SANFILIPPO JOHN B & SON INC, 10-K filed on 21 Aug 19
v3.19.2
Document and Entity Information - USD ($)
12 Months Ended
Jun. 27, 2019
Aug. 15, 2019
Dec. 27, 2018
Document Information [Line Items]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Jun. 27, 2019    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Trading Symbol JBSS    
Entity Registrant Name SANFILIPPO JOHN B & SON INC    
Security Exchange Name NASDAQ    
Entity Interactive Data Current Yes    
Entity Central Index Key 0000880117    
Current Fiscal Year End Date --06-27    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Shell Company false    
Entity Filer Category Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Public Float     $ 481,295,450
Title of 12(b) Security Common Stock    
Entity Address, State or Province IL    
Common Stock, Non-Cumulative Voting Rights of One Vote Per Share [Member]      
Document Information [Line Items]      
Entity Common Stock, Shares Outstanding   8,791,506  
Class A Common Stock [Member]      
Document Information [Line Items]      
Entity Common Stock, Shares Outstanding   2,597,426  
v3.19.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 27, 2019
Jun. 28, 2018
CURRENT ASSETS:    
Cash $ 1,591 $ 1,449
Accounts receivable, less allowance for doubtful accounts of $350 and $270, respectively 60,971 65,426
Inventories 157,024 174,362
Prepaid expenses and other current assets 5,754 6,645
TOTAL CURRENT ASSETS 225,340 247,882
PROPERTY, PLANT AND EQUIPMENT:    
Land 9,285 9,285
Buildings 109,955 108,540
Machinery and equipment 210,962 198,321
Furniture and leasehold improvements 5,128 5,015
Vehicles 673 526
Construction in progress 1,127 2,618
Property, plant and equipment gross 337,130 324,305
Less: Accumulated depreciation 228,778 217,689
Property, plant and equipment net 108,352 106,616
Rental investment property, less accumulated depreciation of $11,212 and $10,431, respectively 17,831 18,462
TOTAL PROPERTY, PLANT AND EQUIPMENT 126,183 125,078
OTHER LONG TERM ASSETS:    
Intangible assets, net 14,626 17,654
Cash surrender value of officers' life insurance and other assets 9,782 10,565
Deferred income taxes 5,723 5,024
Goodwill 9,650 9,650
TOTAL ASSETS 391,304 415,853
CURRENT LIABILITIES:    
Revolving credit facility borrowings 0 31,278
Current maturities of long-term debt, including related party debt of $4,375 and $4,341, respectively and net of unamortized debt issuance costs of $35 and $45, respectively 7,338 7,169
Accounts payable 42,552 60,340
Bank overdraft 901 2,062
Accrued payroll and related benefits 22,101 6,415
Other accrued expenses 11,014 9,929
TOTAL CURRENT LIABILITIES 83,906 117,193
LONG-TERM LIABILITIES:    
Long-term debt, less current maturities, including related party debt of $11,495 and $15,507, respectively and net of unamortized debt issuance costs of $44 and $79, respectively 20,381 27,356
Retirement plan 24,737 21,288
Other 7,725 7,014
TOTAL LONG-TERM LIABILITIES 52,843 55,658
TOTAL LIABILITIES 136,749 172,851
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:    
Capital in excess of par value 122,257 119,952
Retained earnings 137,712 127,320
Accumulated other comprehensive loss (4,325) (3,181)
Treasury stock, at cost; 117,900 shares of Common Stock (1,204) (1,204)
TOTAL STOCKHOLDERS' EQUITY 254,555 243,002
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 391,304 415,853
Class A Common Stock [Member]    
STOCKHOLDERS' EQUITY:    
Common Stock 26 26
TOTAL STOCKHOLDERS' EQUITY 26 26
Common Stock, Non-Cumulative Voting Rights of One Vote Per Share [Member]    
STOCKHOLDERS' EQUITY:    
Common Stock 89 89
TOTAL STOCKHOLDERS' EQUITY $ 89 $ 89
v3.19.2
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Jun. 27, 2019
Jun. 28, 2018
Allowance for doubtful accounts for accounts receivable, current $ 350 $ 270
Accumulated depreciation of rental investment property 11,212 10,431
Current maturities of long-term debt, related party debt 4,375 4,341
Unamortized debt issuance costs, current 35 45
Related party debt, Non-current 11,495 15,507
Unamortized debt issuance costs, noncurrent $ 44 $ 79
Treasury stock, shares 117,900 117,900
Class A Common Stock [Member]    
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 10,000,000 10,000,000
Common stock, shares issued 2,597,426 2,597,426
Common stock, shares outstanding 2,597,426 2,597,426
Common Stock, Non-Cumulative Voting Rights of One Vote Per Share [Member]    
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 17,000,000 17,000,000
Common stock, shares issued 8,909,406 8,865,475
v3.19.2
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
12 Months Ended
Jun. 27, 2019
Jun. 28, 2018
Jun. 29, 2017
Statement of Comprehensive Income [Abstract]      
Net sales $ 876,201 $ 888,931 $ 846,635
Cost of sales 717,931 750,032 704,712
Gross profit 158,270 138,899 141,923
Operating expenses:      
Selling expenses 61,756 52,922 49,392
Administrative expenses 37,990 29,788 32,054
Total operating expenses 99,746 82,710 81,446
Income from operations 58,524 56,189 60,477
Other expense:      
Interest expense including $1,143, $1,103 and $785 to related parties, respectively 3,060 3,463 2,910
Rental and miscellaneous expense, net 1,089 1,406 1,296
Other expense 1,947 1,970 2,133
Total other expense, net 6,096 6,839 6,339
Income before income taxes 52,428 49,350 54,138
Income tax expense 12,962 16,850 18,013
Net income 39,466 32,500 36,125
Other comprehensive (loss) income, net of tax:      
Amortization of prior service cost and actuarial gain included in net periodic pension cost 778 839 820
Net actuarial (loss) gain arising during the period (1,922) 384 1,201
Other comprehensive (loss) income, net of tax (1,144) 1,223 2,021
Comprehensive income $ 38,322 $ 33,723 $ 38,146
Net income per common share-basic $ 3.45 $ 2.86 $ 3.19
Net income per common share-diluted 3.43 2.84 3.17
Cash dividends declared per share $ 2.55 $ 2.50 $ 5.00
Weighted average shares outstanding — basic 11,430,174 11,383,080 11,317,149
Weighted average shares outstanding — diluted 11,501,412 11,449,386 11,403,605
v3.19.2
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Jun. 27, 2019
Jun. 28, 2018
Jun. 29, 2017
Statement of Comprehensive Income [Abstract]      
Interest expense to related parties $ 1,143 $ 1,103 $ 785
v3.19.2
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Capital in Excess of Par Value [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Loss [Member]
Treasury Stock [Member]
Class A Common Stock [Member]
Common Stock, Non-Cumulative Voting Rights of One Vote Per Share [Member]
Balance at Jun. 30, 2016 $ 251,193 $ 115,136 $ 143,573 $ (6,425) $ (1,204) $ 26 $ 87
Balance, Shares at Jun. 30, 2016           2,597,426 8,725,715
Net income 36,125   36,125        
Cash dividends (56,464)   (56,464)        
Pension liability amortization, net of income tax (expense) 820     820      
Pension liability adjustment, net of income tax expense 1,201     1,201      
Equity award exercises, net of shares withheld for employee taxes 63 62         $ 1
Equity award exercises, net of shares withheld for employee taxes, shares             75,926
Stock-based compensation expense 2,504 2,504          
Effect of adopting ASU 2016-09 26 70 (44)        
Balance at Jun. 29, 2017 235,468 117,772 123,190 (4,404) (1,204) $ 26 $ 88
Balance, Shares at Jun. 29, 2017           2,597,426 8,801,641
Net income 32,500   32,500        
Cash dividends (28,370)   (28,370)        
Pension liability amortization, net of income tax (expense) 839     839      
Pension liability adjustment, net of income tax expense 384     384      
