Annual Statements Open main menu
  1. Annual Statements
  2. » Companies
  3. » SANFILIPPO JOHN B & SON INC
  4. » Quarter Report: 2005 December (Form 10-Q)

SANFILIPPO JOHN B & SON INC - Quarter Report: 2005 December (Form 10-Q)

e10vq
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 29, 2005
Commission File Number 0-19681
JOHN B. SANFILIPPO & SON, INC.
A Delaware Corporation
EIN 36-2419677
2299 Busse Road
Elk Grove Village, Illinois 60007
(847) 593-2300
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. T Yes £ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One)
Large accelerated filer £ Accelerated filer T Non-accelerated filer £
Indicate by check mark whether the registrant is a shell company. £ Yes T No
As of February 7, 2006, 8,103,599 shares of the Registrant’s Common Stock, $0.01 par value per share, excluding 117,900 treasury shares, and 2,597,426 shares of the Registrant’s Class A Common Stock, $0.01 par value per share, were outstanding.
 
 

 

Table of Contents

JOHN B. SANFILIPPO & SON, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 29, 2005
INDEX
         
    Page  
       
       
    3  
    5  
    6  
    7  
    12  
    24  
    24  
       
    25  
    25  
    25  
    25  
    26  
 Limited Waiver and First Amendment to Note Purchase Agreement
 Seventh Amendment to Credit Agreement
 Revolving Credit Note
 Revolving Credit Note
 Termination Agreement
 Certification of Jasper B. Sanfilippo Pursuant to Section 302
 Certification of Michael J. Valentine Pursuant to Section 302
 Certification of Jasper B. Sanfilippo Pursuant to Section 906
 Certification of Michael J. Valentine Pursuant to Section 906

2

Table of Contents

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except earnings per share)
                                 
    For the Quarter Ended     For the Twenty-six Weeks Ended  
    December 29,     December 23,     December 29,     December 23,    
    2005     2004     2005     2004  
Net sales
   $ 191,077     $ 183,024     $ 329,735     $ 317,669  
Cost of Sales
     174,938       158,034       300,316       275,753  
 
                        
Gross profit
     16,139       24,990       29,419       41,916  
 
                        
Operating expenses:
                                
Selling expenses
     11,135       10,908       21,021       20,756  
Administrative expenses
     3,742       3,260       7,218       6,013  
 
                        
Total operating expenses
     14,877       14,168       28,239       26,769  
 
                        
Income from operations
     1,262       10,822       1,180       15,147  
 
                        
Other income (expense):
                                
Interest expense ($156, $177, $318 and $360 to related parties)
     (1,149 )     (416 )     (2,664 )     (727 )
Rental and miscellaneous (expense) income, net
     (122 )     120       (268 )     296  
 
                        
Total other expense, net
     (1,271 )     (296 )     (2,932 )     (431 )
 
                        
(Loss) income before income taxes
     (9 )     10,526       (1,752 )     14,716  
Income tax expense (benefit)
     55       4,105       (560 )     5,739  
 
                        
Net (loss) income
   $ (64 )   $ 6,421     $ (1,192 )   $ 8,977  
 
                        
 
                                
Basic (loss) earnings per common share
   $ (0.01 )   $ 0.61     $ (0.11 )   $ 0.85  
 
                        
Diluted (loss) earnings per common share
   $ (0.01 )   $ 0.60     $ (0.11 )   $ 0.84  
 
                        
The accompanying notes are an integral part of these consolidated financial statements.

3

Table of Contents

JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands, except per share amounts)
                         
    December 29,             December 23,  
    2005     June 30, 2005     2004  
ASSETS
                        
CURRENT ASSETS:
                        
Cash
   $ 3,245     $ 1,885     $ 43,438  
Accounts receivable, less allowances of $5,887, $3,729 and $3,125
     47,208       39,002       48,488  
Inventories
     209,488       217,624       209,766  
Income taxes receivable
     1,818       —       —  
Deferred income taxes
     1,808       1,742       1,322  
Prepaid expenses and other current assets
     1,537       1,663       3,107  
 
                  
TOTAL CURRENT ASSETS
     265,104       261,916       306,121  
 
                  
 
                        
PROPERTY, PLANT AND EQUIPMENT:
                        
Land
     10,353       9,333       1,863  
Buildings
     66,442       66,288       66,177  
Machinery and equipment
     106,977       104,703       100,935  
Furniture and leasehold improvements
     5,582       5,437       5,437  
Vehicles
     3,078       3,070       3,070  
Construction in progress
     26,752       12,771       2,591  
 
                  
 
     219,184       201,602       180,073  
Less: Accumulated depreciation
     116,709       112,599       108,377  
 
                  
 
     102,475       89,003       71,696  
Rental investment property, less accumulated depreciation of $528, $128 and $0
     28,365       28,766       —  
 
                  
 
                        
TOTAL PROPERTY, PLANT AND EQUIPMENT
     130,840       117,769       71,696  
 
                  
 
                        
Intangible asset – minimum retirement plan liability
     10,467       —       —  
Cash surrender value of officers’ life insurance and other assets
     4,564       4,468       4,305  
Development agreement
     6,802       6,802       4,944  
Goodwill, less accumulated amortization of $1,262
     1,242       1,242       1,242  
Brand name, less accumulated amortization of $5,858, $5,645 and $5,432
     2,062       2,275       2,488  
 
                  
 
                        
TOTAL ASSETS
   $ 421,081     $ 394,472     $ 390,796  
 
                  
The accompanying notes are an integral part of these consolidated financial statements.

4

Table of Contents

JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands, except per share amounts)
                         
    December 29,             December 23  
    2005     June 30, 2005     2004  
LIABILITIES & STOCKHOLDERS’ EQUITY
                        
CURRENT LIABILITIES:
                        
Revolving credit facility borrowings
   $ 27,817     $ 66,561     $ —  
Current maturities of long-term debt, including related party debt of $751, $703 and $650
     72,073       10,611       1,053  
Accounts payable, including related party payables of $799, $1,113 and $622
     75,142       29,908       89,887  
Book overdraft
     12,640       3,047       12,655  
Accrued payroll and related benefits
     5,839       5,696       5,068  
Other accrued expenses
     8,975       7,534       5,313  
Income taxes payable
     —       795       2,745  
 
                  
TOTAL CURRENT LIABILITIES
     202,486       124,152       116,721  
 
                  
 
                        
LONG-TERM LIABILITIES:
                        
Long-term debt, less current maturities, including related party debt of $3,541, $3,929 and $4,300
     5,275       67,002       77,226  
Retirement plan
     11,197       —       —  
Deferred income taxes
     6,817       7,143       6,380  
 
                  
TOTAL LONG-TERM LIABILITIES
     23,289       74,145       83,606  
 
                  
 
                        
COMMITMENTS AND CONTINGENCIES
                        
 
                        
STOCKHOLDERS’ EQUITY:
                        
Class A Common Stock, convertible to Common Stock on a per share basis, cumulative voting rights of ten votes per share, $.01 par value; 10,000,000 shares authorized, 2,597,426 shares issued and outstanding
     26       26       26  
Common Stock, non-cumulative voting rights of one vote per share, $.01 par value; 17,000,000 shares authorized, 8,103,559, 8,100,349 and 8,087,974 shares issued and outstanding
     81       81       81  
Capital in excess of par value
     99,487       99,164       98,980  
Retained earnings
     96,916       98,108       92,586  
Treasury stock, at cost; 117,900 shares of Common Stock
     (1,204 )     (1,204 )     (1,204 )
 
                  
TOTAL STOCKHOLDERS’ EQUITY
     195,306       196,175       190,469  
 
                  
 
                        
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
   $ 421,081     $ 394,472     $ 390,796  
 
                  
The accompanying notes are an integral part of these consolidated financial statements.

5

Table of Contents

JOHN B. SANFILIPPO & SON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
                 
    For the Twenty-six Weeks Ended  
    December 29,     December 23,  
    2005     2004  
CASH FLOWS FROM OPERATING ACTIVITIES:
                
Net (loss) income
   $ (1,192 )   $ 8,977  
Depreciation and amortization
     5,071       5,488  
(Gain) on disposition of properties
     (2 )     (16 )
Deferred income tax benefit
     (392 )     (8 )
Tax benefit of option exercises
     —       46  
Stock-based compensation expense
     288       —  
Change in current assets and current liabilities:
                
Accounts receivable, net
     (8,206 )     (12,920 )
Inventories
     8,136       (82,307 )
Prepaid expenses and other current assets
     126       (1,004 )
Accounts payable
     45,234       73,499  
Accrued expenses
     1,584       (5,364 )
Income taxes receivable/payable
     (2,613 )     3,688  
Other operating assets
     661       (1,407 )
 
            
Net cash provided by (used in) operating activities
     48,695       (11,328 )
 
            
 
                
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Purchases of property, plant and equipment
     (5,312 )     (4,466 )
Facility expansion costs
     (12,234 )     (2,303 )
Development agreement costs
     —       (4,494 )
Proceeds from disposition of properties
     2       16  
Cash surrender value of officers’ life insurance
     (277 )     —  
 
            
Net cash used in investing activities
     (17,821 )     (11,247 )
 
            
 
                
CASH FLOWS FROM FINANCING ACTIVITIES
                
Borrowings under revolving credit facility
     47,869       36,008  
Repayments of revolving credit borrowings
     (86,613 )     (41,277 )
Issuance of long-term debt
     —       65,000  
Principal payments on long-term debt
     (398 )     (618 )
Increase in book overdraft
     9,593       4,729  
Issuance of Common Stock under option plans
     24       86  
Tax benefit of stock options exercised
     11       —  
 
            
Net cash (used in) provided by financing activities
     (29,514 )     63,928  
 
            
 
                
NET INCREASE IN CASH
     1,360       41,353  
Cash, beginning of period
     1,885       2,085  
 
            
Cash, end of period
   $ 3,245     $ 43,438  
 
            
 
                        
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
                
Capital lease obligations incurred
     133       —  
The accompanying notes are an integral part of these consolidated financial statements.

