JBSS 10-K & 10-Q changes, risk factors and insider trading

We face a number of significant risks and uncertainties, and therefore, an investment in our Common Stock is subject to risks and uncertainties. The factors described below could materially and adversely affect our business, results of operations and financial condition. While each risk is described separately, some of these risks are interrelated and it is possible that certain risks could trigger the applicability of other risks described below. Also, the risks and uncertainties described below are not the only ones that we face. Additional risks and uncertainties not presently known to us or risks we view as not rising to the level of being material, could also potentially impair our business, results of operations and financial condition. Investors should consider the following factors, in addition to the other information contained in this Annual Report on Form 10-K,Report, including Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” before deciding to purchase our Common Stock.

The availability and cost of raw materials for producing our products are subject to crop size and yield fluctuations caused by factors beyond our control. These materials include peanuts, pecans, almonds, cashews, walnuts, pine nuts and other nuts, rolled oats, dried fruits and seeds, cocoa, protein, as well as vegetable oils and other products used in the manufacture of our products. The factors beyond our control include adverse weather conditions, natural disasters (including floods, torrential rain, hail, mudslides, tornados, droughts, frosts, earthquakes and hurricanes), changing climate patterns, plantagricultural diseases,diseases and pests, foreign currency fluctuations, trade agreements, tariffs and embargos, import/export controls, prices of other crops, labor shortages, inflationary conditions, political change and unrest, sanctions, boycotts, revised sourcing regulations, armed hostilities, such as those in Ukraine and in the Middle East, changes in fuel prices, changes in global customer demand, pandemics and disease, changes in government agricultural programs, government support of any agricultural products, federal and state government mandates related to the preceding or otherwise and purchasing behavior of certain countries, including China and India. Additionally, any determination by the USDA or other government agencies may also reduce the supply of edible nuts and other raw materials used in our products and could (among other things) cause our costs to increase significantly. These determinations include, but are not limited to, that certain pesticides, herbicides or other chemicals used by growers have left harmful residues on portions of the crop, negatively impact the environment, cause or may cause adverse health consequences, any portion of the crop has been contaminated by aflatoxin or other agents, or any future raw material or product recalls for other reasons.

Because these raw materials are commodities, their prices are set by the market and can therefore fluctuate quickly and dramatically due to varied events, such as those described above. Furthermore, we are not able to hedge against changes in nut commodity prices because no appropriate futures, derivative or other risk-sharing market for these commodities exists nor can we create such a market. Consequently, in order to achieve or maintain profitability levels, we attempt to increase the prices of our products to reflect the increase in the costs of the raw materials that we use. However, we may not be successful in passing along partial or full price increases to our customers, if at all. In addition, even if we are successful in passing across partial or full price increases, we may not be able to do so in a timely fashion. Our ability to raise prices and the timing of any price increases is often dependent upon the actions of our competitors, some of whom are significantly larger and more diversified than we are or own farms which produce the raw materials.materials subject to such price increases. Determining the alignment of commodity costs with customer pricing also requires significant coordination throughout our entire operations and we may not be able to successfully manage such coordination in the future to align commodity costs with customer prices. We have observed rapid inflation with respect to packaging and other products used to manufacture and package our products and general inflationary conditions that are difficult to predict, and we may not be able to pass along such inflationary increases to our customers or may not be able to do so in a timely fashion. We have also observed tariffs and the threat of tariffs causing increased or uncertain changes in prices and uncertainty in the markets in which we operate, including for the purchase of certain equipment for the manufacture of products. Additionally, any such product price increase that we are able to pass along to our customers may ultimately reduce the demand for, and sales of, our products as customers reduce purchases, buy lower priced products or lower margin products. Alternatively, if the prices of any raw materials significantly decrease, and we have inventories of such materials on hand, we may be unable to reduce product prices without adversely impacting our gross margins or our customers will not pass along price decreases, which could impact overall demand.demand for such products. Any competitors who purchase such material on the open market or own the farms which produce the raw materials may be able to reduce prices in a more timely manner, and we could lose market share to such competitors. We are also subject to risks associated with purchasing a majority of our pecans, peanuts and walnuts directly from growers, including the risk of purchasing such products from growers at costs that later, due to altered market conditions, prove to be above prevailing market prices at time of sale. Accordingly, because we purchase a majority of our pecans, peanuts and walnuts directly from growers during harvest season and shell and process these nuts throughout our fiscal year, there is a possibility that, after we acquire these nuts, market conditions may adversely change. Depending on these changing market conditions, we may be forced to sell these nuts at reduced prices relative to our acquisition cost. Any one or more of the foregoing aspects may have a material adverse effect on our results of operations, cash flows and financial condition.

Moreover, fluctuations in the market prices of nuts may affect the value of our inventories, margins and profitability. We enter into fixed price commitments with a portion of our commercial ingredient customers and certain other customers. The commitments are for a fixed period of time, typically three months to twelve months. Such commitments with a term of six months or more represented approximately 2%1% of our annual net sales in fiscal 2025.2026. Sometimes we enter into fixed price commitments with respect to certain nut products before fixing our acquisition costs in order to maintain customer relationships or when, in management’s judgment, market or crop harvest conditions so warrant. To the extent we do so and our fixed prices are not properly aligned with our acquisition costs, these fixed price commitments may result in reduced or negative gross profit margins, which could have a material adverse effect on our financial condition and results of operations.

We operate in a highly competitive environment. The principal areas of competition are, among others, taste, flavor, quality, packaging, price, nutrition, brand recognition, advertising, promotion, convenience and service. Our principal products compete against food and snack products manufactured and sold by numerous regional, national and international companies, some of which are substantially larger and have greater resources than us, such as Hormel Foods Corp. (Planters brand), Diamond Brand, General Mills (Nature Valley brand), PepsiCo, Inc. (Quaker brand), Mondelez (CLIF brand), Kellanova (Nutrigrain brand), Mars (KIND brand), amongand others. Most of our competitors that sell and market the other top branded snack nut products and bars have committed more financial, marketing and other resources to such brands when compared to the resources available to or spent by us on our brands. Additionally, many food retailers, supercenters, mass merchandisers and internet retailers have continued to emphasize their own private brand offerings as a key part of their strategy and may develop or expand their own private brand nut and nut product offerings and private brand bar offerings, to the exclusion of our branded products or private brand products, particularly in an uncertain economic environment or due to inflationary conditions. Certain other grocery retailers, such as international stores or smaller format stores, may not stock our products. Other smaller competitors may be able to focus on faster-growing, niche markets that we are unable to market effectively to or otherwise sell to due to our size, operations, marketing strategy or perceptions regarding our Company. Additionally, certain food retailers and internet retailers may seek to invest in companies serving certain niche markets and/or offer shelf space, added promotional activity or other marketing efforts in exchange for ownership in such companies, which we are unable to offer to such food retailers or internet companies. Recent consolidation and mergers and acquisitions activity in the nut and snack food marketindustry has resultedintensified incompetitive pricepricing competitionpressures asacross partthe of such consolidation or mergers and acquisitions activity.market. Many of our competitors buy their nuts on the open market and are thus not exposed to the risks of purchasing inshell pecans, peanuts, walnuts and other nut types directly from growers at fixed prices that later, due to altered market conditions, may prove to be above prevailing market prices. We also compete with other shellers in the commercial ingredients market and with regional processors in the retail and wholesale markets. In order to maintain or increase our market share, we must continue to price our products competitively and spend on marketing, advertising, new product innovation and shelf placement and slotting fees. This may cause a decline in gross profit margin if we are unable to increase sales volume or otherwise reduce our costs, which could materially and adversely affect our financial condition and results of operations.

Our financial performance depends in part on our ability to anticipate and offer products to our customers that appeal to their preferences. Consumer preferences can quickly change based on a number of factors beyond our control. These preferences may include, but are not limited to, preference for branded or private brand products, the retail cost for such products, options to purchase such products and the format, and various quantity or volume sizes of such products, and dietary trends and perceived nutritional or health aspects of our products. If we fail to anticipate, identify or react quickly to these changes and are unable to develop and market new and improved products or otherwise offer products that meet consumer preferences, demand for our products could suffer. In addition, demand for our products could be affected by consumer concerns regarding the labeling, packaging, flavors, manner of preparing our products or concerns with respect to the health effects of nutrients or ingredients (including oils and dyes) in any of our products or the overall sustainability or impact of our products on the environment. The development and introduction of new products and packaging or alteration of existing products and packaging requires substantial research and development, testing and marketing expenditures, which we may be unable to recover fully if the new products do not achieve the necessary commercial success. New product introduction also results in increased costs, including from the use of new manufacturing techniques, capital expenditures, new raw materials and ingredients, new or revised methods of processing, additional labor and consulting expenses, development or revision of packaging and labeling and additional marketing and trade spending. Consumers are also purchasing food products with increasing frequency outside traditional retail supermarkets, including via the Internet. If we are unable to provide customers with our products outside traditional retail supermarkets, supercenters and club stores, demand for our products could suffer and/or we will be unable to grow our business. Customers may also use phone-based applications to determine the perceived health factors of our products, which we have little to no control over. As GLP-1 drugs and other drugs which partially reduce food consumption increase in popularity, it may negatively impact the demand for snacking and in turn the demand for our products. Reduction in demand as a result of changing consumer preferences or inability to provide consumers with products they demand, or in the manner they demand, could materially and adversely affect our financial condition and results of operations.