Equity award exercises, net of shares withheld for employee taxes (615) (616)         $ 1
Equity award exercises, net of shares withheld for employee taxes, shares             63,834
Stock-based compensation expense 2,796 2,796          
Balance at Jun. 28, 2018 243,002 119,952 127,320 (3,181) (1,204) $ 26 $ 89
Balance, Shares at Jun. 28, 2018           2,597,426 8,865,475
Net income 39,466   39,466        
Cash dividends (29,074)   (29,074)        
Pension liability amortization, net of income tax (expense) 778     778      
Pension liability adjustment, net of income tax expense (1,922)     (1,922)      
Equity award exercises, net of shares withheld for employee taxes (339) (339)          
Equity award exercises, net of shares withheld for employee taxes, shares             43,931
Stock-based compensation expense 2,644 2,644          
Balance at Jun. 27, 2019 $ 254,555 $ 122,257 $ 137,712 $ (4,325) $ (1,204) $ 26 $ 89
Balance, Shares at Jun. 27, 2019           2,597,426 8,909,406
v3.19.2
Consolidated Statements of Stockholders' Equity (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Jun. 27, 2019
Jun. 28, 2018
Jun. 29, 2017
Statement of Stockholders' Equity [Abstract]      
Cash dividends per common share $ 2.55 $ 2.50 $ 5.00
Pension liability amortization income tax expense $ 274 $ 280 $ 502
Pension liability adjustment income tax (benefit) expense $ (675) $ 127 $ 737
v3.19.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Jun. 27, 2019
Jun. 28, 2018
Jun. 29, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $ 39,466 $ 32,500 $ 36,125
Depreciation and amortization 17,045 15,430 15,559
(Gain) Loss on disposition of properties, net (164) 480 71
Deferred income tax (benefit) expense (298) 3,664 (1,744)
Stock-based compensation expense 2,644 2,796 2,504
Change in assets and liabilities, net of Acquisition:      
Accounts receivable, net 4,447 1,751 13,243
Inventories 17,338 10,015 (25,847)
Prepaid expenses and other current assets (470) (1,074) 201
Accounts payable (16,958) 8,876 6,384
Accrued expenses 15,784 (8,598) 1,484
Income taxes receivable/payable 2,348 (2,659) 2,217
Other long-term liabilities 711 501 579
Other long-term assets (404) 375 (266)
Other, net 1,970 2,097 2,158
Net cash provided by operating activities 83,459 66,154 52,668
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of property, plant and equipment (15,075) (13,229) (10,885)
Acquisition of Squirrel Brand L.P.   (21,727)  
Proceeds from insurance recoveries 429    
Other, net 32 (12) 342
Net cash used in investing activities (14,614) (34,968) (10,543)
CASH FLOWS FROM FINANCING ACTIVITIES:      
Net short-term (repayments) borrowings (31,278) 1,822 17,372
Principal payments on long-term debt (6,851) (5,659) (3,482)
(Decrease) increase in bank overdraft (1,161) 1,130 121
Dividends paid (29,074) (28,370) (56,464)
Proceeds from the exercise of stock options   16 63
Taxes paid related to net share settlement of equity awards (339) (631)  
Net cash used in financing activities (68,703) (31,692) (42,390)
NET INCREASE (DECREASE) IN CASH 142 (506) (265)
Cash, beginning of period 1,449 1,955 2,220
Cash, end of period 1,591 1,449 1,955
Interest paid 2,872 3,357 2,763
Income taxes paid, excluding refunds of $16, $40, and $232, respectively $ 10,883 15,846 $ 17,635
Supplemental disclosure of non-cash investing activities:      
Acquisition of Squirrel Brand L.P. through note payable, see Note 6   $ 11,500  
v3.19.2
Consolidated Statements of Cash Flows (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Jun. 27, 2019
Jun. 28, 2018
Jun. 29, 2017
Statement of Cash Flows [Abstract]      
Income taxes paid, refunds $ 16 $ 40 $ 232
v3.19.2
Significant Accounting Policies
12 Months Ended
Jun. 27, 2019
Accounting Policies [Abstract]  
Significant Accounting Policies
NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation and Description of Business
Our consolidated financial statements include the accounts of John B. Sanfilippo & Son, Inc., and our wholly-owned subsidiary, JBSS Ventures, LLC. Our fiscal year ends on the last Thursday of June each year, and typically consists of
fifty-two
weeks (four thirteen-week quarters). The accompanying consolidated financial statements and related footnotes are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
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, Squirrel Brand, Southern Style Nuts,
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 the major distribution channels to significant buyers of nuts, including food retailers, commercial ingredient users, and contract packaging customers.
Management Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include reserves for customer deductions, the quantity of bulk inventories, the evaluation of recoverability of long-lived assets, the assumptions used in estimating the retirement plan liability and pension expense, and the realizability of deferred tax assets. Actual results could differ from those estimates.
Accounts Receivable
Accounts receivable are stated at the amounts charged to customers, less allowances for doubtful accounts and reserves for estimated cash discounts and customer deductions. The allowance for doubtful accounts is calculated by specifically identifying customers that are credit risks and estimating the extent that other
non-specifically
identified customers will become credit risks. Account balances are charged off against the allowance when we conclude that it is probable the receivable will not be recovered. The reserve for estimated cash discounts is based on historical experience. The reserve for customer deductions represents known customer short payments and an estimate of future credit memos that will be issued to customers related to rebates and allowances for marketing and promotions based on agreed upon programs and historical experience.
Inventories
Inventories, which consist principally of inshell bulk-stored nuts, shelled nuts, dried fruit and processed and packaged nut products, are stated at the lower of cost
(first-in, 
first-out)
and net realizable value. Net realizable value is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Inventory costs are reviewed at least quarterly. Fluctuations in the market price of pecans, peanuts, walnuts, almonds, cashews and other nuts may affect the value of inventory, gross profit and gross profit margin. When net realizable values move below costs, we record adjustments to write down the carrying values of inventories to the lower of cost
(first-in, 
first-out)
and net realizable value. The results of our shelling process can also result in changes to inventory costs, such as adjustments made pursuant to actual versus expected crop yields. We maintain significant inventories of bulk-stored inshell pecans, peanuts and walnuts. Quantities of inshell bulk-stored nuts are determined based on our inventory systems and are subject to quarterly physical verification techniques including observation, weighing and other methods. The quantities of each crop year bulk-stored nut inventories are generally shelled out over a ten to fifteen-month period, at which time revisions to any estimates are also recorded.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Major improvements that extend the useful life, add capacity or add functionality are capitalized and charged to expense through depreciation. Repairs and maintenance costs are charged to expense as incurred. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts, and any gain or loss is recognized currently in operating income.
 