6

Table of Contents

JOHN B. SANFILIPPO & SON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — Basis of Presentation
John B. Sanfilippo & Son, Inc. (the “Company”) was incorporated under the laws of the State of Delaware in 1979 as the successor by merger to an Illinois corporation that was incorporated in 1959. As used herein, unless the context otherwise indicates, the term “Company” refers collectively to John B. Sanfilippo & Son, Inc. and its previously wholly owned subsidiary, JBS International, Inc., which was dissolved in November, 2004. The Company’s fiscal year ends on the final Thursday of June each year, and typically consists of fifty-two weeks (four thirteen week quarters). Fiscal 2005, however, contained fifty-three weeks, with the fourth quarter containing fourteen weeks.
In the opinion of the Company’s management, the accompanying statements present fairly the consolidated statements of operations, consolidated balance sheets and consolidated statements of cash flows, and reflect all adjustments, consisting only of normal recurring adjustments which, in the opinion of management, are necessary for the fair presentation of the results of the interim periods. The interim results of operations are not necessarily indicative of the results to be expected for a full year. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s 2005 Annual Report filed on Form 10-K for the year ended June 30, 2005.
Note 2 — Inventories
Inventories are stated at the lower of cost (first in, first out) or market. Inventories consist of the following (in thousands):
                         
    December 29,     June 30,     December 23,  
    2005     2005     2004  
Raw material and supplies
   $ 115,360     $ 99,851     $ 121,310  
Work-in-process and finished goods
     94,128       117,773       88,456  
 
                  
Inventories
   $ 209,488     $ 217,624     $ 209,766  
 
                  
Note 3 — Earnings Per Common Share
Earnings per common share is calculated using the weighted average number of shares of Common Stock and Class A Common Stock outstanding during the period. The following table presents the reconciliation of the weighted average shares outstanding used in computing earnings per share:
                                 
    For the Quarter Ended     For the Twenty-six Weeks Ended  
    December 29,     December 23,     December 29,     December 23,  
    2005     2004     2005     2004  
Weighted average shares outstanding – basic
     10,582,562       10,562,470       10,581,365       10,560,847  
Effect of dilutive securities:
                                
Stock options
     —       147,754       —       153,508  
 
                        
Weighted average shares outstanding – diluted
     10,582,562       10,710,224       10,581,365       10,714,355  
 
                        
366,440 stock options with a weighted average exercise price of $13.62 were excluded from the computation of diluted earnings per share for both the quarter and twenty-six weeks ended December 29, 2005 due to the net loss for both the quarterly and twenty-six week periods. 3,000 stock options, with a weighted average exercise price of $32.30, were excluded from the computation of diluted earnings per share for both the quarter and twenty-six weeks ended December 23, 2004 due to the exercise price exceeding the average market price of the Common Stock.
Note 4 – Stock-Based Compensation
Under the Company’s stock option plans, the Company may grant incentive and non-qualified options to purchase Common Stock at an exercise price equal to or greater than the fair market value at the grant date, as determined by the Board of Directors. Options vest over four years and vested options are exercisable in part or in full at any time prior to the expiration date of 5 to 10 years from the date of the grant.
At the Company’s annual meeting of stockholders on October 28, 1998, the Company’s stockholders approved the 1998 Equity Incentive Plan under which awards of non-qualified options and stock-based awards may be made.

7

Table of Contents

There are 700,000 shares of common stock authorized for issuance to certain key employees and “outside directors” (i.e. directors who are not employees of the Company or any of its subsidiaries). At December 29, 2005, there were 157,000 options available for distribution under this plan.
In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”). This Statement requires companies to expense the estimated fair value of stock options and similar equity instruments issued to employees over the requisite service period. FAS 123R eliminates the alternative to use the intrinsic method of accounting provided for in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), which generally resulted in no compensation expense recorded in the financial statements related to the grant of stock options to employees if certain conditions were met.
Effective for the first quarter of fiscal 2006, the Company adopted SFAS 123R using the modified prospective method, which requires the Company to record compensation expense for all awards granted after the date of adoption, and for the unvested portion of previously granted awards that remain outstanding at the date of adoption. Accordingly, prior period amounts presented herein have not been restated to reflect the adoption of SFAS 123R.
Prior to the adoption of SFAS 123R, the Company included all tax benefits resulting from the exercise of stock options in operating cash flows in its consolidated statements of cash flows. In accordance with SFAS 123R, for the period beginning with first quarter of fiscal 2006, the Company includes the tax benefits from the exercise of stock options in financing cash flows in its consolidated statement of cash flows.
The Company determines fair value of such awards using the Black-Scholes option-pricing model. The following weighted average assumptions were used to value the Company’s grants through the second quarter of 2006: 3.75 and 6.25 years expected life; expected stock volatility from 51.2% to 56.9%; risk-free interest rate of 4.07% to 4.44%; expected forfeitures of 0%; and expected dividend yield of 0% during the expected term.
The expected term of the awards was determined using the “simplified method” as stated in SEC Staff Accounting Bulletin No. 107 that utilizes the following formula: ((vesting term + original contract term)/2). Expected stock volatility was determined based on historical volatility for either the 3.75 or 6.25 year-period preceding the measurement date. The risk-free rate was based on the yield curve in effect at the time options were granted, using U.S. treasury constant maturities over the expected life of the option. Expected forfeitures were determined based on the Company’s expectations and past experiences. Expected dividend yield was based on the Company’s dividend policy at the time the options were granted.
Under the fair value recognition provisions of SFAS 123R, stock-based compensation is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. Stock-based compensation expense was $156 thousand and $288 thousand for the quarter and twenty six weeks ended December 29, 2005, respectively, and the related tax benefit for non-qualified stock options was $1 thousand and $3 thousand for the quarter and twenty-six weeks ended December 29, 2005, respectively.
Prior to the adoption of SFAS 123R, the Company accounted for stock-based awards to employees using the intrinsic method in accordance with APB 25. The following table illustrates the effect on net income for the quarter and twenty-six weeks ended December 23, 2004 and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123R (in thousands, except per-share amounts):
                 
    December 23, 2004  
          For the  
    For the     Twenty-six  
    Quarter Ended     Weeks Ended  
Reported net income
   $ 6,421     $ 8,977  
Less: Compensation cost determined under the fair value method
     85       148  
 
            
Pro forma net income
   $ 6,336     $ 8,829  
 
            
 
                
Basic earnings per common share:
                
As reported
   $ 0.61     $ 0.85  
Pro forma
   $ 0.60     $ 0.84  
Diluted earnings per common share:
                
As reported
   $ 0.60     $ 0.84  
Pro forma
   $ 0.59     $ 0.82  

8

Table of Contents

Activity in the Company’s stock option plans for the first twenty-six weeks of fiscal 2006 was as follows:
                                 
                    Weighted     Aggregate  
                    Average     Intrinsic  
            Weighted     Remaining     Value  
            Exercise     Contractual     (in)  
Options   Shares     Price     Term     thousands)  
Outstanding, beginning of year
     314,190     $ 12.37                  
Activity:
                                
Granted
     64,500       18.82                  
Exercised
     (3,250 )     7.48                  
Forfeited
     (9,000 )     9.64                  
 
                        
Outstanding, end of period
     366,440     $ 13.62       7.18     $ 2,411  
 
                        
Exercisable, end of period
     175,278     $ 10.30       6.52     $ 858  
 
                        
The weighted average fair value of options granted and the total intrinsic value of options exercised was $9.45 and $29 thousand, respectively, during the first twenty-six weeks of 2006.
A Summary of the status of the Company’s non-vested shares as of December 29, 2005, and changes during the twenty-six weeks ended December 29, 2005, is presented below:
                 
            Weighted-  
            Average Grant-  
Nonvested Shares   Shares     Date Fair Value  
Nonvested, beginning of year
     196,360     $ 7.09  
Activity:
                
Granted
     64,500       9.45  
Vested
     (67,198 )     6.33  
Forfeited
     (2,500 )     9.30  
 
                
Nonvested, end of period
     191,162     $ 8.12  
 
      
 
        
As of December 29, 2005, there was $1.47 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s stock option plans. The Company expects to recognize that cost over a weighted average period of 1.73 years. The total fair value of shares vested during the twenty-six weeks ended December 29, 2005 was $425 thousand.
Note 5 — Retirement Plan
On August 25, 2005, the Company’s Compensation, Nominating and Corporate Governance Committee approved a Supplemental Retirement Plan (the “SERP”) to cover certain executive officers of the Company. The purpose of the SERP is to provide an unfunded, non-qualified deferred compensation monthly benefit upon retirement, disability or death to a select group of management and key employees of the Company. The monthly benefit is based upon each individual’s earnings and his number of years of service. Administrative expenses include the following net periodic benefit costs (amounts in thousands):
                                 
    For the Quarter Ended     For the Twenty-six Weeks Ended  
    December 29,     December 23,     December 29,     December 23,
    2005     2004     2005     2004  
Service cost
   $ 115     $ —     $ 154     $ —  
Interest cost
     193       —       257       —  
Amortization of prior service cost
     239       —       319       —  
 
                        
Net periodic benefit cost
   $ 547     $ —     $ 730     $ —  
 
                        
Additionally, an intangible asset and an additional minimum liability for accumulated benefit obligations of $10.47 million were recorded upon adoption of the SERP during the first quarter of fiscal 2006.

9

Table of Contents

Note 6 — Distribution Channel and Product Type Sales Mix
The Company operates in a single reportable segment through which it sells various nut products through multiple distribution channels.
The following summarizes net sales by distribution channel (in thousands):
                                 
    For the Quarter Ended     For the Twenty-six Weeks Ended  
    December 29,     December 23,     December 29,     December 23,  
Distribution Channel   2005     2004     2005     2004  
Consumer
   $ 107,387     $ 102,948     $ 172,671     $ 173,656  
Industrial
     40,723       38,498       76,508       68,762  
Food Service
     16,826       15,011       33,273       29,094  
Contract Packaging
     11,494       11,092       21,972       21,615  
Export
     14,647       15,475       25,311       24,542  
 
                        
Total
   $ 191,077     $ 183,024     $ 329,735     $ 317,669  
 
                        
The following summarizes sales by product type as a percentage of total gross sales. The information is based on gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product type.
                                 
    For the Quarter Ended     For the Twenty-six Weeks Ended  
    December 29,     December 23,     December 29,     December 23,  
Product Type   2005     2004     2005     2004  
Peanuts
     17.2 %     18.2 %     19.0 %     20.8 %
Pecans
     26.8       27.9       26.0       25.5  
Cashews & Mixed Nuts
     22.1       23.2       21.5       23.4  
Walnuts
     13.3       11.6       11.6       10.3  
Almonds
     13.3       10.8       13.9       11.1  
Other
     7.3       8.3       8.0       8.9  
 
                          
Total
     100.0 %     100.0 %     100.0 %     100.0 %
 
                        
Note 7 — Comprehensive Income
The Company accounts for comprehensive income in accordance with SFAS 130, “Reporting Comprehensive Income”. The Company currently has no components of comprehensive income that are required to be disclosed separately. Consequently, comprehensive income equals net income for all periods presented.
Note 8 – Credit Facilities
The Company was not in compliance with the funded debt to twelve-month EBITDA ratio covenants under its Bank Credit Facility and its primary long-term financing facility (the “Note Agreement”) and the minimum twelve-month EBITDA requirement under its Bank Credit Facility as of December 29, 2005. The Company received waivers not to demand payment of amounts outstanding under these agreements for non-compliance with these three financial covenants as of December 29, 2005. However, the Company expects to not be in compliance with these same three covenants for the quarter ending March 30, 2006. Accordingly, $57.8 million of long-term was reclassified as a current liability. In addition to the waivers, the Bank Credit Facility was amended to provide an additional $20.0 million of availability and the Note Agreement was amended whereby an additional fee of 1.00% per annum will be incurred by the Company for the time period for which compliance with the funded debt to twelve-month EBITDA ratio is not obtained. Non-compliance with financial covenants constitutes an event of default as defined in the financing agreements. Upon an event of default, outstanding amounts, including accrued interest, under the financing facilities would become immediately due at the demand of the lenders. There is no assurance that the Company will be able to successfully renegotiate these financing agreements with its lenders or that the terms of the credit agreements will not be substantially changed. The inability of the Company to renegotiate the terms of its existing credit facilities or obtain new financing could have a material adverse effect on the Company’s business and financial position.