As the retail grocery trade continues to consolidate and our retail customers grow larger, become more sophisticated, use data and artificial intelligence (AI) for purchasing and marketing decisions and obtain more purchasing power, our retail customers are demanding lower pricing, especially private brand customers, and increased free or discounted promotional programs. Further, these retail customers may begin to place a greater emphasis on the lowest-cost supplier in making purchasing decisions, especially during periods of increased or variable raw material acquisition costs or rapid inflation. An increased focus on the lowest-cost supplier could reduce the benefits of some of our competitive advantages, which include a focus on customer service, innovation, production capacity, category management and quality. As the retail environment consolidates, many customers are reducing inventories or focusing on a limited number of brands (often the number one or number two brand by market share) or a limited number of products or SKUs in making purchasing decisions. In addition, certain customers in the retail channel, such as dollar stores and other discount sellers, have become increasingly sophisticated and may demand similar pricing to retail grocery customers. As part of the retail consolidation trend, diversified companies with substantial Internet presences have increased their food offerings or purchased retail supermarkets to expand their grocery business, particularly as such companies focus on food delivery direct to consumers. Such companies have substantial pricing power and may focus on their products to the exclusion of our products. If we fail to respond to these trends, our sales volume growth could suffer, and it may become necessary to lower our prices and increase promotional support of our products. Any of these factors would materially and adversely affect our gross profit and gross profit margin and could materially and adversely affect our financial condition and results of operations.

If consumers in our principal markets lose confidence in the health or safety of nut and bar products, particularly with respect to peanut and tree nut allergies, food borne illnesses, processes, ingredients and packaging used in the manufacturing process or other food safety matters, this could materially and adversely affect our financial condition and results of operations. Individuals with nutcertain food allergies may be at risk of serious illness or death resulting from the consumption of our nut and bar products, including consumption of the products of our customers which in turn contain our products as an ingredient. Notwithstanding our existing food safety controls, we process peanuts and tree nuts on the same equipment, and there is no guarantee that our other products will not be cross-contaminated. Concerns generated by risks of peanut and tree nut cross-contamination and other food safety matters, including food borne illnesses, may discourage consumers or our customers from buying our products, cause production and delivery disruptions or result in product recalls. Product safety issues concerning the products we manufacture, distribute and sell, and also concerning similar products not manufactured, distributed or sold by us, may materially and adversely affect demand for products in the nut and bar industry as a whole, including products without actual safety problems. Decreases in demand for products in the industry generally could have a material adverse effect on our financial condition and results of operations. In addition, the cooling system at our Elgin, Illinois facility utilizes ammonia. If a leak in the system were to occur, there is a possibility that the inventory in cold storage at our Elgin, Illinois facility could be destroyed which could have a material adverse effect on our financial condition and results of operations.

We face risks associated with product liability claims, product recalls and other liabilities in the event: (i) our food safety and quality control procedures are ineffective or fail, (ii) we procure productsproducts, ingredients or packaging from third parties that are or become subject to a recall, regardless of whether or not our food safety and quality control procedures are ineffective or fail, (iii) our products or packaging cause injury or become adulterated or misbranded, (iv) our products are determined to be promoted or labeled in a misleading fashion or do not contain required labeling or notices, (v) government authorities test our products and determine that they contain a contaminant or present a food safety risk, (vi) our products are tampered with, or altered by our employees or third parties, (vii) one of our competitors is subject to claims, recalls or other liabilities involving products similar to ours or (viii) federal, state or other government agencies or courts determine that our products could pose health risks or contain potentially harmful chemicals, ingredients or other substances. In recent years, the food industry has been a target of litigation over product labeling and advertising, including nut and bar products. In addition, the snack food industry has recently been the target of consumer claims regarding ultra-processed foods and the purported negative health impacts of such ultra-processed foods. Such litigation may result in significant costs to defend and resolve. In addition, we do not control the labeling of the products of our customers that contain our products as an ingredient. A product recall of a sufficient quantity or significant adverse publicity, a significant product liability judgment against us, a significant product liability judgment against a supplier which we could not recover for, a significant advertising-related liability or other safety concerns (whether actual or claimed) could impact our products in a number of ways. These impacts could include unavailability of our product for a period of time, re-labeling or re-packaging products, loss of consumer confidence in our products and exposure to liabilities in excess of any insurance we maintain for such events, including to our private brand customers. As customers request revised and more sophisticated packaging, our packaging solutions may result in manufacturing defects or errors in the manufacture of such packaging, which could cause us to recall the products despite having proper food safety protocols. If these kinds of events were to occur, they would have a material adverse effect on the demand for our products, subject us to costly recalls or withdrawals, require us to spend significant amounts to change our operations to remedy such issues, and, consequently, could have a material adverse effect on our results of operations and cash flows.

Our results are dependent on controlling a variety of costs, including multiple costs related to the manufacture and production of our products. In the past we have experienced variability in transportation costs due to additional demand in shipping by a variety of market participants, a general shortage of drivers due to health and safety concerns, and increased fuel costs due to geopolitical issues and the impact of federal regulations, which require increased monitoring of driving time using electronic monitoring technology. In addition to transportation costs, we have experienced (and may continue to experience) increased commodity or raw material costs, increased packaging material prices, higher general water, energy and fuel costs, increased labor costs as well as increased insurance costs, such as for property and workers’ compensation insurance. Maintaining the prices of our products, initiating price increases (including passing along price increases for commodities used in our products) and increasing the demand for our products (especially when prices for our products are decreasing due to commodity price decreases), all of which are important to our plans to increase profitability, may be materially and adversely affected or undermined by such increases in production and operation costs. Material and sustained increases in any of the foregoing costs could materially and adversely affect our financial condition and results of operations.

We depend on information technology to maintain and streamline our operations, including, among other things, (i) interfacing and communicating with our locations, customers and suppliers, (ii) complying with financial reporting, legal and tax regulatory requirements, (iii) maintaining logistics, inventory control and monitoring systems, (iv) providing us with real-time feedback about our business and our industry and (v) allowing continuity of operations. Like other companies, our information technology systems or information technology systems of our customers, vendors, counterparties and other third party providers may be vulnerable to a variety of interruptions or losses due to events beyond our control, including natural disasters, terrorist attacks, government-sponsored or affiliated cyberattacks, telecommunications failures, outages during replacement or upgrades, computer viruses, phishingphishing, activity,vishing or smishing activities, hardware failures, cloud-based technology outages, power outages, hackers, social engineering attacks, loss or theft of hardware, ransomware attacks, cyber risks and other security issues. We have technology security initiatives, cyber insurance and disaster recovery plans in place to mitigate our risk to these vulnerabilities, but these measures may not be adequate, particularly as the global dependence on technology grows, the reliance on AI systems increases and the sophistication of cyber threats increase.increases. Moreover, if we are unable to prevent security breaches or disclosure of non-public information, we may suffer financial and reputational damage, in addition to litigation or remediation costs or penalties because of the unauthorized disclosure of confidential information belonging to us or to our customers, consumers, or suppliers. If we were subject to a ransomware attack, we may be required to pay ransom in amounts that could be material to our financial condition.

In addition, we have outsourced several information technology support services and administrative functions to third-party service providers. We may outsource other functions in the future to achieve cost savings and efficiencies, and use AI in our operations to achieve efficiencies.operations. If the service providers to which we outsource these functions or our AI providers do not perform effectively, we may not be able to achieve the expected cost savings and may have to incur additional costs to correct errors or mitigate the problematic actions made by such service providers or AI providers. Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies, the loss of or damage to intellectual property through security breach, the loss of sensitive data through security breach, or otherwise. While we or any third-party service provider have not experienced any significant disruption, failure or breach impacting our information technology systems, any such disruption, failure or breach could adversely affect our financial condition and results of operations.

As the number of our employees has grown, personnelPersonnel costs, including the costs of medical and other employee health and welfare benefits, have increased.increased due to inflationary pressures, rising healthcare costs, and competitive labor market conditions. These costs can vary substantially as a result of an increase in the number, mix and experience of our employees and changes in health care and other employment-related laws. There are no assurances that we will succeed in reducing future increases in such costs, particularly if government regulations require us to change our health and welfare benefits, government regulations impose additional benefits or monitoring and compliance expenses, or we need to attract and retain additional qualified personnel or provide extra compensation due to other reasons. Increases in personnel costs can also be amplified by low unemployment rates, unavailability of potential workers, including as a result of government actions, increased inflation, our preferences among workers in the labor market and general tight labor market conditions in any of the areas where we operate. Increases in labor costs at any of our suppliers, transportation providers, third parties that we do business with or third parties within our supply chain may also adversely impact the cost of our raw materials and other inputs and thus increase the cost of our products. Our inability to control such costs could materially and adversely affect our financial condition and results of operations.

Although we considerbelieve our laboremployee relations toare be good,positive, if a significant number of our employees engaged in a work slowdown or stoppage, strike, boycott, intentional destruction of our equipment or products or other type of labor unrest, it could impair our ability to source, manufacture and supply our products to customers. In addition, if there is a work slowdown or stoppage, strike, boycott or similar labor unrest event at a customer, supplier, transportation provider, road, port or dock, third party within our supply chain or government agency, it could similarly impact our ability to obtain raw materials, manufacture, ship, supply, or to otherwise provide our products to our customers. Any of these events could result in reduced sales and may distract our management from focusing on our business and strategic priorities. Any of these activities could materially and adversely affect our financial condition and results of operations.