Depreciation expense for the last three fiscal years is as follows:
 
  
Year Ended

June 27, 
2019
 
Year Ended

June 28,
2018
  
Year Ended

June 29,
2017
 
Depreciation expense
 
$
14,017 $13,414  $14,190 
Cost is depreciated using the straight-line method over the following estimated useful lives:
 
Classification
 
Estimated Useful Lives
 
Buildings
 10 to 40 years
 
Machinery and equipment
 5 to 10 years
 
Furniture and leasehold improvements
 5 to 10 years
 
Vehicles
 3 to 5 years
 
Computers and software
 3 to 5 years
 
No interest costs were capitalized for the last three fiscal years due to the lack of any significant project requiring such capitalization.
Business Combinations
We use the acquisition method in accounting for acquired businesses. Under the acquisition method, our financial statements reflect the operations of an acquired business starting from the completion of the acquisition. The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of the acquisition. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.
Segment Reporting
We operate in a single reporting unit and operating segment that consists of selling various nut and nut related products through multiple distribution channels.
Impairment of Long-Lived Assets
We review held and used long-lived assets, including our rental investment property and amortizable identifiable intangible assets (e.g., customer relationships and brand names), to assess recoverability from projected undiscounted cash flows whenever events or changes in facts and circumstances indicate that the carrying value of the assets may not be recoverable. When such events occur, we compare the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of the long-lived asset or asset group. The cash flows are based on our best estimate of future cash flows derived from the most recent business projections. If this comparison indicates there is an impairment, the carrying value of the asset is reduced to its estimated fair value.
We did
no
t record any impairment of long-lived assets for the last three fiscal years.
Goodwill
Goodwill currently represents the excess of the purchase price over the fair value of the net assets from our acquisition of Squirrel Brand, L.P. which closed in November 2017.
Goodwill is not amortized, but is tested annually as of the last day of each fiscal year for impairment, or whenever events or changes in circumstances indicate it is more likely than not that the carrying amount of the reporting unit is greater than its fair value. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include deterioration in general economic conditions, adverse changes in the markets in which we operate, increases in input costs that have negative effects on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others. The fair value that could be realized in an actual transaction may differ from that used to evaluate the impairment of goodwill.
 
In testing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (more than 50%) that the estimated fair value of our single reporting unit is less than its carrying amount. If we elect to perform a qualitative assessment and determine that an impairment is more likely than not, we are then required to perform a quantitative impairment test, otherwise no further analysis is required. We also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test.
Under the goodwill qualitative assessment, various events and circumstances that would affect the estimated fair value of our single reporting unit are identified (similar to impairment indicators above). During fiscal 2019 we elected to perform a qualitative impairment test which indicated
no
indicators of goodwill impairment.
Under the goodwill quantitative impairment test, the evaluation of impairment involves comparing the current fair value of our single reporting unit to its carrying value, including goodwill. We estimate the fair value using level 3 inputs as defined by the fair value hierarchy. The inputs used to calculate the fair value include several subjective factors, such as estimates of future cash flows, estimates of our future cost structure, discount rates for our estimated cash flows, required level of working capital, assumed terminal value, and time horizon of cash flow forecasts. If the carrying value of our single reporting unit exceeds its fair value, we recognize an impairment loss equal to the difference between the carrying value and estimated fair value.
Facility Consolidation Project/Real Estate Transactions
In April 2005, we acquired property to be used for the Elgin Site. Two buildings are located on the Elgin Site, one of which is an office building. Approximately 65% of the rentable area in the office building is currently vacant. Approximately 29% of the rentable area has not been built-out. The other building, a warehouse, was expanded and modified for use as our principal processing facility and headquarters. The allocation of the purchase price to the two buildings was determined through a third-party appraisal. The value assigned to the office building is included in rental investment property on the balance sheet. The value assigned to the warehouse building is included in “Property, plant and equipment”.
The net rental expense from the office building is included in the caption “Rental and miscellaneous expense, net”. Gross rental income and rental (expense), net for the last three fiscal years are as follows:
 
  
Year ended

June 27,
2019
  
Year ended

June 28,
2018
  
Year ended

June 29,
2017
 
Gross rental income
 $1,978  $1,988  $2,003 
Rental (expense), net
(1)
  (1,104  (1,420  (1,311
 
(1)
Includes annual depreciation expense of approximately $800.
Expected future gross rental income under operating leases within the office building is as follows for the fiscal years ending:
 
June 25, 2020
 $2,015 
June 24, 2021
  1,816 
June 30, 2022
  1,599 
June 29, 2023
  1,618 
June 27, 2024
  1,638 
Thereafter
  2,319 
  
 
 
 
  $11,005 
  
 
 
 
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 June 27, 2019 and June 28, 2018 because of the short-term maturities and nature of these balances.
The carrying value of our Credit Facility (as defined in Note 5 – “Revolving Credit Facility” in the Notes to Consolidated Financial Statements below) borrowings approximates fair value at June 28, 2018 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:
 
  
June 27,
2019
  
June 28,
2018
 
Carrying value of long-term debt:
 $27,798  $34,649 
Fair value of long-term debt:
  27,720   33,482 
The estimated fair value of 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.
Revenue Recognition
The Company records revenue based on a five-step model in accordance with ASC Topic 606. The core principle of the guidance is that 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 to in exchange for the goods or services. We sell our products under some arrangements which include customer contracts that fix the sales price for periods, which typically can be up to one year for some commercial ingredient customers, and through specific programs consisting of promotion allowances, volume and customer rebates and marketing allowances, among others, to consumer and some commercial ingredient users. We recognize revenues as performance obligations are
fulfilled, which occurs when control passes to our customers. We report all amounts billed to a customer in a sale transaction as revenue, including those amounts related to shipping and handling. Adjustments for estimated promotion allowances, volume and customer rebates and marketing allowances, among others, are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded. Such estimates are calculated using historical averages adjusted for any expected changes due to current business conditions and experience. See Note 2 – “Revenue Recognition” below for additional information on revenue recognition.
Significant Customers and Concentration of Credit Risk
The highly competitive nature of our business provides an environment for the loss of customers and the opportunity to gain new customers. We are subject to concentrations of credit risk, primarily in trade accounts receivable, and we attempt to mitigate this risk through our credit evaluation process, collection terms and through geographical dispersion of sales. Sales to two customers exceeded 10% of net sales during fiscal 2019. Sales to three customers exceeded 10% of net sales during fiscal 2018 and fiscal 2017.
In total, sales to these
customers represented approximately 43%, 54% and 53% of our net sales in fiscal 2019, fiscal 2018 and fiscal 2017, respectively.
In total, net accounts receivable
from these customers were 40% and 62% of net accounts receivable at June 27, 2019 and June 28, 2018, respectively.
Marketing and Advertising Costs
Marketing and advertising costs are incurred to promote and support branded products in the consumer distribution channel. These costs are generally expensed as incurred, recorded in selling expenses and were as follows for the last three fiscal years:
 
  
Year ended

June 27,
2019
  
Year ended

June 28,
2018
  
Year ended

June 29,
2017
 
Marketing and advertising expense
 $11,936  $11,290  $10,064 
  
 
 