10

Table of Contents

Note 9 – Interest Cost
The following is a breakout of interest cost:
                                 
    For the Quarter Ended     For the Twenty-six Weeks Ended  
    December 29,     December 23,     December 29,     December 23,    
Distribution Channel   2005     2004     2005     2004  
Gross interest cost
   $ 1,465     $ 416     $ 3,231     $ 727  
Capitalized interest
     (316 )     —       (567 )     —  
 
                        
Interest expense
   $ 1,149     $ 416     $ 2,664     $ 727  
 
                        
Note 10 – Subsequent Events
Prior to acquiring the Elgin, Illinois site being used for the Company’s facility consolidation project, the Company and certain related party partnerships entered into a Development Agreement with the City of Elgin, Illinois (the “Development Agreement”) for the development and purchase of the land where a new facility could be constructed (the “Original Site”). The Development Agreement provided for certain conditions, including but not limited to the completion of environmental and asbestos remediation procedures, the inclusion of the property in the Elgin enterprise zone and the establishment of a tax incremental financing district covering the property. The Company fulfilled its remediation obligations under the Development Agreement during fiscal 2005. The Company’s costs under the Development Agreement totaling $6.8 million are recorded as “Other Assets” at December 29, 2005 and June 30, 2005 and $4.9 million at December 23, 2004. On February 1, 2006, the Company and the related party partnerships entered into a Termination Agreement with the City of Elgin whereby the Development Agreement was terminated and the City of Elgin became obligated to convey the property to the Company and the partnerships within thirty days. Upon such conveyance by the City of Elgin, the partnerships have agreed to transfer (by quit claim deed) their interests to the Company without consideration. After the property is conveyed, the Original Site will be marketed to potential buyers. The Company has reviewed the asset under the Development Agreement for realization, and concluded that no adjustment of the carrying value was required as of December 29, 2005.
The Company, along with related party partnerships that own a portion of the Company’s existing Chicago area facilities, is in the process of selling these facilities. The Company intends to lease back from the ultimate purchasers that portion of the facilities that are necessary to run the Company’s business while the facility consolidation project is completed in Elgin. The Company estimates that these sale and leaseback transactions will be consummated during the third quarter of fiscal 2006. Based upon the bids received, the Company believes that proceeds received from the sales will exceed the Company’s carrying value of these assets. The Company’s Board of Directors appointed an independent board committee to explore alternatives with respect to the Company’s existing leases for the properties owned by the related party partnerships. After negotiations with the partnerships, the independent committee approved a non-binding letter of intent whereby: (i) the current related party leases would terminate without penalty to the Company; (ii) the Company would receive $2.0 million for the portion of the Busse Road property that it owns; and (iii) the Company will sell its Selma, Texas properties to the partnerships for $14.3 million (an estimate of fair value and in excess of its carrying value) and lease them back. The sale price and rental rate for the Selma, Texas properties were determined by an independent appraiser. The lease for the Selma, Texas properties will have a ten-year term at a fair market value rent, with three five-year renewal options. In addition, the Company will have an option to repurchase these properties from the partnerships after five years at 95% of the then fair market value.

11

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements.
INTRODUCTION
The Company is a processor, packager, marketer and distributor of shelled and inshell nuts. The Company also markets or distributes, and in most cases manufactures or processes, a diverse product line of food and snack items, including peanut butter, candy and confections, natural snacks and trail mixes, sunflower seeds, corn snacks and sesame products. The Company sells to the consumer market under a variety of private labels and under the Company’s brand names, primarily Fisher. The Company also sells to the industrial food service contract packaging and export markets.
The Company’s results through the second quarter of fiscal 2006 were disappointing in terms of both sales and earnings. Net sales increased by 4.4% to $191.1 million for the second quarter of fiscal 2006 compared to $183.0 million for the second quarter of fiscal 2005, but sales volume measured in pounds decreased by 11.6%. Net sales increased by 3.8% to $329.7 million for the first twenty-six weeks of fiscal 2006 compared to $317.7 million for the first twenty-six weeks of fiscal 2005, but sales volume measured in pounds decreased by 11.1% over this period. The primary factor causing the decline in sales volume was the higher costs of tree nuts during the first half of fiscal 2006 when compared to the first half of fiscal 2005, which led to decreased demand for nut products. Net income decreased to a net loss of $0.1 million for the second quarter of fiscal 2006 compared to net income of $6.4 million for the second quarter of fiscal 2005. Net income decreased to a net loss of $1.2 million for the first twenty-six weeks of fiscal 2006 compared to net income of $9.0 million for the first twenty-six weeks of fiscal 2005.
The Company’s unfavorable operating results have caused non-compliance with certain restrictive covenants under its financing facilities. Specifically, the Company failed to achieve the minimum rolling twelve-month earnings before interest, taxes, depreciation and amortization (“EBITDA”) requirement under the Bank Credit Facility, as defined below, and exceeded the maximum allowable funded debt to twelve-month EBITDA ratio under both the Bank Credit Facility and the Note Agreement, as defined below. The Company received waivers not to demand payment of amounts outstanding under these agreements for non-compliance with these three financial covenants as of December 29, 2005. However, the Company expects to not be in compliance with these same three covenants for the quarter ending March 30, 2006. Accordingly, $57.8 million of long-term was reclassified as a current liability. In addition to the waivers, the Bank Credit Facility was amended to provide an additional $20.0 million of availability and the Note Agreement was amended whereby an additional fee of 1.00% per annum will be incurred by the Company for the time period for which compliance with the funded debt to twelve-month EBITDA ratio is not obtained. Non-compliance with financial covenants constitutes an event of default as defined in the financing agreements. Upon an event of default, outstanding amounts, including accrued interest, under the financing facilities would become immediately due at the demand of the lender. While the Company fully expects to renegotiate the terms of the Bank Credit Facility and the Note Agreement during the third quarter of fiscal 2006, there is no assurance that the Company will be able to successfully renegotiate these financing agreements with its lenders or that the terms of the credit agreements will not be substantially changed. If the Bank Credit Facility is not renewed, the Company believes that it will be able to secure necessary financing from other lenders who have expressed interest in negotiating with the Company. If the Company is not able to renegotiate the terms of its credit agreements, it will have to consider financing alternatives which might include identifying alternative sources of debt or equity capital, or an unplanned sale of assets or the curtailment of the facility consolidation project. The inability of the Company to renegotiate the terms of its existing credit facilities or obtain new financing could have a material adverse effect on the Company’s business and financial position.
The Company is currently undertaking a facility consolidation project as a means of expanding its production capacity and enhancing its operations efficiency. As a result, the Company will consolidate its six Chicago area facilities into a single location in Elgin, Illinois. Of the six current facilities, two facilities and approximately 20% of a third facility are owned by the Company. Eighty percent of the third facility, and a fourth facility, are leased by the Company from certain partnerships owned by executive officers and directors of the Company and their family members. The remaining two facilities are leased by the Company from independent third parties.
As part of the facility consolidation project, on April 15, 2005, the Company closed on the $48.0 million purchase of a site in Elgin, Illinois (the “Current Site”) with the final $46.0 million paid using available funds under the Bank Credit Facility. The Current Site includes both an office building and a warehouse. The Company is leasing 41.5% of the office building back to the seller for a three year period, with options for an additional seven years. The remaining portion of the office building may be leased to third parties. The 653,302 square foot warehouse building is being expanded to approximately 1,000,000 square feet and will be modified to accommodate the Company’s needs.

12

Table of Contents

Groundbreaking for the expansion occurred in August 2005. The construction is expected to be completed in the first half of calendar 2006. The Company’s existing Chicago area operations are expected to be moved to the Current Site over a three-year period as operations permit.
The Company performed an analysis of its existing assets at its Chicago locations, and based on this analysis identified those assets which will be transferred to the Current Site and those that will not. For those assets which are not expected to be transferred to the Current Site, the remaining depreciation period has been reduced to reflect the Company’s estimate of the useful lives of these assets. In addition to the assets being transferred, new machinery and equipment will also be installed at the Current Site. The Company currently anticipates that operations will be fully integrated into the Current Site by December 2008.
Total remaining capital expenditures for the facility consolidation project are estimated to be approximately $30 — $40 million, which the Company expects to finance through the Bank Credit Facility, available cash flow from operations, proceeds from the sale of existing facilities and rental income from the office building at the Current Site. The Bank Credit Facility expires on May 31, 2006. While the Company is currently negotiating with its lenders under the Bank Credit Facility and fully expects to extend the Bank Credit Facility, no assurances can be made that the Bank Credit Facility will be extended or renewed at favorable terms. Also, waivers and/or modifications to the Bank Credit Facility and Note Agreement will be required for the probable non-compliance with financial covenants under the Bank Credit Facility and Note Agreement for the third quarter of fiscal 2006. See “Factors That May Affect Future Results — Risks and Uncertainties Regarding Facility Consolidation Project.”
This facility consolidation project is anticipated to achieve two primary objectives. First, the consolidation is intended to generate cost savings through the elimination of redundant costs, such as interplant freight, and improvements in manufacturing efficiencies. Second, the new facility is expected to initially increase production capacity by 25% to 40% and to provide substantially more square footage than the aggregate space now available in the Company’s existing Chicago area facilities to support future growth in the Company’s business. The facility consolidation project is expected to allow the Company to pursue certain new business opportunities that currently are not available due to the lack of production capacity.
The Company, along with related party partnerships that own a portion of the Company’s existing Chicago area facilities, is in the process of selling these facilities. The Company intends to lease back from the ultimate purchasers that portion of the facilities that are necessary to run the Company’s business while the facility consolidation project is completed in Elgin. The Company estimates that these sale and leaseback transactions will be consummated during the third quarter of fiscal 2006. Based upon the bids received, the Company believes that proceeds received from the sales will exceed the Company’s carrying value of these assets. The Company’s Board of Directors appointed an independent board committee to explore alternatives with respect to the Company’s existing leases for the properties owned by the related party partnerships. After negotiations with the partnerships, the independent committee approved a non-binding letter of intent whereby: (i) the current related party leases would terminate without penalty to the Company; (ii) the Company would receive $2.0 million for the portion of the Busse Road property that it owns; and (iii) the Company will sell its Selma, Texas properties to the partnerships for $14.3 million (an estimate of fair value and in excess of its carrying value) and lease them back. The sale price and rental rate for the Selma, Texas properties were determined by an independent appraiser. The lease for the Selma, Texas properties will have a ten-year term at a fair market value rent, with three five-year renewal options. In addition, the Company will have an option to repurchase these properties from the partnerships after five years at 95% of the then fair market value.
Prior to acquiring the Current Site, the Company and certain related party partnerships entered into a Development Agreement with the City of Elgin, Illinois (the “Development Agreement”) for the development and purchase of the land where a new facility could be constructed (the “Original Site”). The Development Agreement provided for certain conditions, including but not limited to the completion of environmental and asbestos remediation procedures, the inclusion of the property in the Elgin enterprise zone and the establishment of a tax incremental financing district covering the property. The Company fulfilled its remediation obligations under the Development Agreement during fiscal 2005. The Company’s costs under the Development Agreement totaling $6.8 million are recorded as “Other Assets” at December 29, 2005. On February 1, 2006, the Company and the related party partnerships entered into a Termination Agreement with the City of Elgin whereby the Development Agreement was terminated and the City of Elgin became obligated to convey the property to the Company and the partnerships within thirty days. Upon such conveyance by the City of Elgin, the partnerships have agreed to transfer (by quit claim deed) their interests to the Company without consideration. After the property is conveyed, the Original Site will be marketed to potential buyers. The Company has reviewed the asset under the Development Agreement for realization, and concluded that no adjustment of the carrying value was required as of December 29, 2005.
The Company’s business is seasonal. Demand for peanut and other nut products is highest during the months of October, November and December. Peanuts, pecans, walnuts and almonds, the Company’s principal raw materials, are