We have observed changing climate patterns in the U.S. and internationally. These changing climate patterns have caused weather patterns to change, and we have experienced severe droughts, fires, torrential rain, mudslides, hail, floods, frosts, hurricanes, tornadoes, cold and warmer temperatures, adverse air conditions and other previously abnormal natural events. These weather events could impact the ability of our growers and producers to consistently provide us with the quality and quantity of nut and nut related products or other raw materials that we require,require andand, in turn, cause the prices of certain nuts and raw materials to increase or change in unpredictable ways. Any long-term changes in climate patterns could prevent growers from growing or harvesting nuts or other raw materials in previous quantities, or at all, as many nut products require particular soil, water and climate conditions in order to grow or have acceptable yields. Because we (and our growers) cannot predict, change or insure against changing climate patterns, our ability to react to these changes is limited. If we and our growers and producers cannot adapt to changing climate patterns, our financial condition and results of operations could be materially and adversely affected.

We are dependent on a few significant customers for a large portion of our total net sales, particularly in the consumer channel. Sales to our five largest customers represented approximately 67%, 66% and 64%67% of net sales in fiscal 2025, fiscal 20242026 and fiscal 2023,2025 and 66% of net sales in fiscal 2024, respectively. As discussed in “Item 1- Business”, sales to Walmart and Target represented a majority of such sales to our five largest customers. There can be no assurance that all significant customers will continue to purchase our branded or private brand products in the same quantities, same product mix or on the same terms as in the past, particularly as increasingly powerful retailers demand supplier diversification, lower pricing, different packaging, larger marketing support or payments for retail space, establish private brands or request other terms of sale which negatively impact our profitability or sales. We have recently made equipment purchases to, among other things, better serve our most significant customers. If our significant customers do not purchase our products for any reason, we will be required to find new customers to realize a return on our equipment purchases. Many of our largest customers emphasize sales at physical locations and a significant shift to Internet sales may impact the amount and types of products they purchase from us. A loss of one of our largest customers, a material decrease in purchases by one of our largest customers, the inability to collect a receivable from or a significant business interruption at one of our largest customers would result in decreased sales and would materially and adversely affect our results of operations, financial condition and cash flows.

Our products are shelled, manufactured or otherwise processed at our various production facilities. However, certain nut and nut-related products, including the shelling of peanuts, walnuts and pecans and processing and packaging of certain other products, such as certain types of our bars, are conducted only at a single location. If any of these production facilities experience a disruption for any reason, including a work stoppage, power failure, fire, pandemic, terrorism, cyberattack, labor event or weather or climate related condition or natural disaster, this could result in a significant reduction or elimination of the availability of some of our products. In addition, a dispute with, or disruption at, a significant third-party supplier, service provider, distributor or customer may impact our ability to produce, package, market, transport and sell our products. If we were not able to obtain alternate production, manufacture, packaging, shelling or processing capability in a timely manner or on satisfactory terms, this could have a material adverse effect on our financial condition and results of operations.

As part of our strategy, we have and intend to make capability relatedcapability-related acquisitions (of companies or assets) and investments in and enter into strategic relationships with established products and growth-stage companies to take advantage of our manufacturing and supply chain expertise and diversify our product line, such as our acquisition of the Lakeville facility in the 2024 fiscal year.line. However, we may be unsuccessful in managing or integrating completed acquisitions, joint ventures, and other strategic relationships or investments, identifying additional acquisitionsacquisitions, joint ventures or jointother ventures,strategic relationships, or negotiating favorable financial or other terms with third parties which are attractive or advantageous to grow or otherwise supplement our existing business. In addition, the identification, negotiation and completion of any acquisition, joint venture, other strategic relationship, or investment may divert management’s attention from ordinary business matters, require a number of one-time or ongoing advisory costs, result in the loss of employees or customers of our business or the acquired business, involve the assumption of unknown and potentially significant liabilities or result in impairment charges or write-downs if the assumptions underlying the purchase are not satisfied or operating performance suffers. Due to various uncertainties inherent in such activities, we may be unable to achieve a substantial portion of any anticipated benefits or cost savings from previous acquisitions, joint ventures, or investments or other anticipated benefits in the timeframe we anticipate, or at all.

We are subject to extensive regulation by the FDA, the USDA, the United States Environmental Protection Agency (“EPA”) and other state, local and foreign authorities in jurisdictions where our products are manufactured, marketed, packaged, processed or sold. We are also subject to California’s Proposition 65, which requires that clear and reasonable warnings be given to consumers who are exposed to certain chemicals deemed by the state of California to be dangerous.dangerous, and several states are considering or have passed legislation requiring warnings for products containing certain ingredients, including ingredients generally recognized as safe by the FDA. Among other things, these regulations govern the manufacturing, importation, processing, packaging, storage, distribution, advertising and labeling of our products. Our manufacturing and processing facilities and products are subject to periodic compliance inspections by federal, state, local and foreign authorities. We are also subject to environmental regulations governing the discharge of air emissions, water and food waste, the usage and storage of pesticides, and the generation, handling, storage, transportation, treatment and disposal of waste materials. Amendments to existing statutes and regulations, adoption of new statutes and regulations, increased production at our existing facilities as well as our expansion into new operations and jurisdictions may require us to obtain additional licenses and permits and could require us to adapt or alter methods of operations at costs that could be substantial. Due to changing climate patterns and concerns over the environmental impact or sustainability of our products, we may be subject to additional governmental regulations focused on how we produce or source raw materialsmaterials, ingredients or packaging for our products. Compliance with applicable laws and regulations may be time-consuming, expensive or costly to us in different ways and could materially and adversely affect our results of operations. Failure to comply with applicable laws and regulations could subject us to civil remedies, including fines, injunctions, recalls or seizures, as well as possible criminal sanctions, or other litigation and claims, which could materially and adversely affect our results of operations.

Specifically, governmental policies affecting the agricultural and food industry, such as taxes, tariffs, duties, subsidies, incentives and import and export restrictions on agricultural commodities and commodity products, can influence the planting, location and size of certain crops, whether commodity products are traded, the volume and types of imports and exports, and the viability and volume of production of certain of our products. In addition, international trade disputes, sanctions and armed hostilities can adversely affect commodity trade flows by limiting or disrupting trade between countries or regions. Future government policies on packaging, advertising and marketing, how our products are manufactured or the ingredients used in our products may adversely affect the supply of, demand for, and prices of our products, require us to change the manufacture, packaging or marketing of our products, restrict our ability to do business in its existing and target markets, and negatively impact our revenues and operating results.

The FSMA and regulatory guidance gives the FDA expanded authorities over the safety of the national food supply, including increased inspections and mandatory recalls, as well as stricter enforcement actions, each of which could result in additional compliance costs and civil remedies, including fines, injunctions, withdrawals, recalls or seizures and confiscations. The FSMA further instructed the FDA to develop new rules and regulations, including the performance of hazard analyses, implementation of preventive plans to control hazards, and foreign supplier verification provisions, mitigation strategies to protect food against intentional adulteration, sanitary transport of food and food traceability. We currently have food safety plans which build upon established food safety principles of “hazard analysis and critical control points” (“HACCP”) procedures and developed food defense plans that address concernsrequirements as a result of FSMA. HACCP is a management system in which food safety is addressed through the analysis and control of hazards from raw material production, procurement and handling, to manufacturing, distribution and consumption of the finished product.

Approximately 28% of the dollar value of our total nut andnut, dried fruit and oat purchases for fiscal 20252026 were made from foreign countries. We purchase our cashews from Vietnam and certain West African countries and some of our pecans from Mexico. We also purchase sunflower oil and certain other ingredients that are sourced from Ukraine. To this extent, we are exposed to various risks inherent in international markets, including increased governmental ownership and regulation of the economy, greater likelihood of inflation and adverse economic conditions, governmental attempts to control inflation, such as setting interest rates and maintaining wage and price controls, supply reduction into the United States from increased demand in foreign countries, international competition, compliance with, and subjection to, foreign laws, including our ability to protect our intellectual property, such as our brands, compliance with U.S. laws and regulations related to conduct in foreign countries, such as the Foreign Corrupt Practices Act, currency exchange rates, potential for contractual defaults or forced renegotiations on purchase contracts with limited legal recourse, tariffs, quotas, duties, import and export restrictions, sanctions, armed hostilities and other barriers to trade that may reduce our profitability or sales and civil unrest, armed hostilities and significant political instability.

LitigationLitigation, Investigations or Other Legal Actions Could Materially and Adversely Affect Our Financial Condition and Results of Operations

We haveare been the subject of litigation and investigations in the past, and weor may become the subject of litigationa variety of litigation, claims, legal or regulatory proceedings, inquiries, investigations and investigationsother inlegal the future,actions, which may include lawsuits or claimsmatters related to contracts, intellectual property, product recalls,recalls and other regulatory action, product liability, the marketing and labeling of products, employment matters, wage and hour matters, cybersecurity matters, environmental matters, debt obligations or other aspects of our business. Plaintiffs or regulatory bodies could seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to lawsuitslawsuits, investigations and investigationsother legal actions is difficult to estimate accurately. Additionally, many of our customer contracts require us to indemnify and assume the defense of any third-party claim against the customer, increasing the risk of litigation related to our operations or products. Regardless of whether any claims against us are valid, or whether we are ultimately held liable, such litigation andlitigation, investigations or other legal actions may be expensive to defend and may divert time, money and management attention away from our operations and negatively impact our financial performance. We maintain insurance in amounts we believe to be adequate based on our business operations. However, we may incur claims or liabilities for which we are not insured, that exceed the amount of our insurance coverage or that our insurers may raise various objections and exceptions to coverage. A judgment or settlement for significant monetary damages or requiring other significant changes to our business or assets could materially and adversely affect our financial condition and results of operations. Any adverse publicity resulting from allegations or investigations may also adversely affect our reputation and the reputation of our products, which in turn could materially and adversely affect our financial condition and results of operations or result in serious and adverse operational consequences.