  
 
 
  
 
 
 
Shipping and Handling Costs
Shipping and handling costs, which include freight and other expenses to prepare finished goods for shipment, are included in selling expenses. Shipping and handling costs for the last three fiscal years were as follows:
 
  
Year ended

June 27,
2019
  
Year ended

June 28,
2018
  
Year ended

June 29,
2017
 
Shipping and handling costs
 $23,086  $20,418  $17,682 
  
 
 
  
 
 
  
 
 
 
Research and Development Expenses
Research and development expense represents the cost of our research and development personnel and their related expenses and is charged to selling expenses as incurred. Research and development expenses for the last three fiscal years were as follows:
 
  
Year ended

June 27,
2019
  
Year ended

June 28,
2018
  
Year ended

June 29,
2017
 
Research and development expense
 $892  $701  $658 
  
 
 
  
 
 
  
 
 
 
Stock-Based Compensation
We account for stock-based employee compensation arrangements in accordance with the provisions of ASC 718, as amended by Accounting Standard Update (“ASU”)
2016-09,
by calculating compensation cost based on the grant date fair value. We then amortize compensation expense over the vesting period. The grant date fair value of restricted stock units (“RSUs”) is generally determined based on the market price of our Common Stock on the date of grant. Beginning in fiscal 2017, forfeitures are recognized as they occur, and excess tax benefits or tax deficiencies are recognized as a component of income tax expense.
Income Taxes
We account for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been reported in our financial statements or tax returns. Such items give rise to differences in the financial reporting and tax basis of assets and liabilities. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets if it is more likely than not that all or a portion of the asset will not be realized. In estimating future tax consequences, we consider all expected future events other than changes in tax law or rates.
We record liabilities for uncertain income tax positions based on a
two-step
process. The first step is recognition, where we evaluate whether an individual tax position has a likelihood of greater than 50% of being sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation processes. For tax positions that are currently estimated to have a less than 50% likelihood of being sustained, no tax benefit is recorded. For tax positions that have met the recognition threshold in the first step, we perform the second step of measuring the benefit to be recorded. The actual benefits ultimately realized may differ from our estimates. In future periods, changes in facts, circumstances, and new information may require us to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in results of operations and financial position in the period in which such changes occur.
We recognize interest and penalties accrued related to unrecognized tax benefits in the Income tax expense caption in the Consolidated Statement of Comprehensive Income.
We evaluate the realization of deferred tax assets by considering our historical taxable income and future taxable income based upon the reversal of deferred tax liabilities. As of June 27, 2019, we believe that our deferred tax assets are fully realizable.
 
Earnings per Share
Basic earnings per common share are calculated using the weighted average number of shares of Common Stock and Class A Stock outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock.
The following table presents the reconciliation of the weighted average shares outstanding used in computing basic and diluted earnings per share:
 
  
Year ended

June 27,
2019
  
Year ended

June 28,
2018
  
Year ended

June 29,
2017
 
Weighted average number of shares outstanding — basic
  11,430,174   11,383,080   11,317,149 
Effect of dilutive securities:
            
Stock options and restricted stock units
  71,238   66,306   86,456 
  
 
 
  
 
 
  
 
 
 
Weighted average number of shares outstanding — diluted
  11,501,412   11,449,386   11,403,605 
  
 
 
  
 
 
  
 
 
 
The following table presents a summary of anti-dilutive awards excluded from the computation of diluted earnings per share:
 
  
Year ended

June 27,
2019
  
Year ended

June 28,
2018
  
Year ended

June 29,
2017
 
Weighted average number of anti-dilutive shares:
  —     —     1,068 
Weighted average exercise price per share:
 $—    $—    $65.35 
Comprehensive Income
We account for comprehensive income in accordance with ASC Topic 220,
Comprehensive Income
. This topic establishes standards for reporting and displaying comprehensive income and its components in a full set of general-purpose financial statements. The topic requires that all components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. This topic also requires all
non-owner
changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. This guidance also requires presentation by the respective line items of net income, either on the face of the statement where net income is presented or in the notes and information about significant amounts required under U.S. GAAP to be reclassified out of accumulated other comprehensive income in their entirety. For amounts not required to be reclassified in their entirety to net income, we provide a cross-reference to other disclosures that offer additional details about those amounts.
Recent Accounting Pronouncements
The following recent accounting pronouncements have been adopted in the current fiscal year:
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. On June 29, 2018 we adopted Topic 606 using the full retrospective method. Under the full retrospective method, all periods presented are now presented under Topic 606. A cumulative effect of initially applying the new revenue standard for the earliest balance sheet period presented has been accounted for and was immaterial. See Note 2 – “Revenue Recognition” below for additional details.
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. The amendments in this Update were applied using a retrospective transition method to each period presented. ASU
No. 2016-15
was adopted in the first quarter of fiscal 2019 and did not have an impact on our Consolidated Statements of Cash Flows.
 