13

Table of Contents

primarily purchased between August and February and are processed throughout the year until the following harvest. As a result of this seasonality, the Company’s personnel requirements rise during the last four months of the calendar year. This seasonality also impacts capacity utilization at the Company’s Chicago area facilities, with these facilities routinely operating at full capacity during the last four months of the calendar year. The Company’s working capital requirements generally peak during the third quarter of the Company’s fiscal year.
Total inventories were approximately $209.5 million at December 29, 2005, a decrease of $8.1 million, or 3.7%, from the balance at June 30, 2005, and a decrease of $0.3 million, or 0.1%, over the balance at December 23, 2004. The decrease from June 30, 2005 to September 29, 2005 is due primarily to the seasonality of crop procurement. While the dollar value of inventories at December 29, 2005 is virtually unchanged from the dollar value at December 23, 2004, there are significant variations by nut type. The significantly higher cost of almonds resulted in a 31.9% increase in almond inventories despite an 18.8% decrease in the quantities of almonds on hand. Inshell walnut inventories increased 45.7% due to higher purchases of walnuts in fiscal 2006 than fiscal 2005. Offsetting these increases to inventories were a decrease in finished goods and a decrease in inshell peanuts due to a change in the way that peanuts are procured. Net accounts receivable were $47.2 million at December 29, 2005, an increase of approximately $8.2 million, or 21.0%, over the balance at June 30, 2005, and a decrease of $1.3 million, or 2.6% from the balance at December 23, 2004. The increase from June 30, 2005 to December 29, 2005 is due to higher monthly sales in December 2005 than in June 2005.
The Company faces a number of challenges in the future. The Company’s Chicago area processing facilities operate at full capacity at certain times during the year. If the Company experiences growth in unit volume sales, it could exceed its capacity to meet the demand for its products, especially prior to the completion of the facility consolidation project. The Company faces potential disruptive effects on its business, such as cost overruns for the construction of the new facility or business interruptions that may result from the transfer of production to the new facility. In addition, the Company will continue to face the ongoing challenges of its business such as food safety and regulatory issues and the maintenance and growth of its customer base. See “Factors That May Affect Future Results.” On a positive note, on February 1, 2006, the Company was informed by the Antitrust Division of the United States Department of Justice that the antitrust investigation of the peanut shelling industry with respect to the Company is now closed.
The Company’s fiscal year ends on the final Thursday of June each year, and typically consists of fifty-two weeks (four thirteen week quarters). Fiscal 2005, however, contained fifty-three weeks, with the fourth quarter containing fourteen weeks. References herein to fiscal 2006 are to the fiscal year ending June 29, 2006. References herein to fiscal 2005 are to the fiscal year ended June 30, 2005. As used herein, unless the context otherwise indicates, the term “Company” refers collectively to John B. Sanfilippo & Son, Inc. and its previously wholly owned subsidiary, JBS International, Inc., which was dissolved in November 2004.
RESULTS OF OPERATIONS
Net Sales
Net sales increased to $191.1 million for the second quarter of fiscal 2006 from $183.0 million for the second quarter of fiscal 2005, an increase of $8.1 million, or 4.4%. Net sales increased to $329.7 million for the first twenty-six weeks of fiscal 2006 from $317.7 million for the first twenty-six weeks of fiscal 2005, an increase of $12.1 million, or 3.8%. The overall increase in net sales, for both the quarterly and twenty-six week periods, was due generally to higher prices caused by higher commodity costs, especially for almonds and pecans. While sales prices increased, total pounds shipped decreased by 11.6% in the second quarter of fiscal 2006 when compared to the second quarter of fiscal 2005 and decreased by 11.1% for the first twenty-six weeks of fiscal 2006 when compared to the first twenty-six weeks of fiscal 2005.
The decrease in sales volume was caused mainly by decreases in the Company’s consumer and industrial distribution channels. Sales volume in the consumer distribution channel decreased 10.6% for the quarterly period and 13.8% for the twenty-six week period. These decreases were caused in large part to the loss of private label business in the latter part of fiscal 2005 with customers that would not accept price increases. Also, market studies have shown a shift in consumer preference to branded snack nuts away from private label as the price differential between branded and private label products has narrowed. Market studies have also shown a decrease in overall nut category volume sales during the first twenty-six weeks of fiscal 2006. Unit sales volume of the Company’s Fisher brand increased 7.4% and 2.9% for the quarterly and twenty-six periods; however, since the majority of the Company’s consumer distribution channel business is private label, the overall decrease in the consumer distribution channel was significant. Unit sales volume in the industrial distribution channel decreased 22.4% for the quarterly period and 13.7% for the twenty-six week period. These decreases were due primarily to decreased demand due to the higher costs of tree nuts and the loss of certain business at major customers.

14

Table of Contents

Unit volume sales for the second quarter of fiscal 2006, when compared to the first quarter of fiscal 2005, also decreased in the Company’s food service (4.3%), export (7.1%) and contract packaging (2.2%) distribution channels. Unit volume sales for the first twenty-six weeks of fiscal 2006, when compared to the first twenty-six weeks of fiscal 2005, decreased in the Company’s food service (5.4%) and export (6.1%) distribution channels. These decreases, for both the quarterly and twenty-six week periods, were caused largely by reduced demand due to higher selling prices resulting from the significantly higher costs of tree nuts. The food service decreases were also partially attributable to lower airline customer sales.
The following table shows a comparison of sales by distribution channel, and as a percentage of total net sales (dollars in thousands):
                                 
    For the Quarter Ended     For the Twenty-six Weeks Ended  
    December 29,     December 23,     December 29,     December 23,
Distribution Channel   2005     2004     2005     2004  
Consumer
   $ 107,387     $ 102,948     $ 172,671     $ 173,656  
Industrial
     40,723       38,498       76,508       68,762  
Food Service
     16,826       15,011       33,273       29,094  
Contract Packaging
     11,494       11,092       21,972       21,615  
Export
     14,647       15,475       25,311       24,542  
 
                        
Total
   $ 191,077     $ 183,024     $ 329,735     $ 317,669  
 
                        
The following summarizes sales by product type as a percentage of total gross sales. The information is based on gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product type.
                                 
    For the Quarter Ended     For the Twenty-six Weeks Ended  
    December 29,     December 23,     December 29,     December 23,    
Product Type   2005     2004     2005     2004    
Peanuts
     17.2 %     18.2 %     19.0 %     20.8 %
Pecans
     26.8       27.9       26.0       25.5  
Cashews & Mixed Nuts
     22.1       23.2       21.5       23.4  
Walnuts
     13.3       11.6       11.6       10.3  
Almonds
     13.3       10.8       13.9       11.1  
Other
     7.3       8.3       8.0       8.9  
 
                        
Total
     100.0 %     100.0 %     100.0 %     100.0 %
 
                        
Gross Profit
Gross profit for the second quarter of fiscal 2006 decreased 35.4% to $16.1 million from $25.0 million for the second quarter of fiscal 2005. Gross margin decreased to 8.4% of net sales for the second quarter of fiscal 2006 from 13.7% for the second quarter of fiscal 2005. Gross profit for the first twenty-six weeks of fiscal 2006 decreased 29.8% to $29.4 million from $41.9 million for the first twenty-six weeks of fiscal 2005. Gross margin decreased to 8.9% of net sales for the first twenty-six weeks of fiscal 2006 from 13.2% for the first twenty-six weeks of fiscal 2005.
The decrease in gross margin for the quarterly period was caused by two main factors of roughly equal significance: (i) a decrease in production, and (ii) the rising costs of tree nuts. The decreases in sales volume led to a corresponding decrease in production. Also, production further decreased due to a concerted effort to reduce finished goods inventory levels and to reduced levels of pecan shelling since the pecan crop was harvested later in the year during fiscal 2006 than in fiscal 2005. Manufacturing expenses of a fixed nature did not decrease with the decrease in production. The higher costs of tree nuts also negatively affected gross margin. The rising costs of almonds continued to negatively impact the Company’s profitability. The Company recorded a $2.2 million reserve during the first quarter of fiscal 2006 for losses expected on the fulfillment of certain fixed price almond contracts entered into in fiscal 2005. The majority of the balances on these contracts were shipped during the second quarter of fiscal 2006 and resulted in zero gross profit. A reserve of $0.9 million remains at December 29, 2005 for fixed price almond contracts, the majority of which will be fulfilled in the third quarter of fiscal 2006. The shift in sales mix from the

15

Table of Contents

consumer distribution channel also negatively affected gross margin, as consumer sales typically carry higher gross margins than the Company’s overall gross margin.
The decrease in gross margin for the twenty-six week period was generally caused by the same factors that negatively affected gross margin for the quarterly period. Other factors experienced during the first quarter of fiscal 2006 also affected gross margin for the twenty-six week period. Favorably impacting gross margin for the first twenty-six weeks of fiscal 2006 compared to the first quarter of fiscal 2005 was a $0.3 million almond grower liability increase for the final 2004 crop settlement recorded in the first quarter of fiscal 2006 compared to a $1.2 million increase for the final 2003 crop settlement recorded in the first quarter of fiscal 2005. Almond processing costs were negatively impacted by the lower quality of purchased almonds used in production. The gross margins on pecan sales were also lower in the first quarter of fiscal 2006 than the first quarter of fiscal 2005 due to significantly higher pecan costs.
Selling and Administrative Expenses
Selling and administrative expenses increased to $14.9 million, or 7.8% of net sales, for the second quarter of fiscal 2006 from $14.2 million, or 7.7% of net sales, for the second quarter of fiscal 2005. Selling expenses increased slightly to $11.1 million, or 5.8% of net sales, for the second quarter of fiscal 2006 from $10.9 million, or 6.0% of net sales, for the first quarter of fiscal 2005. Administrative expenses increased to $3.7 million, or 2.0% of net sales, for the second quarter of fiscal 2006 from $3.3 million, or 1.8% of net sales, for the second quarter of fiscal 2005. This increase was due primarily to a $0.5 million of expenses related to a supplemental retirement plan adopted in August 2005.
Selling and administrative expenses increased to $28.2 million, or 8.6% of net sales, for the first twenty-six weeks of fiscal 2006 from $26.8 million, or 8.4% of net sales, for the first twenty-six weeks of fiscal 2005. Selling expenses increased slightly to $21.0 million, or 6.4% of net sales, for the first twenty-six weeks of fiscal 2006 from $20.8 million, or 6.5% of net sales, for the first twenty-six weeks of fiscal 2005. Administrative expenses increased to $7.2 million, or 2.2% of net sales, for the first twenty-six weeks of fiscal 2006 from $6.0 million, or 1.9% of net sales, for the first twenty-six weeks of fiscal 2005. This increase was due primarily to a $0.7 million of expenses related to a supplemental retirement plan adopted in August 2005 and to a $0.3 million increase in legal and audit expenses.
Income from Operations
Due to the factors discussed above, income from operations decreased to $1.3 million, or 0.7% of net sales, for the second quarter of fiscal 2006, from approximately $10.8 million, or 5.9% of net sales, for the second quarter of fiscal 2005. Income from operations decreased to $1.2 million, or 0.4% of net sales, for the first twenty-six weeks of fiscal 2006, from approximately $15.1 million, or 4.8% of net sales, for the first twenty-six weeks of fiscal 2005.
Interest Expense
Interest expense increased to $1.2 million for the second quarter of fiscal 2006 from $0.4 million for the second quarter of fiscal 2005. Interest expense increased to $2.7 million for the first twenty-six weeks of fiscal 2006 from $0.7 million for the first twenty-six weeks of fiscal 2005. These increases were caused by higher average levels of borrowings and a higher interest rate on the Company’s revolving bank credit facility.
Rental and Miscellaneous (Expense) Income, Net
Net rental and miscellaneous (expense) income was an expense of $0.1 million for the second quarter of fiscal 2006 compared to income of $0.1 million for the second quarter of fiscal 2005. Net rental and miscellaneous (expense) income was an expense of $0.3 million for the first twenty-six weeks of fiscal 2006 compared to income of $0.3 million for the first twenty-six weeks of fiscal 2005. The decreases of $0.2 million for the quarterly period and $0.6 million for the twenty-six week period were caused by expenses at the office building at the Current Site, including depreciation, exceeding rental income.
Income Taxes
Income tax expense was $0.1 million for the second quarter of fiscal 2006 compared to $4.1 million, or 39.0% of income before income taxes, for the second quarter of fiscal 2005. Income tax expense was recorded for the second quarter of fiscal 2006 despite a slight loss before income taxes due to the inclusion of non-deductible stock option expense. Income tax benefit was $0.6 million, or 32.0% of loss before income taxes, for the first twenty-six weeks of fiscal 2006 compared to $5.7 million of income tax expense, or 39.0% of income before income taxes, for the second quarter of fiscal 2005.
Net (Loss) Income
Net loss was ($0.1) million, or ($0.01) per common share (basic and diluted), for the second quarter of fiscal 2006, compared to net income of $6.4 million, or $0.61 basic per common share ($0.60 diluted), for the second quarter of fiscal 2005. Net loss was ($1.2) million, or ($0.11) per common share (basic and diluted), for the first twenty-six