We consider our intellectual property rights, particularly and most notably our brand trademarks (such as our Fisher, Orchard Valley Harvest, Squirrel Brand, and Southern Style Nuts and Just the Cheese trademarks), but also our patents, trade secrets, know-how copyrights and licensing agreements, to be a significant and valuable aspect of our business. We attempt to protect our intellectual property rights through a combination of patent, service mark, trademark, copyright and trade secret laws, as well as licensing agreements, third-party nondisclosure and assignment agreements and policing of third-party misuses of our intellectual property both domestically and internationally. We also monitor the use of our intellectual property and confidential information as we expand the use of AI in our business. Our failure to obtain or adequately protect our trademarks, products, new features of our products, or our trade secrets and technology, or any change in law or other changes that serve to lessen or remove the current legal protections of our intellectual property, may diminish our competitiveness and could materially and adversely affect our financial condition and results of operations.

As of August 20,19, 2025,2026, Jeffrey T. Sanfilippo, Jasper B. Sanfilippo, Jr., Lisa A. Sanfilippo, John E. Sanfilippo and James J. Sanfilippo (the “Sanfilippo Group”) own or control Common Stock (one vote per share) and Class A Stock (ten votes per share on all matters other than the election of Common Stock directors) representing approximately a 50.5% voting interest in the Company. As of August 20,19, 2025,2026, Michael J. Valentine (the “Valentine Group”) owns or controls Common Stock and Class A Stock representing approximately a 23.8% voting interest in the Company. In addition, the Sanfilippo Group and the Valentine Group as holders of the Class A Stock are entitled to elect seven Class A Directors, or a majority of the members to theour Board of Directors. In addition, the Sanfilippo Group is able to exert certain influence on our business, or take certain actions, that cannot be counteracted by another stockholder or group of stockholders. The Sanfilippo Group is able to determine the outcome of nearly all matters submitted to a vote of our stockholders, including any amendments to our certificate of incorporation or bylaws. The Sanfilippo Group has the power to prevent or cause dividends, or a change in control or sale of the Company, which may or may not be in the best interests of other stockholders, and can take other actions that may be less favorable to other stockholders and more favorable to the Sanfilippo Group, subject to applicable legal limitations, which could materially and adversely affect our financial condition, results of operations and cash flows.

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements. Our fiscal year ends on the final Thursday of June each year,year and typically consists of fifty-two weeks (four thirteen-week quarters). Additional information on the comparability of the periods presented is as follows:

We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States,States. and weWe also manufacture and distribute a complete portfolio of private brand bars. These nuts are primarily sold under a variety of private brand names, as well as our Fisher, Orchard Valley Harvest, Squirrel Brandsnack and Southernnutrition Stylebars Nuts(“bars”), brand names. Weand market and distribute, and in most cases, manufacture or process, a diverse product line of other food and snack products, including bars, peanut butter, almond butter, cashew butter, candy and confections, snack and trail mixes, granola, sunflower kernels, dried fruit, corn snacks, sesame sticks,sticks and other sesame snack productsproducts. andWe bakedprimarily cheesesell snackour products under oura variety of private brand names, includingas Justwell theas Cheese,under our Fisher, Orchard Valley Harvest, Squirrel Brand and underSouthern privateStyle brands.Nuts Webrand distributenames. ourOur products are sold through three core distribution channels, including food retailers in the consumer,consumer channel, commercial ingredientsingredient users and contract manufacturing distribution channels.customers.

We face a number ofAdditional challenges in the future, which include the impacts of higher pricesfood inand food,input incosts partdriven due toby increasing underlying commodity acquisition costs andas thewell overallas impact of tariffs (actual, pending implementationpotential or threatened) by the U.S. governmentand orforeign other governmentstariffs on certainkey commodities, raw materials and equipmentmanufacturing toequipment. process and manufacture out products. We continue to seeOngoing uncertainty overaround global conflict in the Middle East and interest rates that may negativelyfurther impact economic growth,growth consumersand reducingconsumer theirspending resulting in reduced demand for private brand and branded and private label snack purchases,products, including snack nuts, trail mix and bars,bars. We also continue to operate amid intense competition in the snack food industry andcompetition, potential for economic downturndownturns in the markets in which we operate and ongoing supply chain challenges.volatility. To stay compliant with recent changes in employment laws across states where we operate and remain competitive in attracting qualified talent, we expect our labor costs to continue to increase.

We face changing industry trends as consumers' purchasing preferences evolve. We continue to seeface higherchanging sellingmarketplace trends that impact our categories. Retail prices at retail across snack nuts and trail mix drivenhave bygenerally higherrisen due to increased commodity costs.costs and evolving global trade agreements. These higher pricesprices, across our categories and the broader market, coupledpaired with a potentialgeneral economic downturn and tightening of consumer finances due to reduced government support through programs such as SNAP or a variety of other macroeconomic reasons,uncertainty, are causing consumers to purchase fewer branded and private label snack products. ThisAs declininga demand is leading toresult, sales volume declinesvolumes for snack nuts, recipe nuts, trail mix and mainstream bars bothare declining for the Company and across the snackindustry foodoverall. industry.Many Consumersconsumers continueare to shift their preferencesshifting to private brandsbrands, ormore lower pricedaffordable nuts or bars or purchasechoosing snack productssnacks outside thethese snackcategories nut,altogether. trailConsumers mix and bar categories. We haveare also seen consumers shifting to more value-focused retailers, such as mass merchandising retailers and club stores, not all of which we distribute or sell to. Additionally, theemerging increasedhealth and wellness trends, use of GLP-1 drugs and/or prevalenceother consumer health priorities may also impact consumers' purchasing behavior, including decreased purchasing of certainsnack weightfoods. lossIn drugs,response, whichwe may suppress a person’s appetite and/or impact a person's preferences, may impact the demand or consumption patterns of our products. We have responded byare focusing on our strengths,existing includingproducts in our knowledgeportfolio ofthat theaddress these trends, as well as our strengths by leveraging our expertise in snack nut and trail mix and barbars categories, development of additional products that are on-trend, improving efficiency, innovating in product innovation and judiciouspackaging useand ofcarefully managing trade spending and pricing actions to support our products.

Global supply chain pressures have eased compared to past fiscal years,years. butHowever, intermittent challenges, delays and extended lead-times still exist for certain raw materials and inputs. Overall packaging and ingredient inflation appears to have moderated heading intoduring fiscal 2026;2026. however,However there is still uncertainty within the supply chain surrounding near term impacts from the U.S. government's tariffs policy on imports from foreign countries. Approximately 2% of our material costs, primarily pepitascountries and pinecorresponding nuts,retaliatory are currently sourcedtariffs from Chinaforeign and are currently subject to a combined 55% tariff. Cashews are also imported and those sourced from Vietnam, which represents the majority of such imports, are currently subject to a 20% tariff.countries. Any incremental import tariffs will increase the cost of certain raw materials we use in our businessbusiness, and our financial performance may be adversely impacted if we cannot pass on the cost increases in the form of price increases to our customers. WhileIn weNovember do2025, notthe U.S. government removed tariffs for several food categories, including cocoa and cashews among others, which have directno exposuredomestic to suppliers in Russia, Ukraine or Israel, the conflicts and prospects for conflict in these regions could continue to result in volatile commodity markets, supply chain disruptions and increased costs, including shipping costs. In addition, the ultimate impact of tariffs may be difficult to predict as their amount and duration is uncertain, making our planning process more difficult, and the threat of tariffs can also have adverse implications to our business and the business of our suppliers and customers.production.

Trucking capacity continues to slowly decline, potentially leading to further instability in the transportation industry. While indicators suggest transportation prices are stabilizing, the overall transportation environment remains unpredictable. Additionally, fuel prices have been unpredictable and may vary depending on the level of economic activity in the areas where we ship and receive shipments.goods as well as prevailing oil prices. We have seen fuel prices increase due to recent military operations in and around Iran, which have led to volatility in the price of crude oil. Fuel prices could continue to remain volatile as the conflict persists.

OurAmong our most significant ingredient requirements includeare cocoa products, dried fruits, sweeteners, vegetable oils, rolled oats, flour and dairy. Many of these materials and their associated costs are subject to price fluctuations from several factors, including changing commodity markets, other market conditions, demand for raw materials, weather, growing and harvesting conditions, climate change, energy costs, currency fluctuations, supplier capacities, governmental actions, import and export requirements (including tariffs), and ongoing political instability and other factors beyond our control.

Furthermore, recordThe cocoa pricessupply-demand haveoutlook beenis fueledimproving by a threefollowing consecutive years of supply deficits, ledwhile byconsumption significanthas productiondeclined declinesdue withinto elevated price levels over the largestpast producers,two Ivory Coast and Ghana. Despite anticipated supply recovery in the current crop year, cocoa market prices have continued to be volatile and touched new highs in December 2024 while remaining well above long-term average levels throughout fiscal 2025. Amid higher cocoa prices, consumption data is starting to reflect North American demand reductions, but global supply balances remain historically tight.years. Additionally, as costs increase due to these circumstances or due to overall inflationary pressures, there is a further risk ofwe our not being able tocannot pass (in part or in full) such potential cost increases on to our customers or in a timely manner. If we cannot align our input costs with prices for our products, our financial performance could be adversely impacted.