In May 2017, the FASB issued ASU
No. 2017-09
Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting
”. The amendments in this Update provide guidance about which changes to terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU
No. 2017-09
should be applied prospectively to an award modified on or after the adoption date. ASU
No. 2017-09
was adopted in the first quarter of fiscal 2019 and did not have an impact on our Consolidated Financial Statements.
In August 2018, the SEC issued Release
No. 33-10532
that amends and clarifies certain financial reporting requirements. The principal change to our financial reporting is the inclusion of the annual disclosure of changes in stockholders’ equity in Rule
3-04
of Regulation
S-X
to interim periods. We adopted the provisions of this new rule beginning with our fiscal 2019 financial reporting. We now include our Consolidated Statements of Stockholders’ Equity with each quarterly filing on Form
10-Q
and have removed the dividends per share disclosure from the Consolidated Statements of Comprehensive Income in interim filings. We have also removed the disclosure on high and low trading prices within Part II, Item 5 — “Market for Registrants Common Equity and Related Stockholder Matters” in the 2019 Annual Report on Form
10-K.
In March 2019, the SEC issued Release
No. 33-10618,
FAST Act Modernization and Simplification of Regulation
S-K.
The amendments are intended to simplify certain disclosure requirements, improve readability and navigability of disclosure documents, and discourage repetition and disclosure of immaterial information. The amendments are effective for all filings submitted on or after May 2, 2019, except for specific amendments that are effective as cited in the rule. The Company has adopted the provisions of this new rule beginning with the 2019 Annual Report on Form
10-K.
The Company now includes its trading symbol for each class of registered securities on the Form 10-K cover page and other reports filed with the SEC under the Exchange Act. We also simplified certain annual disclosures, for example, by removing the analysis of the earliest of the three years discussed within Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. The final rule does not have an impact on our Consolidated Financial Statements.
The following recent accounting pronouncements have not yet been adopted:
In August 2018, the FASB issued ASU
No. 2018-15
Intangibles – Goodwill and Other –
Internal-Use
Software (Subtopic
350-40):
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract
”. The amendments in this Update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain
internal-use
software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this Update. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, for all entities. The amendments in this Update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. This Update will be effective for the Company in fiscal 2021. We do not expect this accounting Update to have a material impact on our Consolidated Financial Statements.
In August 2018, the FASB issued ASU
No. 2018-14
Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic
715-20):
Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans
”. The amendments in this Update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendments in this Update remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in this Update are effective for public business entities for fiscal years ending after December 15, 2020. Early adoption is permitted for all entities. An entity should apply the amendments in this Update on a retrospective basis to all periods presented. This Update will be effective for the Company in fiscal 2021. We do not expect this accounting Update to have a material impact on our Consolidated Financial Statements.
In August 2018, the FASB issued ASU
No. 2018-13
Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement
”. The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820,
Fair Value Measurement
. Certain disclosure requirements will be removed from Topic 820 with this Update to include: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. The amendments also clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. This Update will add the requirement to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. This Update will be effective for the Company in fiscal 2021. We do not expect this accounting Update to have a material impact on our Consolidated Financial Statements.
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
No. 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. Under ASU
No. 2016-02
the guidance was to be adopted using a modified retrospective approach, with elective reliefs, with application of the new guidance for all periods presented. In July 2018, the FASB issued ASU
No. 2018-11
Leases (Topic 842): Targeted Improvements
” which provides for another transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The amendments in this Update also provide lessors with a practical expedient, by class of underlying asset, to not separate
non-lease
components from the associated lease component, similar to the expedient provided for lessees. In July 2018, the FASB also issued ASU
No. 2018-10
Codification Improvements to Topic 842, Leases
” which affects narrow aspects of the guidance issued in ASU
No. 2016-02.
In December 2018, the FASB issued ASU
No. 2018-20
Leases (Topic 842) – Narrow Scope Improvements for Lessors
” which provides specific guidance for lessors on the issues of sales taxes and other similar taxes collected from lessees, certain lessor costs, and recognition of variable payments for contracts with lease and
non-lease
components. In March 2019, the FASB issued ASU
No. 2019-01
Leases (Topic 842) – Codification Improvements
” which clarifies transition disclosure requirements for annual and interim periods after the date of adoption of ASU
No. 2016-02.
We have implemented processes and information technology tools to assist in our ongoing lease data analysis. We have also updated our accounting policies and internal controls that are impacted by the new guidance, to ensure readiness for adoption in the first quarter of fiscal 2020. We plan to adopt ASU
2016-02
utilizing the modified retrospective transition method and will not recast comparative periods in transition to the new standard. In addition, the new standard provides a number of optional practical expedients in transition. We expect to elect the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We do not expect to elect the
use-of-hindsight
or the practical expedient pertaining to land easements; the latter not being applicable to us. Based on our current portfolio of leases, the Company expects the impact of these new standards to result in the recognition of new
right-of-use
(ROU) assets and lease liabilities of approximately $5,200 to $5,700 upon adoption and to lead to increased financial statement disclosures. The new standard also provides practical expedients for an entity’s initial and ongoing accounting. We currently expect to elect the short-term lease recognition exemption for all leases that qualify. We also currently expect to elect the practical expedient to not separate lease and
non-lease
components for all of our leases.
v3.19.2
Revenue Recognition
12 Months Ended
Jun. 27, 2019
Revenue from Contract with Customer [Abstract]  
Revenue Recognition
NOTE 2 — REVENUE RECOGNITION
On June 29, 2018 we adopted ASU
No. 2014-09,
Revenue from Contracts with Customers (“Topic 606”)
using the full retrospective method. See Note 1 – “Recent Accounting Pronouncements” for additional information. For each customer contract a five-step process is now followed in which we identify the contract, identify performance obligations, determine the transaction price, allocate the contract transaction price to the performance obligations, and recognize the revenue when (or as) the performance obligation is transferred to the customer. As a result of adopting Topic 606 we have updated our accounting policy for revenue recognition as follows:
Nature of Products
We manufacture and sell the following:
 
  
branded products under our own proprietary brands to retailers on a national basis;
 
  
private label products to retailers, such as supermarkets, mass merchandisers, and specialty retailers, for resale under the retailers’ own or controlled labels;
 
  
private label and branded products to the foodservice industry, including foodservice distributors and national restaurant operators;
 
  
branded products under
co-pack
agreements to other major branded companies for their distribution; and
 
  
products to our industrial customer base for repackaging in portion control packages and for use as ingredients by other food manufacturers.
 
When Performance Obligations Are Satisfied
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations are primarily for the delivery of raw and processed recipe and snack nuts, nut butters and trail mixes.
Our customer contracts do not include more than one performance obligation. If a contract were to contain more than one performance obligation, we are required to allocate the contract’s transaction price to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by directly observable data.
Revenue recognition is generally completed at a point in time when product control is transferred to the customer. For approximately 99% of our revenues, control transfers to the customer when the product is shipped or delivered to the customer based upon applicable shipping terms, as the customer can then direct the use and obtain substantially all of the remaining benefits from the asset at that point in time. Therefore, for 99% of our revenues, the timing of revenue recognition requires minimal judgment and does not change compared to previous revenue recognition guidance. However, certain transactions within our contract packaging distribution channel include contracts to develop, manufacture and deliver customized or proprietary products, which have no alternative use for the Company in the event the customer cancels the contract. In addition, for certain of these transactions the Company has the right to payment for performance completed to date. As a result, the revenue for products that are considered assets with no alternative use is now recognized over time. The value of these assets with no alternative use at
period-end
(an output method) is used as the basis to recognize revenue, which faithfully depicts our performance towards complete satisfaction of the performance obligation. This generally results in revenue recognition approximately one month earlier compared to previous revenue recognition guidance. The amount of contract revenue recognized over time is generally immaterial to total revenue recognized for any given period.
The performance obligations in our contracts are satisfied within one year, and typically much less. As such, we have not disclosed the transaction price allocated to remaining performance obligations for any periods presented.
Significant Payment Terms
Our customer contracts identify the product, quantity, price, payment and final delivery terms. Payment terms usually include early pay discounts. We grant payment terms consistent with industry standards. On a limited basis some payment terms may be extended, however, no payment terms beyond six months are granted at contract inception. The average customer payment is received within approximately 31 days of the invoice date. As a result, we do not adjust the promised amount of consideration for the effects of a significant financing component because the period between our transfer of a promised good or service to a customer and the customer’s payment for that good or service will be six months or less.
Shipping
All shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are included in selling expense.
Variable Consideration
Some of our products are sold through specific incentive programs consisting of promotional allowances, volume and customer rebates,
in-store
display incentives and marketing allowances, among others, to consumer and some commercial ingredient customers. The ultimate cost of these programs is dependent on certain factors such as actual purchase volumes or customer activities and is dependent on significant management estimate and judgment. The Company accounts for these programs as variable consideration and recognizes a reduction in revenue (and a corresponding reduction in the transaction price) in the same period as the underlying program based upon the terms of the specific arrangements.
Trade promotions, consisting primarily of customer pricing allowances, merchandising funds and consumer coupons, are also offered through various programs to customers and consumers. A provision for estimated trade promotions is recorded as a reduction of revenue (and a reduction in the transaction price) in the same period when the sale is recognized. Revenues are also recorded net of expected customer deductions which are provided for based upon past experiences. Evaluating these estimates requires management judgment.
We generally use the most likely amount method to determine the variable consideration. We believe there will not be significant changes to our estimates of variable consideration when any related uncertainties are resolved with our customers. The Company reviews and updates its estimates and related accruals of variable consideration and trade promotions at least quarterly based on the terms of the agreements and historical experience. Any uncertainties in the ultimate resolution of variable consideration due to factors outside of the Company’s influence are typically resolved within a short timeframe, therefore, no additional constraint on the variable consideration is required.
 