16

Table of Contents

weeks of fiscal 2006, compared to net income of $9.0 million, or $0.85 basic per common share ($0.84 diluted), for the first twenty-six weeks of fiscal 2005.
LIQUIDITY AND CAPITAL RESOURCES
General
The primary uses of cash are to fund the Company’s current operations, including its facility consolidation project, fulfill contractual obligations and repay indebtedness. Also, various uncertainties could result in additional uses of cash, such as those described below under “Factors That May Affect Future Results”.
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 the Company sells. Current market trends in nut prices and crop estimates also impact nut procurement.
Net cash provided by operating activities was $48.7 million for the first twenty-six weeks of fiscal 2006 compared to net cash used in operating activities of $11.3 million for the first twenty-six weeks of fiscal 2005. The increase is due to a $51.0 million decrease in inventory purchases, primarily in pecans, peanuts and cashews. Pecan purchases decreased due to a 25.4% decrease in the average cost of inshell pecans along with a 23.4% decrease in the quantity purchased. The decrease in the quantity of inshell pecan purchases is due to a timing difference in procuring the inshell pecans in fiscal 2006 compared to fiscal 2005, with a greater portion of the inshell pecan purchases occurring in the third quarter of fiscal 2006. Peanut purchases decreased due to a change in the manner that peanuts are procured. Cashew purchases decreased due to sufficient quantities already on hand in inventories at the beginning of the period. Overall nut purchases for the first twenty-six weeks of fiscal 2006 compared to the first twenty-six weeks of fiscal 2005 decreased by 29.8% in terms of pounds, and 20.0% in terms of dollars.
The Company repaid $0.4 million of long-term debt during the first twenty-six weeks of fiscal 2006 compared to $0.6 million during the first twenty-six weeks of fiscal 2005.
Financing Arrangements
The Company’s bank credit facility (the “Bank Credit Facility”) is comprised of (i) a working capital revolving loan which provides working capital financing of up to $93.6 million (as amended in February 2006) in the aggregate, and matures, as amended, on May 31, 2006, and (ii) a $6.4 million letter of credit (the “IDB Letter of Credit”) to secure the industrial development bonds described below which matures on June 1, 2006. The Bank Credit Facility was amended on February 2, 2006 to temporarily increase the total availability under the facility by $20.0 million and waive the Company’s non-compliance with two financial covenants, as is described below. Borrowings under the working capital revolving loan accrue interest at a rate (the weighted average of which was 7.14% at December 29, 2005) determined pursuant to a formula based on the agent bank’s quoted rate and the Eurodollar Interbank rate. As of December 29, 2005 the Company had $43.1 million of available credit under the Bank Credit Facility.
The Bank Credit Facility, as amended, matures on May 31, 2006 and includes certain restrictive covenants that, among other things: (i) require the Company to maintain specified financial ratios; (ii) limit the Company’s annual capital expenditures; and (iii) require that Jasper B. Sanfilippo (the Company’s Chairman of the Board and Chief Executive Officer) and Mathias A. Valentine (a director and the Company’s former President) together with their respective immediate family members and certain trusts created for the benefit of their respective sons and daughters, continue to own shares representing the right to elect a majority of the directors of the Company. In addition, the Bank Credit Facility limits dividends to the lesser of (a) 25% of net income for the previous fiscal year, or (b) $5.0 million, and prohibits the Company from redeeming shares of capital stock.
On December 16, 2004, the Company received $65.0 million pursuant to a note purchase agreement (the “Note Agreement”) with various lenders to fund a portion of the facility consolidation project and for general working capital purposes. Under the terms of the Note Agreement, the notes have a maturity of ten years, bear interest at a 4.67% annual rate and are required to be repaid in equal semi-annual principal payments of $3.6 million beginning on June 1, 2006. As of December 29, 2005, the outstanding balance on the Note Agreement was $65.0 million.
The Company was not in compliance with the funded debt to twelve-month EBITDA ratio covenants under the Bank Credit Facility and the Note Agreement and the minimum twelve-month EBITDA requirement under the Bank Credit Facility as of December 29, 2005. The Company received waivers not to demand payment of amounts outstanding under these agreements for non-compliance with these three financial covenants as of December 29, 2005. However, the Company expects to be in non-compliance with these same three covenants for the quarter ending March 30, 2006. Accordingly, $57.8 million of long-term was reclassified as a current liability. In addition to the waivers, the Bank Credit Facility was amended to provide an additional $20.0 million of availability and the Note

17

Table of Contents

Agreement was amended whereby an additional fee of 1.00% per annum will be incurred by the Company for the time period for which compliance with the funded debt to twelve-month EBITDA ratio is not obtained. Non-compliance with financial covenants constitutes an event of default as defined in the financing agreements. Upon an event of default, outstanding amounts, including accrued interest, under the financing facilities would become immediately due at the demand of the lender. While the Company fully expects to renegotiate the terms of the Bank Credit Facility and the Note Agreement during the third quarter of fiscal 2006, there is no assurance that the Company will be able to successfully renegotiate these financing agreements with its lenders or that the terms of the credit agreements will not be substantially changed. If the Bank Credit Facility is not renewed, the Company believes that it will be able to secure necessary financing from other lenders who have expressed interest in negotiating with the Company. If the Company is not able to renegotiate the terms of its credit agreements, it will have to consider financing alternatives which might include identifying alternative sources of debt or equity capital, or an unplanned sale of assets or the curtailment of the facility consolidation project. The inability of the Company to renegotiate the terms of its existing credit facilities or obtain new financing could have a material adverse effect on the Company’s business and financial position.
As of December 29, 2005, the Company had $6.2 million in aggregate principal amount of industrial development bonds outstanding, which was originally used to finance the acquisition, construction and equipping of the Company’s Bainbridge, Georgia facility. The bonds bear interest payable semiannually at 4.00% (which was reset on June 1, 2002) through May 2006. On June 1, 2006, and on each subsequent interest reset date for the bonds, the Company is required to redeem the bonds at face value plus any accrued and unpaid interest, unless a bondholder elects to retain his or her bonds. Any bonds redeemed by the Company at the demand of a bondholder on the reset date are required to be remarketed by the underwriter of the bonds on a “best efforts” basis. Funds for the redemption of bonds on the demand of any bondholder are required to be obtained from the following sources in the following order of priority: (i) funds supplied by the Company for redemption; (ii) proceeds from the remarketing of the bonds; (iii) proceeds from a drawing under the IDB Letter of Credit; or (iv) in the event funds from the foregoing sources are insufficient, a mandatory payment by the Company. Drawings under the IDB Letter of Credit to redeem bonds on the demand of any bondholder are payable in full by the Company upon demand of the lenders under the Bank Credit Facility. In addition, the Company is required to redeem the bonds in varying annual installments, ranging from $0.3 million in fiscal 2006 to $0.8 million in fiscal 2017. The Company is also required to redeem the bonds in certain other circumstances; for example, within 180 days after any determination that interest on the bonds is taxable. The Company has the option, subject to certain conditions, to redeem the bonds at face value plus accrued interest, if any.
Capital Expenditures
The Company spent $5.3 million on capital expenditures unrelated to the facility consolidation project during the first twenty-six weeks of fiscal 2006 compared to $4.5 million during the first twenty-six weeks of fiscal 2005. This increase is due primarily to $1.0 million spent to purchase land adjacent to the Company’s plant in Gustine, California. Capital expenditures for fiscal 2006 that are unrelated to the facility consolidation project are expected to be approximately $12 million. Capital expenditures related to the facility consolidation project were $12.2 million for the first twenty-six weeks of fiscal 2006 compared to $2.3 million for the first twenty-six weeks of fiscal 2005. Groundbreaking at the Current Site occurred in August 2005. The Company entered into a contract with a general contractor for an estimated amount of $23.2 million, $9.1 million of which was paid during the first twenty-six weeks of fiscal 2006, to construct the expansion of the Current Site. This expansion is scheduled to be completed in the first half of calendar 2006. The Company expects to incur an additional $30 — $40 million on the facility consolidation project from fiscal 2006 through completion, primarily related to the completion of the expansion to the Current Site and the purchase of capital equipment. Groundbreaking at the Current Site occurred in August 2005.
The Company, along with related party partnerships that own a portion of the Company’s existing Chicago area facilities, is in the process of selling these facilities. The Company intends to lease back from the ultimate purchasers that portion of the facilities that are necessary to run the Company’s business while the facility consolidation project is completed in Elgin. The Company estimates that these sale and leaseback transactions will be consummated during the third quarter of fiscal 2006. Based upon the bids received, the Company believes that proceeds received from the sales will exceed the Company’s carrying value of these assets. The Company’s Board of Directors appointed an independent board committee to explore alternatives with respect to the Company’s existing leases for the properties owned by the related party partnerships. After negotiations with the partnerships, the independent committee approved a non-binding letter of intent whereby: (i) the current related party leases would terminate without penalty to the Company; (ii) the Company would receive $2.0 million for the portion of the Busse Road property that it owns; and (iii) the Company will sell its Selma, Texas properties to the partnerships for $14.3 million (an estimate of fair value and in excess of its carrying value) and lease them back. The sale price and rental rate for the Selma, Texas properties were determined by an independent appraiser. The lease for the Selma, Texas properties will have a ten-year term at a fair market value rent, with three five-year renewal options. In addition, the Company will have an option to repurchase these properties from the partnerships after five years at 95% of the then fair market value.