Similar to other commodity dependentcommodity-dependent businesses, extreme weather events from climate change can have an unfavorable impact on our business. Floods, hurricanes, wildfires, extreme rainfall, tornadoes, blizzards, droughts, mudslides, poor air quality and extreme temperatures can affect our ability to obtain adequate (or acceptable quality) inputs, including fruit and nut materials, and our ability to manufacture products in our facilities. These extreme weather events can also have an adverse impact on the transportation industry and supply chains upon which we rely. Climate change can also result in unfavorable impacts that are unique to our business, especially for normal crop development. Below are some examples of essential weather conditions that must be present for normal development of the crops from which we derive the major raw materials we use in our products.

Gross profit decreasedincreased $10.7$7.7 million and our gross profit margin, as a percentage of net sales, decreased to 18.0% in fiscal 2026 from 18.4% in fiscal 2025 from 20.1% in fiscal 2024.2025.

Total operating expenses for fiscal 20252026 decreasedincreased $10.2$3.2 million, or 7.9%,2.7%, to $118.8$122.0 million. Operating expenses, as a percentage of net sales, waswere 10.4% of net sales in fiscal 2026 compared to 10.7% of net sales in fiscal 2025 compared to 12.1% of net sales in fiscal 2024.2025.

Diluted earnings per share decreasedincreased approximately 2.3%4.6% compared to fiscal 2024.2025.

The total value of inventories on hand at the end of fiscal 20252026 increaseddecreased $58.0$8.8 million, or 29.5%,3.4%, in comparison to the total value of inventories on hand at the end of fiscal 2024.2025. We have seen acquisition costs increase for walnuts increase significantlypecans and allalmonds, otherwhile treecosts nutof increasewalnuts, modestlypeanuts and cashews decreased in the 20242025 crop year (which falls into our 20252026 fiscal year).

Net sales in the commercial ingredients distribution channel decreasedincreased 1.4%10.2% in dollars and sales volume increased 0.7%4.7% in fiscal 20252026 compared to fiscal 2024. Excluding the fiscal 2025 first quarter's impact of the Lakeville Acquisition, net sales in the commercial ingredients channel decreased $1.8 million, or 1.6%, and sales volume increased 0.3%.2025. The sales volume increase was due to higher food services sales fromat existing customers and sales to one new distributioncustomer. to a foodservice customer and higherIncreased sales of peanut crushing stock also contributed to peanutthe oiloverall processors. This increase was largely offset by competitive pricing pressures.growth.

Net sales in the contract manufacturing distribution channel increased 8.4%4.4% in dollars and sales volume increased 23.3%2.9% in fiscal 20252026 compared to fiscal 20242025. primarilyThe sales volume increase was due to increased granolasales volume.to Excludinga customer added during the second quarter of fiscal 20252025. firstThis quarter'scustomer impactcurrently provides the majority of the Lakevilleraw Acquisition,ingredients netfor salesthese inproducts, and the contractCompany manufacturing channel increased $4.6 million, or 5.5%,processes and packages these products. This increase was largely offset by decreased granola sales volume increased 15.4% due to a new customer and an opportunistic sale to a current customer. These gains were significantly offset by reducedlower peanut butter sales volume to a major customer due to soft consumer demand.customer.

Total operating expenses for fiscal 20252026 decreasedincreased $10.2$3.2 million to $118.8$122.0 million. Operating expenses as a percent of net sales were 10.4% for fiscal 2026 compared to 10.7% for fiscal 2025 compared to 12.1% for fiscal 2024. The decrease is net of the $2.2 million net gain on bargain purchase that occurred in the second quarter of fiscal 2024 due to the Lakeville Acquisition.2025.

Administrative expenses for fiscal 20252026 were $39.8$43.0 million, aan decreaseincrease of $8.7$3.2 million, or 17.9%,8.1%, from the amount recorded for fiscal 2024.2025. The decrease was due to aincrease was primarily due to a $9.3$8.3 million decreaseincrease in incentive compensation expense. This was partially offset by a $2.3 million estimated insurance recovery associated with the dry milk powder recall, a $1.8 million favorable change in gain/loss on asset disposals and a $1.2 million decrease in personnel, recruitment and employee compensation expenses.

Interest expense was $2.4 million for fiscal 2026 compared to $3.6 million for fiscal 2025 compared to $2.5 million for fiscal 2024.2025. The increasedecrease in interest expense was due to higherlower average line of credit debt levels.

Pension expense (excluding service costs) was $1.6 million for fiscal 2026 and $1.4 million for both fiscal 2025 and fiscal 2024.2025.

The primary uses of cash are to fund our current operations, fulfill contractual obligations, pursue our Long-Range Plan through growing our branded and private brand programs,nut and bar businesses, consummate and integrate business acquisitions, return cash to our stockholders through dividends, repay indebtedness and pay amounts owed under theour Supplemental Employee Retirement Plan.Plan (“SERP”). Also, various uncertainties, including cost uncertainties,uncertainties and tariff payments, could result in additional or unexpected uses of cash. The primary sources of cash are results of operations and availability under our Credit Facility. Beginning in the second quarter of fiscal 2025 and continuing into the nextearly fiscal year,2027, we plan towill invest approximately $90.0 million in capital expenditures and related expenses, excluding any applicable tariffs, to acquire and install equipment, and make related infrastructure improvements to expand our production capabilities, increase our efficiency and further enhance our product offerings to our customers. ApproximatelyIn halffiscal of2025, this project expenditure is payable to vendors located in Europe. Furthermore, the large majority of those payments will be denominated in foreign currency. Depending on the level of tariffs in place at the time of delivery and unfavorable changes in foreign currency exchange rates, the ultimate cost of such equipment purchases could increase significantly. Wewe obtained an equipment loan to finance a portion of this capital investment,investment and intend to fund the remainder with borrowings under our Credit Facility and/or usewith available cash generated from our operations. We anticipate that expected net cash flow generated from operations and amounts available pursuant to the Credit Facility and the aforementionedEquipment equipmentLoan loan(as defined below) will be sufficient to fund our operations and capital expenditures for the next twelve months. Our available credit under our Credit Facility has allowed us to devote funds to promote our products, increase consumer insight capabilities and promotional efforts, reinvest in the Company through capital expenditures, develop new products, pay cash dividends, consummate strategic investments and business acquisitions, such as the Lakeville Acquisition,acquisitions and explore other growth strategies outlined in our Long-Range Plan.

Operating Activities. Net cash provided by operating activities was $30.5$123.8 million in fiscal 2025,2026, aan decreaseincrease of $71.1$93.3 million compared to fiscal 2024.2025. The decreaseincrease in operating cash flow was due to changes in working capital, primarily for inventory, compared to fiscal 2024.2025.

Total inventories were $254.6$245.8 million at June 26,25, 2025,2026, ana increasedecrease of $58.0$8.8 million, or 29.5%,3.4%, from the inventory balance at June 27,26, 2024.2025. The increasedecrease was due primarily dueto tolower finished goods inventories for bars, lower walnut acquisition costs and lower on hand quantities of pecans and walnuts, which were partially offset by higher commodity acquisition costs across all major tree nuts, as well as higher on-hand quantities of finished goods in preparation for anticipatedpecans seasonaland demand.almonds.

Raw nut and dried fruit input stocks, some of which are classified as work in process, decreased 5.05.4 million pounds, or 8.4%,10.1%, at June 26,25, 20252026 compared to June 27,26, 2024.2025. This decrease was due to lower quantities of walnutspecans and pecanswalnuts on handhand. dueThis toreduction increasedwas shellingoffset drivenpartially by demandhigher quantities of certainpeanuts, sizesalmonds and inventorycashews levels.on hand. The weighted average cost per pound of raw nut and dried fruit input stocks on hand at the end of fiscal 20252026 increased by 30.4%12.1% compared to the end of fiscal 2024,2025, primarily due to higher acquisition costs for almostpecans alland majoralmonds, treepartially nuts.offset by lower acquisition cost of walnuts.

Additional contractual cash obligations include amounts owed for lease commitments and the payments to former officers under ourthe Supplemental Employee Retirement Plan (“SERP”).SERP. We believe 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 all contractual cash obligations. See Note 43 — “Leases” and Note 1514 — “Retirement Plan” of the Notes to Consolidated Financial Statements for additional information and future maturities.

Investing Activities. Cash used in investing activities was $50.8$86.2 million in fiscal 2025.2026. Capital expenditures accounted for aan $50.7$88.1 million use of cash in fiscal 2025.2026. Slightly offsetting the fiscal 2026 cash outflows for capital asset purchases was $1.5 million of net life insurance proceeds received from existing life insurance contracts and $0.5 million received on sale of non-core equipment.

Cash used in investing activities was $50.8 million in fiscal 2025. Capital expenditures accounted for a $28.3$50.7 million use of cash in fiscal 2024.2025.

We expect total capital expenditures for equipment purchases and upgrades for fiscal 20262027 to be approximately $104.0$48.0 million based on current foreign currency and tariff expectations.million. This includes all capital expenditures needed forto complete the plannedpurchase purchaseand installation of equipment to expand our production capabilities and related infrastructure improvements as described above, as well as ongoing facility maintenance, food safety enhancements and other expansion needs for our bar business. We expect to fund these capital purchases through a combination of borrowings under our existing Credit Facility, use of available cash from our operations and equipment loan financing obtained in the fourth quarter of fiscal 2025.financing. Absent any additional material acquisitions or other significant investments, we believe that cash on hand, combined with cash provided by operations, borrowings available under the Credit Facility and equipment financing, will be sufficient to meet the cash requirements for planned capital expenditures.