Product Returns
While customers generally have the right to return defective or
non-conforming
products, past experience has demonstrated that product returns have generally been immaterial. Customer remedies may include either a cash refund or an exchange of the returned product. As a result, the right of return and related refund liability for
non-conforming
or defective goods is estimated and recorded as a reduction in revenue, if necessary.
Contract Balances
Contract assets or liabilities result from transactions with revenue recorded over time. If the measure of remaining rights exceeds the measure of the remaining performance obligations, the Company records a contract asset. Conversely, if the measure of the remaining performance obligations exceeds the measure of the remaining rights, the Company records a contract liability. Contract asset balances at June 27, 2019 and June 28, 2018 were $117 and $336, respectively, and are recorded in the caption “Prepaid expenses and other current assets” on the Consolidated Balance Sheets. The Company generally does not have material deferred revenue or contract liability balances arising from transactions with customers.
Contract Costs
The Company does not incur significant fulfillment costs requiring capitalization.
Disaggregation of Revenue
Revenue disaggregated by distribution channel is as follows:
 
  
For the Year Ended
 
Distribution Channel
 
June 27,

2019
  
June 28,

2018
 
Consumer
 $625,581  $589,867 
Commercial Ingredients
  140,103   154,114 
Contract Packaging
  110,517   144,950 
  
 
 
  
 
 
 
Total
 $876,201  $888,931 
  
 
 
  
 
 
 
Impact of Adoption
The Company adopted Topic 606 using the full retrospective basis on June 29, 2018. The prior period comparative information for the fiscal 2018 has been recast to reflect the requirements of Topic 606. The impact on fiscal 2017 was immaterial. The impact of Topic 606 on the Consolidated Statement of Comprehensive Income for the year ended June 28, 2018 was as follows:
 
  
Year ended

June 28, 2018 as
previously reported
  
Impact of
Adoption
  
As
Adjusted
 
Net sales
 $888,595  $336  $ 888,931 
Gross profit
  138,819   80   138,899 
Income from operations
  56,109   80   56,189 
Net income
 $32,420  $80  $32,500 
Earnings per share-basic
 $2.85  $0.01  $2.86 
Earnings per share-diluted
 $2.83  $0.01  $2.84 
The impact of Topic 606 on the comparative Consolidated Balance Sheet and Consolidated Statement of Cash Flows was not material.
v3.19.2
Inventories
12 Months Ended
Jun. 27, 2019
Inventory Disclosure [Abstract]  
Inventories
NOTE 3 — INVENTORIES
Inventories consist of the following:
 
  
June 27,
2019
  
June 28,
2018
 
Raw material and supplies
 $58,927  $73,209 
Work-in-process
and finished goods
  98,097   101,153 
  
 
 
  
 
 
 
  $157,024  $174,362 
  
 
 
  
 
 
 
v3.19.2
Goodwill and Intangible Assets
12 Months Ended
Jun. 27, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets
NOTE 4 – GOODWILL AND INTANGIBLE ASSETS
Intangible assets subject to amortization consist of the following:
 
  
June 27, 2019
  
June 28, 2018
 
Customer relationships
 $21,100  $21,100 
Non-compete
agreements
  270   270 
Brand names
  16,990   16,990 
  
 
 
  
 
 
 
Total intangible assets, gross
  38,360   38,360 
  
 
 
  
 
 
 
Less accumulated amortization:
        
Customer relationships
  (14,466  (12,182
Non-compete
agreements
  (86  (32
Brand names
  (9,182  (8,492
  
 
 
  
 
 
 
Total accumulated amortization
  (23,734  (20,706
  
 
 
  
 
 
 
Net intangible assets
 $14,626  $17,654 
  
 
 
  
 
 
 
Customer relationships relate to the Squirrel Brand acquisition completed in fiscal 2018 and the Orchard Valley Harvest (“OVH”) acquisition completed in fiscal 2010. The customer relationships resulting from the OVH acquisition were fully amortized in fiscal 2017. The brand names consist primarily of the
Squirrel Brand
and
Southern Style Nuts
brand names acquired in fiscal 2018 and the
Fisher
brand name, which we acquired in a 1995 acquisition. The
Fisher
brand name was fully amortized in fiscal 2011. The remainder of the brand name relates to the OVH acquisition, which was fully amortized in fiscal 2015.
Total amortization expense related to intangible assets, which is classified in administrative expense in the Consolidated Statement of Comprehensive Income, was as follows for the last three fiscal years:
 
  
Year ended

June 27,
2019
  
Year ended

June 28,
2018
  
Year ended

June 29,
2017
 
Amortization of intangible assets
 $3,028  $2,016  $1,369 
  
 
 
  
 
 
  
 
 
 
Expected amortization expense the next five fiscal years is as follows:
 
Fiscal year ending
   
June 25, 2020
  2,501 
June 24, 2021
  2,165 
June 30, 2022
  1,896 
June 29, 2023
  1,657 
June 27, 2024
  1,414 
Our net goodwill of $9,650 relates entirely to the Squirrel Brand acquisition completed in fiscal 2018. The changes in the carrying amount of goodwill during the two fiscal years ended June 27, 2019 are as follows:
 
Gross goodwill balance at June 30, 2017
 $8,766 
Accumulated impairment losses
  (8,766
Net balance at June 30, 2017
  —   
Goodwill acquired during fiscal 2018
  9,650 
Balance at June 27, 2019
 $9,650 
v3.19.2
Revolving Credit Facility
12 Months Ended
Jun. 27, 2019
Text Block [Abstract]  
Revolving Credit Facility
NOTE 5 — REVOLVING CREDIT FACILITY
On February 7, 2008, we entered into a Credit Agreement with a bank group (the “Bank Lenders”) providing a $117,500 revolving loan commitment and letter of credit subfacility (the “Credit Facility”). The Credit Facility is secured by substantially all our assets other than real
property, machinery and equipment and fixtures.
At June 27, 2019 there were
no
borrowings on the line of credit. At June 28, 2018, the weighted average interest rate for the Credit Facility was 3.90%. The terms of the Credit Facility contain covenants that require us to restrict investments, indebtedness, acquisitions and certain sales of assets, cash dividends, 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 $25,000, we will be required to maintain a specified fixed charge coverage ratio, tested on a monthly basis. All cash received from customers is required to be applied against the Credit Facility. The Bank Lenders are entitled to require 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 certain other defaults by us under the Credit Facility (including a default under the Mortgage Facility). As of June 27, 2019, we were in compliance with the financial covenant under the Credit Facility and we currently expect to be in compliance with the financial covenant in the Credit Facility for the next twelve months. At June 27, 2019, we had $113,550 of available credit under the Credit Facility which reflects reduced availability as a result of $3,950 in outstanding letters of credit. We would still be in compliance with all restrictive covenants under the Credit Facility if this entire amount were borrowed.
On July 7, 2017, we entered into the Eighth Amendment to our Credit Facility which eliminated the quarterly restriction on cash dividends and distributions and allows the Company to, without obtaining lender consent, make up to four cash dividends or distributions on our stock per fiscal year, or purchase, acquire, redeem or retire stock in any fiscal year, 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 Facility remains over $30,000 immediately before and after giving effect to any such dividend, distribution, purchase or redemption.
On November 29, 2017, we entered into the Consent and Ninth Amendment to our Credit Agreement (the “Ninth Amendment”). The Ninth Amendment provided lender consent for us to incur unsecured debt (in particular, the Promissory Note) in connection with our acquisition of the Squirrel Brand business, and for: (i) the incurrence of unsecured debt in connection with the Acquisition and (ii) the Acquisition to constitute a “Permitted Acquisition” under the terms of the Credit Agreement. The Ninth Amendment also modified our collateral reporting requirements.
v3.19.2
Long-Term Debt
12 Months Ended
Jun. 27, 2019
Debt Disclosure [Abstract]  
Long-Term Debt
NOTE 6 — LONG-TERM DEBT
Long-term debt consists of the following:
 