18

Table of Contents

FORWARD LOOKING STATEMENTS
The statements contained in this filing that are not historical (including statements concerning the Company’s expectations regarding market risk) are “forward looking statements”. These forward looking statements, which generally are followed (and therefore identified) by a cross reference to “Factors That May Affect Future Results” or are identified by the use of forward looking words and phrases such as “intends”, “may”, “believes” and “expects”, represent the Company’s present expectations or beliefs concerning future events. The Company cautions that such statements are qualified by important factors, including the factors described below under “Factors That May Affect Future Results”, that could cause actual results to differ materially from those in the forward looking statements, as well as the timing and occurrence (or nonoccurrence) of transactions and events which may be subject to circumstances beyond the Company’s control. Consequently, results actually achieved may differ materially from the expected results included in these statements.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Availability of Raw Materials and Market Price Fluctuations
The availability and cost of raw materials for the production of the Company’s products, including peanuts, pecans, almonds, walnuts and other nuts are subject to crop size and yield fluctuations caused by factors beyond the Company’s control, such as weather conditions, plant diseases and changes in government programs. Additionally, the supply of edible nuts and other raw materials used in the Company’s products could be reduced upon any determination by the United States Department of Agriculture (“USDA”) or other government agencies that certain pesticides, herbicides or other chemicals used by growers have left harmful residues on portions of the crop or that the crop has been contaminated by aflatoxin or other agents. If worldwide demand for nuts continues at recent rates, and supply does not expand to meet demand, a reduction in availability and an increase in the cost of raw materials would occur. This type of increase was experienced during the last half of fiscal 2004 and during fiscal 2005 and the first quarter of fiscal 2006 for most of the Company’s major nut types. The Company is not able to hedge against changes in commodity prices because no market to do so exists, and thus, shortages in the supply of and increases in the prices of nuts and other raw materials used by the Company in its products (to the extent that cost increases cannot be passed on to customers) could have an adverse impact on the Company’s profitability. Furthermore, fluctuations in the market prices of nuts may affect the value of the Company’s inventories and profitability. The Company has significant inventories of nuts that would be adversely affected by any decrease in the market price of such raw materials. The Company is currently committed to purchase 4.6 million pounds of almonds during the last half of fiscal 2006 at costs that are currently above the market price in the industrial distribution channel. However, these almonds are expected to be sold at a profit, thus eliminating the need for any loss to be recognized as of December 29, 2005. See “Introduction”.
Competitive Environment
The Company operates in a highly competitive environment. The Company’s principal products compete against food and snack products manufactured and sold by numerous regional and national companies, some of which are substantially larger and have greater resources than the Company, such as Planters and Ralcorp Holdings, Inc. The Company also competes with other shellers in the industrial market and with regional processors in the retail and wholesale markets. In order to maintain or increase its market share, the Company must continue to price its products competitively, which may lower revenue per unit and cause declines in gross margin, if the Company is unable to increase unit volumes as well as reduce its costs.
Dependence Upon Customers
The Company is dependent on a few significant customers for a large portion of its total sales, particularly in the consumer channel. Sales to the Company’s five largest customers represented approximately 38%, 39% and 37% of gross sales in fiscal 2005, fiscal 2004 and fiscal 2003, respectively. Wal-Mart alone accounted for approximately 18%, 19% and 17% of the Company’s net sales for fiscal 2005, fiscal 2004 and fiscal 2003, respectively. The loss of one of the Company’s largest customers, or a material decrease in purchases by one or more of its largest customers, would result in decreased sales and adversely impact the Company’s income and cash flow.
Pricing Pressures
As the retail grocery trade continues to consolidate and the Company’s retail customers grow larger and become more sophisticated, the Company’s retail customers are demanding lower pricing and increased promotional programs. Further, these customers may begin to place a greater emphasis on the lowest-cost supplier in making purchasing decisions, particularly if buying techniques such as reverse internet auctions increase in popularity. An increased focus on the lowest-cost supplier could reduce the benefits of some of the Company’s competitive advantages. The Company’s sales volume growth could slow, and it may become necessary to lower the Company’s

19

Table of Contents

prices and increase promotional support of the Company’s products, any of which would adversely affect its gross profit.
Production Limitations
The Company has experienced significant sales growth as its customer demand has increased. If the Company continues to experience comparable increases in customer demand, particularly prior to the completion of the Company’s facility consolidation project, it may be unable to fully satisfy its customers’ supply needs. If the Company becomes unable to supply sufficient quantities of products, it may lose sales and market share to its competitors.
Financing Agreements
The Company’s unfavorable operating results have caused non-compliance with certain restrictive covenants under its financing facilities. Specifically, the Company failed to achieve the minimum rolling twelve-month EBITDA requirement under the Bank Credit Facility and exceeded the maximum allowable funded debt to twelve-month EBITDA ratio under both the Bank Credit Facility and the Note Agreement. The Company received waivers not to demand payment of amounts outstanding under these agreements for non-compliance with these three financial covenants as of December 29, 2005. However, the Company expects to not be in compliance with these same three covenants for the quarter ending March 30, 2006. Accordingly, $57.8 million of long-term was reclassified as a current liability. In addition to the waivers, the Bank Credit Facility was amended to provide an additional $20.0 million of availability and the Note Agreement was amended whereby an additional fee of 1.00% per annum will be incurred by the Company for the time period for which compliance with the funded debt to twelve-month EBITDA ratio is not obtained. Non-compliance with financial covenants constitutes an event of default as defined in the financing agreements. Upon an event of default, outstanding amounts, including accrued interest, under the financing facilities would become immediately due at the demand of the lender. While the Company fully expects to renegotiate the terms of the Bank Credit Facility and the Note Agreement during the third quarter of fiscal 2006, there is no assurance that the Company will be able to successfully renegotiate these financing agreements with its lenders or that the terms of the credit agreements will not be substantially changed. If the Bank Credit Facility is not renewed, the Company believes that it will be able to secure necessary financing from other lenders who have expressed interest in negotiating with the Company. If the Company is not able to renegotiate the terms of its credit agreements, it will have to consider financing alternatives which might include identifying alternative sources of debt or equity capital, or an unplanned sale of assets or the curtailment of the facility consolidation project. The inability of the Company to renegotiate the terms of its existing credit facilities or obtain new financing could have a material adverse effect on the Company’s business and financial position.
Food Safety and Product Contamination
The Company could be adversely affected if consumers in the Company’s principal markets lose confidence in the safety of nut products, particularly with respect to peanut and tree nut allergies. Individuals with peanut allergies may be at risk of serious illness or death resulting from the consumption of the Company’s nut products, including consumption of other companies’ products containing the Company’s products as an ingredient. Notwithstanding existing food safety controls, the Company processes peanuts and tree nuts on the same equipment, and there is no guarantee that the Company’s peanut-free products will not be cross-contaminated by peanuts. Concerns generated by risks of peanut and tree nut cross-contamination and other food safety matters may discourage consumers from buying the Company’s products, cause production and delivery disruptions, or result in product recalls.
Product Liability and Product Recalls
The Company faces risks associated with product liability claims and product recalls in the event its food safety and quality control procedures fail and its products cause injury or become adulterated or misbranded. In addition, the Company does not control the labeling of other companies’ products containing the Company’s products as an ingredient. A product recall of a sufficient quantity, or a significant product liability judgment against the Company, could cause the Company’s products to be unavailable for a period of time and could result in a loss of consumer confidence in the Company’s food products. These kinds of events, were they to occur, would have a material adverse effect on demand for the Company’s products and, consequently, the Company’s income and liquidity.
Retention of Key Personnel
The Company’s future success will be largely dependent on the personal efforts of its senior operating management team, including Michael J. Valentine, the Company’s Executive Vice President Finance, Chief Financial Officer and Secretary, Jeffrey T. Sanfilippo, the Company’s Executive Vice President Sales and Marketing, and Jasper B. Sanfilippo, Jr., the Company’s Executive Vice President of Operations, which has assumed management of the day-to-day operation of the Company’s business over the past two years. In addition, the Company’s success depends on the talents of Everardo Soria, Senior Vice President Pecan Operations and Procurement, Walter R. Tankersley, Jr., Senior Vice President Industrial Sales, Charles M. Nicketta, Senior Vice President of Manufacturing and Michael G. Cannon, Senior Vice President of Corporate Operations. The Company believes that the expertise and knowledge of these individuals in the industry, and in their respective fields, is a critical factor to the Company’s continued growth

20

Table of Contents

and success. The Company has not entered into an employment agreement with any of these individuals, nor does the Company have key officer insurance coverage policies in effect. The loss of the services of any of these individuals could have a material adverse effect on the Company’s business and prospects if the Company were unable to identify a suitable candidate to replace any such individual. The Company’s success is also dependent upon its ability to attract and retain additional qualified marketing, technical and other personnel, and there can be no assurance that the Company will be able to do so.
Risks and Uncertainties Regarding Facility Consolidation Project
The facility consolidation project may not result in significant cost savings or increases in efficiency, or allow the Company to increase its production capabilities to meet expected increases in customer demand. Moreover, the Company’s expectations with respect to the financial impact of the facility consolidation project are based on numerous estimates and assumptions, any or all of which may differ from actual results. Such differences could substantially reduce the anticipated benefit of the project.
More specifically, the following risks, among others, may limit the financial benefits of the facility consolidation project:
  •   delays and cost overruns in the construction of and equipment for the new facility are possible and could offset other cost savings expected from the consolidation;
 
  •   the facility consolidation project is likely to have a negative impact on the Company’s earnings during the construction period and the time during which operations are transitioned to the Current Site;
 
  •   the proceeds the Company receives from selling or renting its existing facilities may be less than it expects, and the timing of the receipt of those proceeds may be later than the Company has planned;
 
  •   the facility consolidation project may not eliminate as many redundant processes as the Company presently anticipates;
 
  •   the Company may not realize the expected increase in demand for its products necessary to justify additional production capacity created by the facility consolidation;
 
  •   the Company may have problems or unexpected costs in transferring equipment or obtaining new equipment;
 
  •   the Company may not be able to transfer production from its existing facilities to the new facility without a significant interruption in its business;
 
  •   moving the Company’s facilities to a new location may cause attrition in its personnel at levels that result in a significant interruption in its operations, and the Company expects to incur additional annual compensation costs of approximately $300,000 to facilitate the retention of certain of its key personnel while the facility consolidation project is in process;
 
  •   the Company may be required to fund a portion of the facility consolidation project through additional financing, which may be at rates less favorable than its current credit facilities;
 
  •   the Company may be unable to refinance its Bank Credit Facility;
 
  •   the Company may be unable to obtain amendments or waivers for future non-compliance with restrictive financial covenants under its credit facilities for the third quarter of fiscal 2006;
 
  •   the Company may not receive the anticipated rental income for the unused portion of the Current Site; and
 
  •   the Company may not be able to recover its investment in the Original Site.
If for any reason the Company were to realize less than the expected benefits from the facility consolidation project, its future income stream, cash flows and debt levels could be materially adversely affected. In addition, the facility consolidation project is a long-term project and unanticipated risks may develop as the project proceeds.
Government Regulation
The Company is subject to extensive regulation by the United States Food and Drug Administration, the United States Department of Agriculture, the United States Environmental Protection Agency and other state and local authorities in jurisdictions where its products are manufactured, processed or sold. Among other things, these

21

Table of Contents

regulations govern the manufacturing, importation, processing, packaging, storage, distribution and labeling of the Company’s products. The Company’s manufacturing and processing facilities and products are subject to periodic compliance inspections by federal, state and local authorities. The Company is also subject to environmental regulations governing the discharge of air emissions, water and food waste, 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 the Company’s existing facilities as well as its expansion into new operations and jurisdictions, may require the Company to obtain additional licenses and permits and could require it to adapt or alter methods of operations at costs that could be substantial. Compliance with applicable laws and regulations may adversely affect the Company’s business. Failure to comply with applicable laws and regulations could subject the Company to civil remedies, including fines, injunctions, recalls or seizures, as well as possible criminal sanctions, which could have a material adverse effect on the Company’s business.
Economic, Political and Social Risks of Doing Business in Emerging Markets
The Company purchases a substantial portion of its cashew inventories from India, Brazil and Vietnam, which are in many respects emerging markets. To this extent, the Company is exposed to risks inherent in emerging markets, including:
  •   increased governmental ownership and regulation of the economy;
 