Financing Activities. Cash providedused byin financing activities was $20.4$37.1 million during fiscal 2025.2026. There was a net increasedecrease in borrowings under our Credit Facility of $37.2$24.0 million in fiscal 20252026 due to increasingimproved commodityoperating acquisitioncash costs and capital investment. Equipment loan proceeds received were $9.3 million in fiscal 2025.flows. We paid dividends totaling $24.4$46.8 million in fiscal 2025.2026. We repaid $0.7$0.8 million of long-term debt during fiscal 2025.2026. Equipment loan proceeds received were $35.0 million in fiscal 2026. See Note 76 — “Revolving Credit Facility” and Note 87 — “Long-Term Debt” of the Notes to Consolidated Financial Statements for additional information and future maturities.

On February 7, 2008, we entered into the Former Credit Agreement (as defined below) 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 providing us with two term loans for an aggregate amount of $45.0 million (as amended, the “Mortgage Facility”). The Mortgage Facility was repaid in full in the third quarter of fiscal 2023 and the related mortgages on our owned real property located in Elgin, Illinois and Gustine, California have been released.

The terms of the Credit Facility contain covenants that, among other things, require us to restrict investments, indebtedness, liens, acquisitions and certain sales of assets and limit annual cash dividends or distributions, transactions with affiliates, redemptions of capital stock and prepayment or refinancing of indebtedness (if such prepayment,prepayment or refinancing, among other things, is of a subordinate debtdebt, including the Equipment Loan). If loan availability under the borrowing base calculation falls below $25.0 million, we will be required to maintain a specified fixed charge coverage ratio, tested on a monthly basis, until loan availability equals or exceeds $25.0 million for three consecutive months. All cash received from customers is required to be applied against the Credit Facility. The Bank Lenders have the option to accelerate and demand immediate repayment of our obligations under the Credit Facility in the event of default on the payments required under the Credit Facility, a change in control in the ownership of the Company, non-compliance with the financial covenant or upon the occurrence of other defaults by us under the Credit Facility. As of June 26,25, 2025,2026, we were in compliance with all covenants under the Credit Facility, and we currently expect to be in compliance with the financial covenant in the Credit Facility for the foreseeable future. At June 26,25, 2025,2026, we had $86.9$110.7 million of available credit under the Credit Facility. If this entire amount were borrowed at June 26,25, 2025,2026, we would still be in compliance with all restrictive covenants under the Credit Facility.

In September 2006, we sold our Selma, Texas properties (the “Selma Properties”) to two related party partnerships for $14.3 million and are leasing them back. The selling price was determined by an independent appraiser to be the fair market value which also approximated our carrying value. No gain or loss was recorded on the Selma Properties transaction. The lease for the Selma Properties has a ten-year term at a fair market value rent with three five-year renewal options. In September 2015, we exercised two of the five-year renewal options which extended the lease term to September 2026. The lease extension also reduced the monthly lease payment on the Selma Properties, beginning in September 2016, to reflect then current market conditions. At the end of each five-year renewal option, the base monthly lease amounts are reassessed, and the monthly payments increased to $114$114,000 beginning in September 2021. OneOn December 30, 2025 we exercised the final remaining five-year renewal option remains.which Also,extended wethe lease term to September 2031 and the base monthly lease payment will increase to approximately $121,000 beginning in September 2026. We currently have an option to purchase the Selma Properties from the owner at 95% (100% in certain circumstances) of the then fair market value, but not less than the original $14.3 million purchase price. The provisions of the arrangement are not eligible for sale-leaseback accounting and the $14.3 million was recorded as a debt obligation. As of June 26,25, 2025,2026, $6.4$5.6 million of the debt obligation was outstanding.

On June 16, 2025, the Company entered into a financing agreement with Wells Fargo Bank, N.A. which allows the Company to finance up to $50 million for the purchase of equipment to further expand our production capabilities, increase our efficiency and further enhance our product offerings to our customers (the “Equipment Loan”). The Equipment Loan is provided under a master loan agreement and related equipment schedule(s), and is secured under a Security Agreement which provides for a first priority lien on all equipment and a second priority lien on our accounts receivable and inventory. The Company will be required to make sixty (60) equal monthly payments comprised of principal and interest starting upon distribution of the final loan proceeds which is expected to occur in the fourthfirst quarterhalf of fiscal 2026.2027. The fixed interest rate (SOFR plus an applicable margin of 1.49%) will be calculated at that point in time as well. The Equipment Loan contains a graded prepayment penalty if the loan is paid off within thirty-six (36) months of commencement. The Company will make monthly interest-only payments of SOFR plus an applicable margin of 1.60% prior to the delivery and acceptance of the equipment and distribution of the final loan proceeds which will be capitalized as part of the equipment acquisition cost. As of June 26,25, 2025,2026, $9.3$44.3 million of thesuch debtloan obligationcommitment under the Equipment Loan was outstanding.

In addition to the other information set forth in this report on Form 10-Q, you should also consider the factors, risks and uncertainties that 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 26, 2025. There were no significant changes to the risk factors identified on the Form 10-K for the fiscal year ended June 26, 2025 or during the first twenty-sixthirty-nine weeks of fiscal 2026.

References herein to the secondthird quarter of fiscal 2026 and fiscal 2025 are to the quarters ended DecemberMarch 25,26, 20252026 and DecemberMarch 26,27, 2024,2025, respectively.

References herein to the first halfthree quarters or first twenty-sixthirty-nine weeks of fiscal 2026 and fiscal 2025 are to the twenty-sixthirty-nine weeks ended DecemberMarch 25,26, 20252026 and DecemberMarch 26,27, 2024,2025, respectively.

We are one of the leading processors and distributors of peanuts, pecans, cashews, walnuts, almonds and other nuts in the United States. We also manufacture and distribute a portfolio of snack and nutrition bars (“bars”), and market and distribute, and in most cases, manufacture or process, a diverse product line of other food and snack products, including peanut butter, almond butter, cashew butter, candy and confections, snack and trail mixes, granola, sunflower kernels, dried fruit, corn snacks, sesame sticks,sticks and other sesame snack products and baked cheese snack products. We primarily sell our products under a variety of private brand names, as well as under our Fisher, Orchard Valley Harvest, Squirrel Brand,Brand and Southern Style Nuts and Just the Cheese brand names. Our products are sold through three core distribution channels, including food retailers in the consumer channel, commercial ingredient users and contract manufacturing customers.

Our Long-Range Plan defines our future growth priorities, focused on accelerating our private brand business with key customers in high-growth snacking categories, most notably private brand bars, while expanding branded distribution behind Orchard Valley Harvest and Fisher via insight-driven product and packaging innovation. Execution of this plan is anchored in delivering value-added solutions and high-quality, innovative products based on our extensive industry and consumer expertise. Growth in private brand bars will be supported by capacity expansion and a robust innovation pipeline, with continued focus on nutrition bars. For our branded nut &and trail mix business, we are focused on attracting new consumers through product innovation, broader distribution across traditional and alternative channels and expanded purchasing occasions, including club stores and e-commerce. Promotional and advertising investments are being prioritized to drive branded volume growth, supported by an omni-channel strategy across recipe nuts, snack nuts and trail mix. Our Long-Range Plan includes growth through product and packaging innovation and targeted, opportunistic acquisitions. To support these initiatives, beginning in the second quarter of fiscal 2025 and continuing into fiscal 2026,2027, we are making incremental significant capital investments in equipment and infrastructure improvements to expand our production capabilities, improve efficiency and enhance product offerings for our customers.

Additional challenges include, higher food and input costs driven by increasing underlying commodity acquisition costs as well as the actual, potential or threatened U.S. and foreign tariffs on key commodities, raw materials and manufacturing equipment. Ongoing uncertainty around global conflict in the Middle East and interest rates may further impact economic growth and consumer spending resulting in reduced demand for private brand and branded snack products, including snack nuts, trail mix and bars. We also continue to operate amid intense industry competition, potential economic downturns in the markets in which we operate and ongoing supply chain volatility. To stay compliant with recent changes in employment laws across states where we operate and remain competitive in attracting qualified talent, we expect our labor costs to continue to increase.

We continue to face changing marketplace trends that are impacting our categories. Retail prices across snack nuts and trail mix have generally risen due to increased commodity costs and evolving global trade agreements. These higher prices, paired with general economic uncertainty, are causing consumers to purchase fewer snack products. As a result, sales volumes for snack nuts, recipe nuts, trail mix and mainstream bars are declining for the Company and the industry overall. In addition, some of our larger snack food competitors have recently focused on lower prices for certain snack foods which could be a substitute for our products. Many consumers are shifting to private brands, more affordable nuts or bars or choosing snacks outside these categories altogether. Consumers are also shifting to more value-focused retailers, such as mass merchandising retailers and club stores, not all of which we distribute or sell to. Additionally, emerging health and wellness trendstrends, use of GLP-1 drugs and other consumer health priorities may also impact consumers' purchasing behavior, including decreased purchasing of snack foods. In response, we are focusing on our strengths by leveraging our expertise in snack nut and trail mix and bars categories, improving efficiency, innovating in product and packaging and carefully managing trade spending and pricing to support our products.