  
June 27,

2019
  
June 28,

2018
 
Mortgage Facility (“Tranche A”), collateralized by real property, due in monthly installments of $
230
including interest at
4.25
% per annum with a final payment due
March 1, 2023
 $9,542  $11,841 
Mortgage Facility (“Tranche B”), collateralized by real property, due in monthly installments of $
57
including interest at
4.25
% per annum with a final payment due
March 1, 2023
  2,386   2,960 
Squirrel Brand Seller-Financed Note to a related party 
(“Promissory Note”), unsecured,
due in monthly principal installments of $
319
plus interest at
5.5
% per annum beginning in
January 2018
through
November 30, 2020
  5,750   9,264 
Selma, Texas facility financing obligation to related parties, due in monthly installments of $
103
through
September 1, 2026
  10,120   10,584 
Unamortized debt issuance costs
  (79  (124
  
 
 
  
 
 
 
   27,719   34,525 
Less: Current maturities, net of unamortized debt issuance costs
  (7,338  (7,169
  
 
 
  
 
 
 
Total long-term debt, net of unamortized debt issuance costs
 $20,381  $27,356 
  
 
 
  
 
 
 
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 $36,000 (“Tranche A”) and the other in the amount of $9,000 (“Tranche B”), for an aggregate amount of $45,000 (the “Mortgage Facility”). 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”).
On March 1, 2018 the interest rate on the Mortgage Facility was fixed at 4.25% per annum. Prior to March 1, 2018, Tranche A accrued interest at a fixed interest rate of 7.63% per annum, payable monthly and Tranche B accrued 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 terms of the Mortgage Facility contain covenants that require us to maintain a specified net worth of $110,000 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 June 27, 2019, we were in compliance with all financial covenants under the Mortgage Facility. The carrying amount of assets pledged as collateral for the Mortgage Facility was approximately $69,408 at June 27, 2019.
In September 2006, we sold our Selma, Texas properties to two related party partnerships for $14,300 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, Texas properties had an initial
ten
-year
term at a fair market value rent with three five-year renewal options. In September 2015, we signed a lease renewal which exercised two five-year renewal options and extended the term of our Selma lease to September 18, 2026. The lease extension also reduced the base monthly lease amount to $103, beginning in September 2016. One five-year renewal option remains. Also, we currently have the option to purchase the properties from the partnerships at
95
% (
100
% in certain circumstances) of the then fair market value, but not to be less than the $14,300 purchase price. The financing obligation is being accounted for similar to the accounting for a capital lease, whereby the purchase price was recorded as a debt obligation, as the provisions of the arrangement are not eligible for sale-leaseback accounting. The balance of the debt obligation outstanding at June 27, 2019 was $10,120.
In November 2017, we completed the Squirrel Brand acquisition which was financed by a combination of cash (drawn under the Credit Facility) and a
three
-year seller-financed note for $11,500. The principal owner and seller of the Squirrel Brand business was subsequently appointed as an executive officer of the Company and is considered a related party. The Promissory Note is unsecured, bears interest at 5.5% per annum and is payable in equal monthly principal payments of $319, plus interest which began in January 2018. Upon an event of default, as defined in the Promissory Note, the interest rate increases to 7.5% until such event of default is cured. We can
pre-pay
the Promissory Note at any time during the three-year period without penalty. At June 27, 2019, the principal amount of $5,750 of the Promissory Note was outstanding. Interest paid on the Promissory Note for the fiscal year ended June 27, 2019 was $413.
 
Aggregate maturities of long-term debt are as follows for the fiscal years ending:
 
June 25, 2020
 $7,373 
June 24, 2021
  5,625 
June 30, 2022
  3,886 
June 29, 2023
  3,209 
June 27, 2024
  718 
Thereafter
  6,987 
  
 
 
 
  $27,798 
  
 
 
 
v3.19.2
Income Taxes
12 Months Ended
Jun. 27, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 7 — INCOME TAXES
The provision for income taxes is based entirely on income before income taxes earned in the United States, and is as follows for the last three fiscal years:
 
  
For the Year Ended:
 
  
June 27,

2019
  
June 28,

2018
  
June 29,

2017
 
Current:
            
Federal
 $10,309  $10,722  $17,013 
State
  2,951   2,464   2,744 
  
 
 
  
 
 
  
 
 
 
Total current expense
  13,260   13,186   19,757 
Deferred:
            
Deferred federal
  395   3,902   (1,698
Deferred state
  (693  (238  (46
  
 
 
  
 
 
  
 
 
 
Total deferred (benefit) expense
  (298  3,664   (1,744
  
 
 
  
 
 
  
 
 
 
Total income tax expense
 $12,962  $16,850  $18,013 
  
 
 
  
 
 
  
 
 
 
The reconciliations of income taxes at the statutory federal income tax rate to income tax expense reported in the Consolidated Statements of Comprehensive Income for the last three fiscal years are as follows:
 
  
June 27,

2019
  
June 28,

2018
  
June 29,

2017
 
Federal statutory income tax rate
  21.0  28.1  35.0
State income taxes, net of federal benefit
  3.1   3.1   3.3 
Impact of Tax Reform
  —     6.3   —   
Section 162(m) Limitation
  1.1   —     —   
Research and development tax credit
  (0.3)  (0.2  (0.1
Domestic manufacturing deduction
  —     (2.2  (3.1
Windfall tax benefits
  (0.2  (1.0  (1.8
Uncertain tax positions
  0.1   0.1   0.1 
Other
  (0.1)  (0.1  (0.1
  
 
 
  
 
 
  
 
 
 
Effective tax rate
  24.7  34.1  33.3
  
 
 
  
 
 
  
 
 
 
Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement basis and the tax basis of assets and liabilities using enacted statutory tax rates applicable to future years. Deferred tax assets and liabilities are comprised of the following:
 
  
June 27,

2019
  
June 28,

2018
 
Deferred tax assets (liabilities):
        
Accounts receivable
 $332  $305 
Employee compensation
  1,673   810 
Inventory
  309   273 
Depreciation and amortization
  (10,847  (9,504
Capitalized leases
  1,117   1,020 
Goodwill and intangible assets
  3,182   3,160 
Retirement plan
  6,599   5,484 
Workers’ compensation
  1,862   1,692 
Share based compensation
  1,305   1,281 
Capital loss carryforward
  —     112 
Other
  191   503 
Less valuation allowance
  —     (112
  