  •   greater likelihood of inflation and adverse economic conditions stemming from governmental attempts to reduce inflation, such as imposition of higher interest rates and wage and price controls;
 
  •   potential for contractual defaults or forced renegotiations on purchase contracts with limited legal recourse;
 
  •   tariffs and other barriers to trade that may reduce the Company’s profitability; and
 
  •   civil unrest and significant political instability.
The existence of these risks in these and other foreign countries that are the origins of the Company’s raw materials could jeopardize or limit its ability to purchase sufficient supplies of cashews and other imported raw materials and may adversely affect the Company’s income by increasing the costs of doing business overseas.
Fixed Price Commitments
The great majority of the Company’s industrial sales, and certain other customers, require the Company to enter into fixed price commitments with its customers. Such commitments represented approximately 28% of the Company’s annual net sales in fiscal 2005, and in many cases are entered into after the Company’s cost to acquire the nut products necessary to satisfy the fixed price commitment is substantially fixed. The commitments are for a fixed period of time, typically one year, but may be extended if remaining balances exist. The Company expects to continue to enter into fixed price commitments with respect to certain of its nut products prior to fixing its acquisition cost in order to maintain customer relationships or when, in management’s judgment, market or crop harvest conditions so warrant. To the extent the Company does so, however, these fixed price commitments may result in reduced gross profit margins or generate losses that have a material adverse effect on the Company’s results of operations.
Inventory Measurement
The Company purchases its nut inventories from growers and farmers in large quantities at harvest times, which are primarily during the second and third quarters of the Company’s fiscal year, and receives nut shipments in bulk truckloads. The weights of these nuts are measured using truck scales at the time of receipt, and inventories are recorded on the basis of those measurements. The nuts are then stored in bulk in large warehouses to be shelled or processed throughout the year. Bulk-stored nut inventories are relieved on the basis of continuous high-speed bulk weighing systems as the nuts are shelled or processed or on the basis of calculations derived from the weight of the shelled nuts that are produced. While the Company performs various procedures to confirm the accuracy of its bulk-stored nut inventories, these inventories are estimates that must be periodically adjusted to account for positive or negative variations, and such adjustments directly affect earnings. The precise amount of the Company’s bulk-stored nut inventories is not known until the entire quantity of the particular nut is depleted, which may not necessarily occur every year. Prior crop year inventories may still be on hand as the new crop year inventories are purchased. There can be no assurance that such inventory quantity adjustments will not have a material adverse effect on the Company’s results of operations in the future.
2002 Farm Bill
The Farm Security and Rural Investment Act of 2002 (the “2002 Farm Bill”) terminated the federal peanut quota program beginning with the 2002 crop year. The 2002 Farm Bill replaced the federal peanut quota program with a

22

Table of Contents

fixed payment system through the 2007 crop year that can be either coupled or decoupled. A coupled system is tied to the actual amount of production, while a decoupled system is not. The series of loans and subsidies established by the 2002 Farm Bill is similar to the systems used for other crops such as grains and cotton. To compensate farmers for the elimination of the peanut quota, the 2002 Farm Bill provides a buy-out at a specified rate for each pound of peanuts that had been in that farmer’s quota under the prior program. Additionally, among other provisions, the Secretary of Agriculture may make certain counter-cyclical payments whenever the Secretary believes that the effective price for peanuts is less than the target price. The termination of the federal peanut quota program has reduced the Company’s costs for peanuts, beginning in fiscal 2003, and has resulted in a higher gross margin than the Company has historically achieved. Although this margin is now similar to the Company’s total gross profit margin, the Company may be unable to maintain these higher gross profit margins on the sale of peanuts, and the Company’s business, financial position and results of operations would thus be materially adversely affected.
Public Health Security and Bioterrorism Preparedness and Response Act of 2002
The events of September 11, 2001 reinforced the need to enhance the security of the United States. Congress responded in part by passing the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (the “Bioterrorism Act”). The Bioterrorism Act includes a number of provisions to help guard against the threat of bioterrorism, including new authority for the Secretary of Health and Human Services (“HHS”) to take action to protect the nation’s food supply against the threat of international contamination. The Food and Drug Administration (“FDA”), as the food regulatory arm of HHS, is responsible for developing and implementing these food safety measures, which fall into four broad categories: (i) registration of food facilities, (ii) establishment and maintenance of records regarding the sources and recipients of foods, (iii) prior notice to FDA of imported food shipments and (iv) administrative detention of potentially affected foods. FDA has issued rules in each of these categories, which rules generally took effect on December 12, 2003. There can be no assurances that the effects of the Bioterrorism Act and the related rules, including any potential disruption in the Company’s supply of imported nuts, which represented approximately 37% of the Company’s total nut purchases in fiscal 2005, will not have a material adverse effect on the Company’s business, financial position or results of operations in the future.

23

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to the impact of changes in interest rates and to commodity prices of raw material purchases. The Company has not entered into any arrangements to hedge against changes in market interest rates, commodity prices or foreign currency fluctuations.
The Company is unable to engage in hedging activity related to commodity prices, since there are no established futures markets for nuts. Approximately 37% of nut purchases for fiscal 2005 were made from foreign countries, and while these purchases were payable in U.S. dollars, the underlying costs may fluctuate with changes in the value of the U.S. dollar relative to the currency in the foreign country.
The Company is exposed to interest rate risk on the Bank Credit Facility, its only variable rate credit facility because the Company has not entered into any hedging instruments that fix the floating rate. A hypothetical 10% adverse change in weighted-average interest rates would have had an immaterial impact on the Company’s net income and cash flows from operating activities.
Item 4. Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a–15(e)) as of December 29, 2005. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of December 29, 2005, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.
In connection with the evaluation by management, including the Company’s Chief Executive Officer and Chief Financial Officer, there were no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended December 29, 2005 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

24

Table of Contents

PART II—OTHER INFORMATION
Item 1 – Legal Proceedings
On February 1, 2006, the Company was informed by the Antitrust Division of the United States Department of Justice that the antitrust investigation of the peanut shelling industry, which was described in prior filings, is now closed.
Item 4 — Submission of Matters to a Vote of Security Holders
The Company’s 2005 Annual Meeting of Stockholders was held on October 25, 2005 for the purpose of (i) electing those directors entitled to be elected by the holders of the Company’s Class A Common Stock, (ii) electing those directors entitled to be elected by the holders of the Company’s Common Stock, (iii) ratifying the action of the Company’s Audit Committee of the Board of Directors in appointing PricewaterhouseCoopers LLP as independent accountants for fiscal 2006, and (iv) transacting such other business properly brought before the meeting. The meeting proceeded and (i) the holders of Class A Common Stock elected Jasper B. Sanfilippo, Mathias A. Valentine, Michael J. Valentine, Jeffrey T. Sanfilippo, Jasper B. Sanfilippo, Jr. and Timothy R. Donovan to serve on the Company’s Board of Directors by a unanimous vote of 2,597,426 votes cast for, representing 100% of the then outstanding shares of Class A Common Stock, (ii) the holders of Common Stock elected Governor Jim R. Edgar by a vote of 6,324,871 votes cast for and 613,061 votes withheld, (iii) the holders of Common Stock elected Daniel M. Wright by a vote of 6,351,811 votes cast for and 586,121 votes withheld, and (iv) the holders of Class A Common Stock and Common Stock ratified the appointment of PricewaterhouseCoopers LLP as the Company’s independent accountants for fiscal 2006 by a total of 32,569,499 votes cast for ratification, 342,593 votes against ratification and 100 abstentions.
Item 5 — Other Information
Termination Agreement
On February 1, 2006, the Company, together with the Arthur/Busse Limited Partnership and 300 East Touhy Avenue Limited Partnership, two related party partnerships, entered into a Termination Agreement with the City of Elgin whereby the Development Agreement among such parties was terminated and the City of Elgin became obligated to convey the property to the Company and the partnerships within thirty days. Upon such conveyance by the City of Elgin, the partnerships have agreed to transfer (by quit claim deed) their interests to the Company without consideration. After the property is conveyed, this property will be marketed to potential buyers.
Amendment of Bank Credit Facility and Note Agreement
On February 2, 2006, the Company agreed to amend its Bank Credit Facility by entering into the Seventh Amendment to Credit Agreement by and among the Company, U.S. Bank, N.A. and LaSalle Bank, N.A. This amendment was necessary because the Company failed to achieve the minimum rolling twelve-month EBITDA requirement under the Bank Credit Facility, and exceeded the maximum allowable funded debt to twelve-month EBITDA ratio under the Bank Credit Facility. The Company received a waiver not to demand payment of amounts outstanding under this agreement for non-compliance with these financial covenants as of December 29, 2005. In addition to the waiver, the amendment provides the Company with an additional $20.0 million of availability under the Bank Credit Facility
On February 6, 2006, the Company agreed to amend its Note Agreement related to the Company’s $65 million senior notes by entering into a Limited Waiver and First Amendment to the Note Agreement among the Company and each of the noteholders. This amendment was necessary because the Company exceeded the maximum allowable funded debt to twelve-month EBITDA ratio under the Note Agreement. The Company received a waiver from the noteholders not to demand payment of amounts outstanding under this agreement for non-compliance with this financial covenant as of December 29, 2005. In addition to the waiver, the Note Agreement was amended whereby an additional fee of 1.00% per annum will be incurred by the Company for the time period for which compliance with the funded debt to twelve-month EBITDA ratio is not obtained.
Non-compliance with financial covenants constitutes an event of default as defined in both the Bank Credit Facility and the Note Agreement. Upon an event of default, outstanding amounts, including accrued interest, under the financing facilities would become immediately due at the demand of the lenders. While the Company fully expects to renegotiate the terms of the Bank Credit Facility and the Note Agreement during the third quarter of fiscal 2006, there is no assurance that the Company will be able to successfully renegotiate these financing agreements with its lenders or that the terms of the credit agreements will not be substantially changed. If the Bank Credit Facility is not renewed, the Company believes that it will be able to secure necessary financing from other lenders who have expressed interest in negotiating with the Company. If the Company is not able to renegotiate the terms of its credit agreements, it will have to consider financing alternatives which might include identifying alternative sources of debt or equity capital, or an unplanned sale of assets or the curtailment of the facility consolidation project. The inability of the Company to renegotiate the terms of its existing credit facilities or obtain new financing could have a material adverse effect on the Company’s business and financial position.
Item 6. Exhibits
The exhibits filed herewith are listed in the exhibit index that follows the signature page and immediately precedes the exhibits filed.

25

Table of Contents

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on February 7, 2006.
         
