of law may disclose Trade Secrets to the attorney of Recipient and use the Trade Secrets information in the court proceeding if Recipient (a) files any document containing the Trade Secrets under seal, and (b) does not disclose the Trade Secrets, except pursuant to court order.

11.

Non-Solicitation and Non-Disparagement.

Restrictions as to Solicitation of Employees – Recipient agrees that, during his employment with the Company and for a period of 12 months from the cessation of Recipient’s employment with the Company for any reason, including retirement, voluntary resignation, cessation as a result of performance or for or without cause, Recipient shall not solicit, hire or cause to be hired any employees of the Company for employment in any line of business or attempt to induce or encourage any such employee to leave the employ of the Company. Recipient also agrees not to make such solicitations indirectly. Recipient also shall not, directly or indirectly, aid or assist any other person, firm, corporation or other business entity in performing any of the aforesaid acts. This applies to actions Recipient may take in any capacity, including, but not limited to, as proprietor, partner, joint venturer, stockholder, director, officer, trustee, principal, agent, servant, employee, or in any other capacity. It is agreed this restriction is reasonable and necessary to protect the goodwill and confidential information of the Company.

[Employee RSU]

Non-Disparagement – Recipient agrees not to willingly or knowingly make any statement or criticism that would reasonably be expected to cause the Company’s customers, suppliers or other business partners embarrassment, humiliation or otherwise cause or contribute to the Company’s customers, suppliers or other business partners being held in disrepute by the public or by the customers, suppliers, other business partners or employees of the Company, except as required by law. Recipient agrees not to willingly or knowingly make any statement or criticism that would reasonably be expected to cause the Company embarrassment, humiliation or otherwise cause or contribute to the Company being held in disrepute by the public or the customers, suppliers, other business partners or employees of the Company, or otherwise disparage or harm the reputation of the Company. However, nothing in this RSU Award Agreement will be construed to prohibit Recipient from filing a charge with, reporting possible violations to, or participating or cooperating with any governmental agency or entity, including but not limited to the Equal Employment Opportunity Commission, the Department of Justice, the Securities and Exchange Commission, Congress, or any agency Inspector General, or making other disclosures that are protected under the whistleblower, anti-discrimination or antiretaliation provisions of federal, state or local law or regulation; provided, that Recipient may not disclose Company information that is protected by the attorney-client privilege, except as expressly authorized by law; provided further, Recipient does not need the prior authorization of the Company to make any such reports or disclosures, and Recipient is not required to notify the Company that Recipient has made such reports or disclosures.

12.

Cooperation. At any time subsequent to the cessation of Recipient’s employment with the Company for any reason, Recipient agrees to cooperate fully with the Company in the defense, prosecution or conduct of any claims, actions, investigations, or reviews now in existence or which may be initiated in the future against, involving or on behalf of the Company or any Subsidiary which relate to events or occurrences that transpired during Recipient’s employment with the Company (“ Matters ”). Recipient’s cooperation in connection with such Matters will include, but not be limited to, being available for telephone conferences with outside counsel and/or personnel of the Company, being available for interviews, depositions and/or to act as a witness on behalf of the Company, if reasonably requested. The Company will reimburse Recipient for all reasonable out-of-pocket expenses incurred by Recipient in connection with such cooperation with respect to such Matters.

13.

Remedies. Recipient understands and agrees that money damages would not be a sufficient remedy for any breach of this RSU Award Agreement and that if Recipient should breach, or threaten to commit a breach, of any of the provisions of this RSU Award Agreement, the Company is entitled to seek equitable relief, including injunction and specific performance, as a remedy of such breach, in each case without any requirement to post a bond or other surety. Such remedies shall not be deemed to be the exclusive remedies for a breach of this RSU Award Agreement, but shall be in addition to all other remedies available at law or equity to the Company. The restrictions contained in this RSU Award Agreement do not supersede or reduce any rights that the Company may have pursuant to Federal or State law pertaining to any Trade Secrets or Confidential Information and, in the event that any such law provides greater protections with respect to any Trade Secrets or Confidential Information than the protections contained in this RSU Award Agreement, such greater protections shall apply.

[Employee RSU]

14.

Governing Law and Severability. This RSU Award Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. To the extent not preempted by Federal law, the RSU Award Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of law provisions. The provisions of this RSU Award Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

15.

Definitions. Capitalized terms not otherwise defined in the RSU Award Agreement or in this Annex A attached thereto shall have the meanings given them in the Plan.

16.