Global supply chain pressures have eased compared to past fiscal years,years. butHowever, intermittent challenges, delays and extended lead-times still exist for certain raw materials and inputs. Overall packaging and ingredient inflation appears to have moderated into ourduring fiscal 2026,2026. butHowever there is still uncertainty within the supply chain from the U.S. government's tariffs policy on imports from foreign countries and corresponding retaliatory tariffs from foreign countries. Any incremental import tariffs will increase the cost of certain raw materials we use in our businessbusiness, and our financial performance may be adversely impacted if we cannot pass on the cost increases in the form of price increases to our customers. In November 2025, the U.S. government removed tariffs for several food categories, including cocoa and cashews among others, which have no domestic production. The ultimate impact of tariffs may be difficult to predict as their amount and duration is uncertain, making our planning process more difficult. The threat of tariffs may also have adverse implications to our business and the business of our suppliers and customers. While we do not have direct exposure to suppliers in Venezuela, Russia, Ukraine or Israel, the conflicts and prospects for conflict in these regions could continue to result in volatile commodity markets, supply chain disruptions and increased costs, including shipping costs.

Trucking capacity continues to slowly decline, potentially leading to further instability in the transportation industry. While indicators suggest transportation prices are stabilizing, the overall transportation environment remains unpredictable. Additionally, fuel prices have been unpredictable and may vary depending on the level of economic activity in the areas where we ship and receive shipmentsgoods andas well as prevailing oil prices. We have seen fuel prices increase due to recent military operations in Iran, which have led to significant spikes in crude oil. Fuel prices could continue to remain volatile as the prevailingconflict price of oil.persists.

OurAmong our most significant ingredient requirements includeare cocoa products, dried fruits, sweeteners, vegetable oils, rolled oats, flour and dairy. Many of these materials and their associated costs are subject to price fluctuations from several factors, including changing commodity markets, other market conditions, demand for raw materials, weather, growing and harvesting conditions, climate change, energy costs, currency fluctuations, supplier capacities, governmental actions, import and export requirements (including tariffs), ongoing political instability and other factors beyond our control.

The cocoa supply-demand outlook is showing signs of improvementimproving following three consecutive years of supply deficits, benefiting from recovery in Ivory Coast and Ghana as well as strong exports from Ecuador; however, cocoa prices still remain above long-term averages. Global cocoa supply balances remain historically tight, while consumption datahas reflectsdeclined Northdue Americanto demandelevated reductionsprice amidlevels higherover prices.the past two years. Additionally, as costs increase due to these circumstances or due to overall inflationary pressures, there is a further risk we cannot pass (in part or in full) such potential cost increases on to our customers or in a timely manner. If we cannot align our input costs with prices for our products, our financial performance could be impactedadversely adversely.impacted.

Our net sales of $314.8$281.8 million for the secondthird quarter of fiscal 2026 increased $13.7$20.9 million, or 4.6%,8.0%, from our net sales of $301.1$260.9 million for the secondthird quarter of fiscal 2025. Net sales for the first twenty-sixthirty-nine weeks of fiscal 2026 increased by $36.2$57.1 million, or 6.3%,6.8%, to $613.5$895.2 million compared to the first twenty-sixthirty-nine weeks of fiscal 2025.

Sales volume, measured as pounds sold to customers, decreased 9.7%0.3% compared to the secondthird quarter of fiscal 2025. Sales volume for the first twenty-sixthirty-nine weeks of fiscal 2026 decreased 5.3%3.7% compared to the first twenty-sixthirty-nine weeks of fiscal 2025.

Gross profit increaseddecreased $6.9$2.1 million, and our gross profit margin, as a percentage of net sales, increaseddecreased to 18.8%19.1% for the secondthird quarter of fiscal 2026, compared to 17.4%21.4% for the secondthird quarter of fiscal 2025. Gross profit increased $14.5$12.3 million, and our gross profit margin increased to 18.5%18.7% from 17.1%18.5% for the first twenty-sixthirty-nine weeks of fiscal 2026 compared to the first twenty-sixthirty-nine weeks of fiscal 2025.

Total operating expenses for the secondthird quarter of fiscal 2026 increased by $0.3$2.3 million, or 0.9%,8.3%, compared to the secondthird quarter of fiscal 2025. As a percentage of net sales, total operating expenses inwas 10.6% for both the secondthird quarter of fiscal 2026 decreased to 10.5% from 10.9% for the second quarter ofand fiscal 2025. Total operating expenses for the first twenty-sixthirty-nine weeks of fiscal 2026 decreasedincreased by $2.1$0.1 million, or 3.4%,0.2%, compared to the first twenty-sixthirty-nine weeks of fiscal 2025. As a percentage of net sales, total operating expenses for the first twenty-sixthirty-nine weeks of fiscal 2026 decreased to 9.8%10.1% from 10.8% for the first twenty-sixthirty-nine weeks of fiscal 2025.

The total value of inventories on hand at the end of the secondthird quarter of fiscal 2026 increaseddecreased $29.6$5.2 million, or 14.4%,2.0%, compared to the total value of inventories on hand at the end of the secondthird quarter of fiscal 2025.

We have seen acquisition costs for most major nut types, except for walnuts and peanuts, increase in the 2025 crop year (which falls into our current 2026 fiscal year). We completed procurement of inshell walnuts during the first half of fiscal 2026.2026 During the third quarter, we will determineand the final total payments due to our walnut growers were determined in the current quarter. The final prices paid, and remaining to be paid to the walnut growersgrowers, were based upon current market prices and other factorsfactors, such as crop size and export demand. WeA havelarge estimatedmajority of payments to walnut growers were completed in the liabilitythird quarter of fiscal 2026. Remaining amounts to be paid to walnut growers as of March 26, 2026 are final and are not subject to revision. We decreased our walnut growers and our walnut inventory costs using currently available information. Any difference between our estimatedgrower liability andby theapproximately actual$2.8 payments will be determinedmillion during the third quarter of fiscal 20262026, as the final payments due to walnut growers are slightly less than the amounts estimated at the end of the second quarter. This decrease is insignificant compared to our total inshell walnut procurement costs for the year, and willthe beportion recognizedof inthe adjustment to cost of sales was immaterial to our financial results atof that time.operations.

In the secondthird quarter of fiscal 2026, our net sales increased 4.6%8.0% to $314.8$281.8 million, compared to net sales of $301.1$260.9 million for the secondthird quarter of fiscal 2025. The net sales increase was primarily driven by aan 15.8%8.3% increase in weighted average selling price per pound, which was primarily due to pricing actions taken in response to higher commodity acquisition costs for all major tree nuts and peanuts.peanuts as well as a shift in product mix toward higher priced items in the current quarter. Sales volume, which is defined as pounds sold to customers, decreasedremained 9.7%.essentially flat. Sales volume decreaseddeclined for substantially all major product types. Approximately half of the sales volume decline was attributable to granola soldtypes in the contractthird manufacturingquarter channel,but whichincreased was offset by increases of sales volume offor walnuts, almondspecans and pecans.mixed nuts.

For the first twenty-sixthirty-nine weeks of fiscal 2026 our net sales were $613.5$895.2 million, an increase of $36.2$57.1 million, or 6.3%,6.8%, compared to the same period of fiscal 2025. The increase in net sales was attributable to aan 12.2%11.0% increase in the weighted average selling price per pound, which was primarily due to pricing actions taken in response to higher commodity acquisition costs for all major tree nuts. Sales volume decreased 5.3%3.7% compared to the same period in the prior fiscal year. Sales volume decreaseddeclined for bars,substantially granola,all trailmajor mixproduct andtypes cashews,but while sales volumeincreased for walnuts, peanuts, pecans and almonds increased.peanuts.

Sales of branded products were approximately 20% and 21%13% of total consumer sales duringfor both the secondthird quarter of fiscal 2026 and fiscal 2025, respectively.2025. Fisher branded products were approximately 78%53% and 72%56% of branded sales during the secondthird quarter of fiscal 2026 and fiscal 2025, respectively, with Orchard Valley Harvest and Southern Style Nuts branded products accounting for the majority of the remaining branded product sales.

Sales of branded products were approximately 17%16% and 19%17% of total consumer sales during the first twenty-sixthirty-nine weeks of fiscal 2026 and fiscal 2025, respectively. Fisher branded products were approximately 74%68% and 66%63% of branded sales during the first twenty-sixthirty-nine weeks of fiscal 2026 and fiscal 2025, respectively, with Orchard Valley Harvest and Southern Style Nuts branded products accounting for the majority of the remaining branded product sales.

Net sales in the consumer distribution channel increased $11.8$18.2 million, or 4.7%,8.5%, and sales volume decreased 8.4%4.5% in the secondthird quarter of fiscal 2026, compared to the secondthird quarter of fiscal 2025. The sales volume decrease was driven by a 7.9%5.3% decrease in private brand sales volume due to lower volume in bars and, to a lesser extent,while nuts and trail mix.mix sales volume remained relatively flat. Bar sales were impacted by continued category softness at a mass merchandise retailer. Our strategic decision to reduce sales to a grocery store retailer also contributed to the overall decline in bar volume. Nuts and trail mix volume was impacted by higherelevated retail prices, softreduced demand,promotional including consumer downsizing,activity and reduceddiscontinuation distributionof atunderperforming a major mass merchandiser.items. These declines were partiallylargely offset by new private brand walnut business with an existing customer and improvedincreased performancesales resulting from promotional pricing on walnuts and peanuts at anotheran massonline merchandiser. Bar sales declined as prior year's volumes were elevated by low industry-wide inventory levels and the lingering impact of a national brand recall, which temporarily boosted private label bars demand. A strategic reduction in sales to one grocery retailer also contributed to the bars decline.retailer. Branded sales volume decreasedincreased 11.2%3.3% due to lostlimited distributionopportunistic orders of Orchard Valley Harvest at a major non-food customer and the timing of Fisher snack promotions also at a major non-food customer.