 
 
  
 
 
 
Net deferred tax asset — long term
  5,723   5,024 
  
 
 
  
 
 
 
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the character necessary during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income and
tax-planning
strategies in making this assessment. During fiscal 2019 and fiscal 2018 the net change in the total valuation allowance was not material. If or when recognized, the tax benefits relating to any reversal of the valuation allowance will be recognized as a reduction of income tax expense.
For the years ending June 27, 2019 and June 28, 2018, unrecognized tax benefits and accrued interest and penalties were $
259
and $
214
. Accrued interest and penalties related to uncertain tax positions are not material for any periods presented. Interest and penalties within income tax expense were not material for any period presented. The total gross amounts of unrecognized tax benefits were $
240
and $
207
at June 27, 2019 and June 28, 2018, respectively.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
 
  
June 27,

2019
  
June 28,

2018
  
June 29,

2017
 
Beginning balance
 $207  $174  $24 
Gross increases — tax positions in prior year
  —     6   7 
Gross decreases — tax positions in prior year
  (6  —     —   
Settlements
  —     —     —   
Gross increases — tax positions in current year
  39   27   23 
Lapse of statute of limitations
  —     —     120 
  
 
 
  
 
 
  
 
 
 
Ending balance
 $240  $207  $174 
  
 
 
  
 
 
  
 
 
 
Unrecognized tax benefits, that if recognized, would affect the annual effective tax rate on income from continuing operations, are as follows:
 
  
June 27,

2019
  
June 28,

2018
  
June 29,

2017
 
Unrecognized tax benefits that would affect annual effective tax rate
 $217  $177  $136 
During fiscal 2019, the change in unrecognized tax benefits due to statute expiration was not material. We do not anticipate that total unrecognized tax benefits will significantly change in the next twelve months.
 
There were certain changes in state tax laws during the period, for which the impact was insignificant. We file income tax returns with federal and state tax authorities within the United States of America. Our federal and Illinois tax returns are open for audit for fiscal 2016 through 2018. Our California tax returns for fiscal 2015 through 2018 are open for audit. No other tax jurisdictions are material to us.
v3.19.2
Commitments and Contingencies
12 Months Ended
Jun. 27, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
NOTE 8 — COMMITMENTS AND CONTINGENCIES
Operating Leases
We primarily lease material handling equipment pursuant to agreements accounted for as operating leases. Rent expense aggregated under these operating leases was as follows for the last three fiscal years:
 
  
Year ended

June 27,
2019
  
Year ended

June 28, 
2018
  
Year ended

June 29,
2017
 
Rent expense related to operating leases
 $1,981  $1,988  $1,880 
  
 
 
  
 
 
  
 
 
 
Aggregate
non-cancelable
lease commitments under these operating leases with initial or remaining terms greater than one year are as follows:
 
Fiscal year ending
    
June 25, 2020
  1,715 
June 24, 2021
  1,540 
June 30, 2022
  1,392 
June 29, 2023
  1,109 
June 27, 2024
  464 
Thereafter
  133 
  
 
 
 
  $6,353 
  
 
 
 
Litigation
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 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 money 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.
During fiscal 2017 we were subject to a class-action complaint for an employment related matter. In early fiscal 2018 we agreed to a $1,200 settlement for which we were fully reserved at June 29, 2017. In the first quarter of fiscal 2019 the settlement was paid.
v3.19.2
Stockholders' Equity
12 Months Ended
Jun. 27, 2019
Federal Home Loan Banks [Abstract]  
Stockholders' Equity
NOTE 9 — STOCKHOLDERS’ EQUITY
Our Class A Common Stock, $
.01
par value (the “Class A Stock”), has cumulative voting rights with respect to the election of those directors which the holders of Class A Stock are entitled to elect, and 10 votes per share on all other matters on which holders of our Class A Stock and Common Stock are entitled to vote, with the exception of election of the directors for which the holders of Common Stock are eligible to elect. In addition, each share of Class A Stock is convertible at the option of the holder at any time into one share of Common Stock and automatically converts into one share of Common Stock upon any sale or transfer other than to related individuals or certain other events as set forth in our Restated Certificate of Incorporation. Each share of our Common Stock, $
.01
par value (the “Common Stock”) has noncumulative voting rights of one vote per share. The Class A Stock and the Common Stock are entitled to share equally, on a
share-for-share
basis, in any cash dividends declared by the Board of Directors, and the holders of the Common Stock are entitled to elect 25%, rounded up to the nearest whole number, of the members comprising the Board of Directors. During fiscal 2017, our Board of Directors adopted a dividend policy under which it intends to pay an annual cash dividend on our Common Stock and Class A Stock during the first quarter of each fiscal year.
v3.19.2
Stock-Based Compensation Plans
12 Months Ended
Jun. 27, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation Plans
NOTE 10 — STOCK-BASED COMPENSATION PLANS
At our annual meeting of stockholders on October 29, 2014, our stockholders approved a new equity incentive plan (the “2014 Omnibus Plan”) under which awards of options and other stock-based awards may be made to employees, officers or
non-employee
directors of our Company. A total of 1,000,000 shares of Common Stock are authorized for grants of awards thereunder, which may be in the form of options, restricted stock, RSUs, stock appreciation rights (“SARs”), performance shares, performance units, Common Stock or dividends and dividend equivalents. As of June 27, 2019, there were 726,248 shares of Common Stock that remained authorized for future grants of awards, subject to the limitations set below. Under the terms of the Omnibus Plan, the total number of shares of Common Stock with respect to which options or SARs may be granted in any calendar year to any participant may not exceed 500,000 shares (this limit applies separately with respect to each type of award). Additionally, under the terms of the 2014 Omnibus Plan, for awards of restricted stock, RSUs, performance shares or other stock-based awards that are intended to qualify as performance-based compensation: (i) the total number of shares of Common Stock that may be granted in any calendar year to any participant may not exceed 250,000 shares (this limit applies separately to each type of award) and (ii) the maximum amount that may be paid to any participant for awards that are payable in cash or property other than Common Stock in any calendar year is $
5,000
. During fiscal 2017, the Board of Directors adopted an equity grant cap which further restricted the number of awards that could be made to any one participant or in the aggregate. The equity grant cap limited the number of awards to 250,000 awards to all participants and 20,000 awards to any one participant. Except as set forth in the 2014 Omnibus Plan, RSUs have vesting periods of three years for awards to employees and one year for awards to
non-employee
members of the Board of Directors. Recipients of RSUs have the option to defer receipt of vested shares until a specified later date, typically soon after separation from the Company. The exercise price of stock options is determined as set forth in the 2014 Omnibus Plan by the Compensation Committee of our Board of Directors and must be at least the fair market value of the Common Stock on the date of grant. Except as set forth in the 2014 Omnibus Plan, stock options expire upon termination of employment or directorship, as applicable. Stock options granted under the 2014 Omnibus Plan are exercisable 25% annually commencing on the first anniversary date of grant and become fully exercisable on the fourth anniversary date of grant. Options generally will expire no later than ten years after the date on which they were granted. We issue new shares of Common Stock upon exercise of stock options.