Code Section 409A. It is intended that this RSU Award Agreement will either comply with or be exempt from Code Section 409A to the extent applicable, and the Plan and the RSU Award Agreement shall be interpreted and construed on a basis consistent with such intent. The RSU Award Agreement may be amended in any respect deemed necessary (including retroactively) by the Committee in order to preserve compliance with (or exemption from) Code Section 409A. The preceding shall not be construed as a guarantee of any particular tax effect for any benefits or amounts deferred or paid pursuant to this RSU Award Agreement.

17.

Waiver. The Recipient and every person claiming under or through the Recipient hereby waives to the fullest extent permitted by applicable law any right to a trial by jury with respect to any litigation directly or indirectly arising out of, under, or in connection with the Plan or this RSU Award Agreement issued pursuant to the Plan.

18.

Interpretation. The Committee shall have final authority to interpret and construe the Plan and this RSU Award Agreement and Annex A and to make any and all determinations thereunder, and its decision shall be binding and conclusive upon the Recipient and his/her legal representative in respect of any questions arising under the Plan or this RSU Award Agreement and Annex A.

19.

Securities Laws . The Recipient acknowledges that certain restrictions under state or federal securities laws may apply with respect to the Shares underlying the RSUs granted pursuant to this RSU Award Agreement, even after the Shares have been delivered to the Recipient. Specifically, Recipient acknowledges that, to the extent he or she is an “affiliate” of the Company (as that term is defined by the Securities Act of 1933), the Shares underlying the RSUs granted pursuant to this RSU Award Agreement are subject to certain trading restrictions under applicable securities laws (including particularly the Securities and Exchange Commission’s Rule 144). Recipient hereby agrees to execute such documents and take such actions as the Company may reasonably require with respect to state and federal securities laws and any restrictions on the resale of such shares which may pertain under such laws.

20.

Compensation Recovery . This RSU Award Agreement shall be subject to any compensation recovery policy adopted by the Company, including any policy required to comply with applicable law or listing standards, as such policy may be amended from time

[Employee RSU]

to time in the sole discretion of the Company. As consideration for and by accepting the RSUs, the Recipient agrees that all prior equity awards made by the Company to the Recipient shall become subject to the terms and conditions of the provisions of this Section 16.

21.

Data Collection . The Recipient hereby explicitly and unambiguously consents to the collection, use, holding and transfer, in electronic or other form, of his or her personal data as described in this RSU Award Agreement by the Company for the exclusive purpose of implementing, administering and managing the Recipient’s participation in the Plan. The Recipient understands that the Company may hold certain personal information about the Recipient, including his or her name, home address and telephone number, date of birth, social security number or other identification number, salary, nationality, job title, any Shares held in the Company, details of all options or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Recipient’s favor, for the purpose of implementing, administering and managing the Plan (“ Data ”). Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan. The Recipient may request a list with the names and addresses of any recipients of the Data by contacting the Senior Vice President, Human Resources. The Recipient authorizes any such third parties to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Recipient may elect to deposit any shares acquired upon settlement of the RSUs. Data will be held only as long as is necessary to implement, administer and manage the Recipient’s participation in the Plan. The Recipient may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Senior Vice President, Human Resources. Refusing or withdrawing his or her consent may affect the Recipient’s ability to participate in the Plan. For more information on the consequences of a refusal to consent or withdrawal of consent, the Recipient may contact the Senior Vice President, Human Resources.

Exhibit 31.1

CERTIFICATION

I, Jeffrey T. Sanfilippo, certify that:

1.	I have reviewed this Report on Form 10-Q of John B. Sanfilippo & Son, Inc. for the quarter ended December 29, 2016;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

February 1, 2017

/s/ Jeffrey T. Sanfilippo

Jeffrey T. Sanfilippo

Chairman of the Board and

Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, Michael J. Valentine, certify that:

1.	I have reviewed this Report on Form 10-Q of John B. Sanfilippo & Son, Inc. for the quarter ended December 29, 2016;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

February 1, 2017

/s/ Michael J. Valentine

Michael J. Valentine

Chief Financial Officer, Group

President and Secretary

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of John B. Sanfilippo & Son, Inc. (the “Company”) on Form 10-Q for the quarter ended December 29, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey T. Sanfilippo, Chief Executive Officer and Chairman of the Board, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 1, 2017

/s/ Jeffrey T. Sanfilippo

Jeffrey T. Sanfilippo

Chief Executive Officer and Chairman of

the Board

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of John B. Sanfilippo & Son, Inc. (the “Company”) on Form 10-Q for the quarter ended December 29, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael J. Valentine, Chief Financial Officer, Group President and Secretary, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 1, 2017

/s/ Michael J. Valentine

Michael J. Valentine

Chief Financial Officer, Group President

and Secretary

Large accelerated filer

Accelerated filer

Non-accelerated filer

☐ (Do not check if a smaller reporting company)

Smaller reporting company