In the first twenty-sixthirty-nine weeks of fiscal 2026, net sales in the consumer distribution channel increased $24.5$42.7 million, or 5.1%,6.1%, and sales volume decreased 6.8%6.1% compared to the same period of fiscal 2025. The sales volume decrease was driven by a 5.5% decrease in private brand sales volume due to lower volume in bars, nuts and trail mix, bars and peanut butter. Nuts and trail mix volume was impacted by higher retail prices, consumer downsizing, soft demand and reduced distribution at a major mass merchandiser. These nuts and trail mix declines were partially offset by new business with an existing customer. Private brand bars declined due the reasons cited in the quarterly comparison,comparison. whichNuts wereand partiallytrail offsetmix volume was impacted by growththe atreasons acited currentin customer.the quarterly comparison. Peanut butter declined primarily due to a product discontinuation at a mass merchandiser. Branded sales volume decreased 14.5%10.2% due to lost distribution of Orchard Valley Harvest citedat ina themajor quarterlynon-food comparison.customer.

Net sales in the contractcommercial manufacturingingredients distribution channel increased $0.5$3.6 million, or 2.2%,14.6%, and sales volume decreasedincreased 26.5%by 14.3% in the secondthird quarter of fiscal 2026 compared to the secondthird quarter of fiscal 2025. The decrease in sales volume increase was due to decreasedhigher granolafood processedservices sales at theexisting Lakevillecustomers facility, which was partially offset by increased snack nutand sales to atwo customernew addedcustomers. duringIncreased sales of peanut crushing stock also contributed to the secondoverall quarter of the prior year.growth.

In the first twenty-sixthirty-nine weeks of fiscal 2026, net sales in the contractcommercial manufacturingingredients distribution channel increased $6.0$9.3 million, or 13.9%,11.9%, and sales volume decreasedincreased 7.6%8.6% compared to the same period of fiscal 2025. The sales volume decreaseincrease was due to the reasons cited in the quarterly comparison along with lower peanut and peanut butter to a major customer. This was partially offset by the same increase cited in the quarterly comparison.

Gross profit increaseddecreased $6.9$2.1 million, or 13.2%,3.8%, to $59.2$53.8 million for the secondthird quarter of fiscal 2026, compared to $52.3$55.9 million for the secondthird quarter of fiscal 2025. The increasedecrease in gross profit was primarily due primarily to highersignificantly netlower salesinventory andvaluation selling prices more closely aligned with commodity acquisition costsadjustments compared to the secondthird quarter of fiscal 2025.2025, Additionally,which reducedwas manufacturingpartially spendingoffset andby operationalhigher efficienciesnet contributed to the overall gross profit increase.sales. Our gross profit margin, as a percentage of net sales, increaseddecreased to 18.8%19.1% for the secondthird quarter of fiscal 2026 compared to 17.4%21.4% for the secondthird quarter of fiscal 2025, mainly due to the factors mentioned previously.

Gross profit was $113.3$167.0 million for the first twenty-sixthirty-nine weeks of fiscal 2026 compared to $98.8$154.7 million for the first twenty-sixthirty-nine weeks of fiscal 2025 for the same reasons cited in the quarterly comparison. Our gross profit margin, as a percentage of net sales, increased to 18.5% for the first twenty-six weeks of fiscal 2026 compared to 17.1% for the first twenty-six weeks of fiscal 2025 mainly due to thepricing factorsmore mentionedclosely previouslyaligned with commodity acquisition costs and a one time pricing concession in the first quarter of fiscal 2025 for a bars customer which did not recur in fiscal 2026. Our gross profit margin, as a percentage of net sales, increased to 18.7% for the first thirty-nine weeks of fiscal 2026 compared to 18.5% for the first thirty-nine weeks of fiscal 2025.

Total operating expenses for the secondthird quarter of fiscal 2026 increased $0.3$2.3 million, or 0.9%,8.3%, to $33.2$30.0 million. Operating expenses decreasedwere to 10.5%10.6% of net sales for both the secondthird quarter of fiscal 2026,2026 compared to 10.9% of net sales for the second quarter ofand fiscal 2025.

AdministrativeSelling expenses for the firstthird twenty-six weeksquarter of fiscal 2026 increasedwere $1.3$19.3 million, an increase of $0.6 million, or 6.5%,3.4%, to $21.2 million comparedfrom the firstthird twenty-six weeksquarter of fiscal 2025. The increase was primarilydriven due toby a $2.9$1.5 million increase in incentive compensation expense and $0.3 million increase in commissions expense. ThisThese wasincreases partiallywere largely offset by a $0.6 million decrease in personnelrent and recruitment expensesexpense and a $0.6$0.5 million decrease in losssalary on asset disposals.expenses.

Due to the factors discussed above, income from operations was $26.0$23.8 million, or 8.3%8.4% of net sales, for the secondthird quarter of fiscal 2026, compared to $19.4$28.2 million, or 6.4%10.8% of net sales, for the secondthird quarter of fiscal 2025.

Due to the factors discussed above, income from operations was $53.0$76.8 million, or 8.6% of net sales, for the first twenty-sixthirty-nine weeks of fiscal 2026, compared to $36.4$64.6 million, or 6.3%7.7% of net sales, for the first twenty-sixthirty-nine weeks of fiscal 2025.

Interest expense was $0.5 million for the secondthird quarter of fiscal 2026, compared to $0.8$1.1 million for the secondthird quarter of fiscal 2025 due to lower average line of credit debt levels.

Interest expense was $1.5$2.0 million for the first twenty-sixthirty-nine weeks of fiscal 2026, compared to $1.3$2.3 million for the first twenty-sixthirty-nine weeks of fiscal 2025.

Net rental and miscellaneous expense was $1.2$0.6 million for both the firstthird twenty-six weeksquarter of fiscal 2026,2026 compared to $0.8 million for the first twenty-six weeks ofand fiscal 2025.

Pension expense (excluding service costs) was $0.4 million for both the secondthird quarter of fiscal 2026 and fiscal 2025.

Pension expense (excluding service costs) was $0.8$1.2 million for the first twenty-sixthirty-nine weeks of fiscal 2026, compared to $0.7$1.1 million for the first twenty-sixthirty-nine weeks of fiscal 2025.

Income tax expense was $6.6$5.4 million, or 26.7%24.4% of income before income taxes, for the secondthird quarter of fiscal 2026, compared to $4.3$6.0 million, or 24.0%22.9% of income before income taxes, for the secondthird quarter of fiscal 2025. The increase in the effective tax rate is primarily due to an increase in the disallowed deduction related to officer compensation.

Income tax expense was $12.9$18.3 million, or 26.0%25.5% of income before income taxes, for the first twenty-sixthirty-nine weeks of fiscal 2026 compared to $8.4$14.3 million, or 24.9%24.0% of income before income taxes, for the first twenty-sixthirty-nine weeks of fiscal 2025. The increase in the effective tax rate is primarily due to the reason cited in the quarterly comparison.

Net income was $18.0$16.8 million, or $1.54$1.44 per common share basic and $1.53$1.43 per common share diluted, for the secondthird quarter of fiscal 2026, compared to $13.6$20.2 million, or $1.17$1.73 per common share basic and $1.16$1.72 per common share diluted, for the secondthird quarter of fiscal 2025.

Net income was $36.7$53.5 million, or $3.14$4.58 per common share basic and $3.12$4.55 per common share diluted, for the first twenty-sixthirty-nine weeks of fiscal 2026, compared to $25.3$45.4 million, or $2.17$3.90 per common share basic and $2.16$3.87 per common share diluted, for the first twenty-sixthirty-nine weeks of fiscal 2025.

The primary uses of cash are to fund our current operations, fulfill contractual obligations, pursue our Long-Range Plan through growing our branded and private brand nut and bar businesses, consummate and integrate business acquisitions, return cash to our stockholders through dividends, repay indebtedness and pay amounts owed under the Retirement Plan. Also, various uncertainties, including cost uncertainties, could result in additional or unexpected uses of cash. The primary sources of cash are results of operations and availability under our Credit Facility. Beginning in the second quarter of fiscal 2025 and continuing throughoutinto fiscal 2026,2027, we will invest approximately $90.0 million in capital expenditures and related expenses, excluding any applicable tariffs, to acquire and install equipment, and make related infrastructure improvements to expand our production capabilities, increase our efficiency and further enhance our product offerings to our customers. Approximately half of these expenditures are payable to equipment vendors located in Europe, and most of those payments will be denominated in foreign currency. DependingDue on the level of tariffs in place at the time of delivery, andto the potential for unfavorable changes in foreign currency exchange rates, the ultimate cost of such equipment purchases could increaseincrease. significantly. During the fourth quarter ofIn fiscal 2025, we obtained an equipment loan to finance a portion of this capital investment and intend to fund the remainder with borrowings under our Credit Facility or with available cash generated from our operations. We anticipate that expected net cash flow generated from operations and amounts available pursuant to the Credit Facility and the Equipment Loan (as defined below) will be sufficient to fund our operations and capital expenditures for the next twelve months. Our available credit under our Credit Facility has allowed us to reinvest in the Company through capital expenditures, develop new products, pay cash dividends, consummate strategic investments and business acquisitions and explore other growth strategies outlined in our Long-Range Plan.

Cash flows from operating activities have historically been driven by net income but are also significantly influenced by inventory requirements, which can change based upon fluctuations in both quantities and market prices of the various nuts andnuts, nut products and other commodities or other input materials we buy and sell. Current market trends in nut prices and crop estimates also impact nut procurement.

The following table sets forth certain cash flow information for the first halfthree quarters of 2026 and 2025, respectively (dollars in thousands):