  JOHN B. SANFILIPPO & SON, INC
 		  
  By:   /s/ Michael J. Valentine    
    Michael J. Valentine    
    Executive Vice President Finance, Chief Financial Officer, and Secretary   
 

26

Table of Contents

EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
     
     
Exhibit
Number		 Description
 
    
2
  Not applicable
 
    
3
 .1 Restated Certificate of Incorporation of Registrant(24)
 
    
3
.2 Bylaws of Registrant(1)
 
    
4
.1 Specimen Common Stock Certificate(3)
 
    
4
.2 Specimen Class A Common Stock Certificate(3)
 
    
4
 .3 Note Purchase Agreement (the “Note Agreement”) in the amount of $65 million by the Company with The Prudential Insurance Company of America, Pruco Life Insurance Company, American Skandia Life Assurance Corporation, Prudential Retirement Ceded Business Trust, ING Life Insurance and Annuity Company, Farmers New World Life Insurance Company, Physicians Mutual Insurance Company, Great-West Life & Annuity Insurance Company, The Great-West Life Assurance Company, United of Omaha Life Insurance Company and Jefferson Pilot Financial Insurance Company dated as of December 16, 2004(21)
 
    
4
.4 Limited Waiver and First Amendment to Note Purchase Agreement dated February 6, 2006, filed herewith
 
    
5
-9 Not applicable
 
    
10
.1 Certain documents relating to $8.0 million Decatur County-Bainbridge Industrial Development Authority Industrial Development Revenue Bonds (John B. Sanfilippo & Son, Inc. Project) Series 1987 dated as of June 1, 1987(1)
 
    
10
.2 Industrial Building Lease (the “Touhy Avenue Lease”) dated November 1, 1985 between the Registrant and LaSalle National Bank (“LNB”), as Trustee under Trust Agreement dated September 20, 1966 and known as Trust No. 34837(5)
 
    
10
.3 First Amendment to the Touhy Avenue Lease dated June 1, 1987(5)
 
    
10
.4 Second Amendment to the Touhy Avenue Lease dated December 14, 1990(5)
 
    
10
.5 Third Amendment to the Touhy Avenue Lease dated September 1, 1991(7)
 
    
10
.6 Mortgage, Assignment of Rents and Security Agreement made on September 29, 1992 by LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628 in favor of the Registrant relating to the properties commonly known as 2299 Busse Road and 1717 Arthur Avenue, Elk Grove Village, Illinois(4)
 
    
10
.7 Industrial Building Lease dated June 1, 1985 between Registrant and LNB, as Trustee under Trust Agreement dated February 7, 1979 and known as Trust No. 100628(1)
 
    
10
.8 First Amendment to Industrial Building Lease dated September 29, 1992 by and between the Registrant and LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628(4)
 
    
10
.9 Second Amendment to Industrial Building Lease dated March 3, 1995 by and between the Registrant and LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628(6)
 
    
10
.10 Third Amendment to Industrial Building Lease dated August 15, 1998 by and between the Registrant and LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628(9)
 
    
10
.11 Ground Lease dated January 1, 1995 between the Registrant and LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628(6)
 
    
10
.12 Party Wall Agreement, dated March 3, 1995 between the Registrant, LaSalle Trust, not personally but as Successor Trustee under Trust Agreement dated February 7, 1979 and known as Trust Number 100628, and the Arthur/Busse Limited Partnership(6)

27

Table of Contents

     
     
Exhibit
Number		 Description
 
10
.13 Tax Indemnification Agreement between Registrant and certain Stockholders of Registrant prior to its initial public offering(2)
 
    
10
.14 Indemnification Agreement between Registrant and certain Stockholders of Registrant prior to its initial public offering(2)
 
    
10
.15 The Registrant’s 1995 Equity Incentive Plan(8)
 
    
10
.16 Promissory Note (the “ILIC Promissory Note”) in the original principal amount of $2.5 million, dated September 27, 1995 and executed by the Registrant in favor of Indianapolis Life Insurance Company (“ILIC”)(9)
 
    
10
.17 First Mortgage and Security Agreement (the “ILIC Mortgage”) by and between the Registrant, as mortgagor, and ILIC, as mortgagee, dated September 27, 1995, and securing the ILIC Promissory Note and relating to the property commonly known as 3001 Malmo Drive, Arlington Heights, Illinois(9)
 
    
10
.18 Assignment of Rents, Leases, Income and Profits dated September 27, 1995, executed by the Registrant in favor of ILIC and relating to the ILIC Promissory Note, the ILIC Mortgage and the Arlington Heights facility(9)
 
    
10
.19 Environmental Risk Agreement dated September 27, 1995, executed by the Registrant in favor of ILIC and relating to the ILIC Promissory Note, the ILIC Mortgage and the Arlington Heights facility(9)
 
    
10
.20 Credit Agreement dated as of March 31, 1998 among the Registrant, Sunshine Nut Co., Inc., Quantz Acquisition Co., Inc., JBS International, Inc. (“JBSI”), U.S. Bancorp Ag Credit, Inc. (“USB”) as Agent, Keybank National Association (“KNA”), and LNB(10)
 
    
10
.21 The Registrant’s 1998 Equity Incentive Plan(12)
 
    
10
.22 First Amendment to the Registrant’s 1998 Equity Incentive Plan(14)
 
    
10
.23 Second Amendment to Credit Agreement dated May 10, 2000 by and among the Registrant, JBSI, USB as Agent, LNB and SunTrust Bank, N.A.(“STB”) (replacing KNA)(13)
 
    
10
.24 Third Amendment to Credit Agreement dated May 20, 2002 by and among the Registrant, JBSI, USB as Agent, LNB and STB(15)
 
    
10
.25 Fourth Amendment to Credit Agreement dated May 30, 2003 by and among the Registrant, JBSI, USB as Agent, LNB and STB(16)
 
    
10
.26 Consent, Waiver and Fifth Amendment to Credit Agreement dated December 1, 2004 by and among the Registrant, USB as Agent, LNB and STB(19)
 
    
10
.27 Revolving Credit Note in the principal amount of $40.0 million executed by the Registrant and JBSI in favor of USB, dated as of May 30, 2003(14)
 
    
10
.28 Revolving Credit Note in the principal amount of approximately $22.9 million executed by the Registrant and JBSI in favor of STB, dated as of May 30, 2003(14)
 
    
10
.29 Revolving Credit Note in the principal amount of approximately $17.1 million executed by the Registrant and JBSI in favor of LSB, dated as of May 30, 2003(14)
 
    
10
.30 Industrial Building Lease between the Registrant and Cabot Acquisition, LLC dated April 18, 2003(16)
 
    
10
.31 Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number One among John E. Sanfilippo, as trustee of the Jasper and Marian Sanfilippo Irrevocable Trust, dated September 23, 1990, Jasper B. Sanfilippo, Marian R. Sanfilippo and Registrant, dated December 31, 2003(15)
 
    
10
.32 Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number Two among Michael J. Valentine, as trustee of the Valentine Life Insurance Trust, Mathias Valentine, Mary Valentine and Registrant, dated December 31, 2003(15)
 
    
10
.33 Request for Waiver and Restriction on Transfer, dated January 22, 2004, by and between the Registrant and each holder of the Registrant’s Class A Common Stock(16)

28

Table of Contents

     
     
Exhibit
Number		 Description
 
10
.34 Letter Agreement, dated January 21, 2004, by and between the Registrant and Mathias A. Valentine(16)
 
    
10
.35 Letter Agreement, dated January 21, 2004, by and between the Registrant and Michael J. Valentine, Trustee of the Michael J. Valentine Trust(16)
 
    
10
.36 Letter Agreement, dated January 21, 2004, by and between the Registrant and Michael J. Valentine, Trustee of the James Valentine Trust(16)
 
    
10
.37 Letter Agreement, dated January 21, 2004, by and between the Registrant and Michael J. Valentine, Trustee of the Mary Jo Carroll Trust(16)
 
    
10
.38 Letter Agreement, dated January 21, 2004, by and between the Registrant and Marian Sanfilippo, Trustee of the John E. Sanfilippo Irrevocable Trust Agreement Dated 10/08/96(16)
 
    
10
.39 Letter Agreement, dated January 21, 2004, by and between the Registrant and Marian Sanfilippo, Trustee of the James J. Sanfilippo Irrevocable Trust Agreement Dated 10/08/96(16)
 
    
10
.40 Letter Agreement, dated January 21, 2004, by and between the Registrant and Marian Sanfilippo, Trustee of the Jeffrey T. Sanfilippo Irrevocable Trust Agreement Dated 10/08/96(16)
 
    
10
.41 Letter Agreement, dated January 21, 2004, by and between the Registrant and Marian Sanfilippo, Trustee of the Lisa Sanfilippo Irrevocable Trust Agreement Dated 1/21/93(16)
 
    
10
.42 Letter Agreement, dated January 21, 2004, by and between the Registrant and Marian Sanfilippo, Trustee of the Jasper B. Sanfilippo Irrevocable Trust Agreement Dated 10/08/96(16)
 
    
10
.43 Amendment, dated February 12, 2004, to Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number One among John E. Sanfilippo, as trustee of the Jasper and Marian Sanfilippo Irrevocable Trust, dated September 23, 1990, Jasper B. Sanfilippo, Marian R. Sanfilippo and Registrant, dated December 31, 2003(16)
 
    
10
.44 Amendment, dated February 12, 2004, to Amended and Restated John B. Sanfilippo & Son, Inc. Split-Dollar Insurance Agreement Number Two among Michael J. Valentine, as trustee of the Valentine Life Insurance Trust, Mathias Valentine, Mary Valentine and Registrant, dated December 31, 2003(16)
 
    
10
.45 Development Agreement dated as of May 26, 2004, by and between the City of Elgin, an Illinois municipal corporation, the Registrant, Arthur/Busse Limited Partnership, an Illinois limited partnership, and 300 East Touhy Avenue Limited Partnership, an Illinois limited partnership(17)
 
    
10
.46 Agreement For Sale of Real Property, dated as of June 18, 2004, by and between the State of Illinois, acting by and through its Department of Central Management Services, and the City of Elgin(17)
 
    
10
.47 Agreement for Purchase and Sale between Matsushita Electric Corporation of America and the Company, dated December 2, 2004(20)
 
    
10
.48 First Amendment to Purchase and Sale Agreement dated March 2, 2005 by and between Panasonic Corporation of North America (“Panasonic”), f/k/a Matsushita Electric Corporation, and the Company(22)
 
    
10
.49 Sixth Amendment to Credit Agreement dated March 7, 2005 by and among the Company and USB in its capacity as agent to STB and LSB(22)
 
    
10
.50 Amended and Restated Line of Credit Note in the principal amount of $52.5 million executed by the Company in favor of USB, dated March 7, 2005(22)
 
    
10
.51 Amended and Restated Line of Credit Note in the principal amount of $22.5 million executed by the Company in favor of STB, dated March 7, 2005(22)
 
    
10
.52 Amended and Restated Line of Credit Note in the principal amount of $30.0 million executed by the Company in favor of LSB, dated March 7, 2005(22)
 
    
10
.53 Office Lease dated April 15, 2005 between the Company, as landlord, and Panasonic, as tenant(23)
 
    
10
.54 Warehouse Lease dated April 15, 2005 between the Company, as landlord, and Panasonic, as tenant(23)

29

Table of Contents

     
     
Exhibit
Number		 Description
 
10
.55 Construction contract dated August 18, 2005 between the Company and McShane Construction Corporation, as general contractor(25)
 
    
10
.56 The Registrant’s Supplemental Retirement Plan(25)
 
    
10
.57 Form of Option Grant Agreement under 1998 Equity Incentive Plan(25)
 
    
10
.58 Seventh Amendment to Credit Agreement dated February 2, 2006 by and among the Company and USB in its capacity as agent to LSB, filed herewith
 
    
10
.59 Revolving Credit Note in the principal amount of $50.0 million executed by the Registrant in favor of USB, dated as of February 2, 2006, filed herewith
 
    
10
.60 Revolving Credit Note in the principal amount of $50.0 million executed by the Registrant in favor of LSB, dated as of February 2, 2006, filed herewith
 
    
10
.61 Termination Agreement executed February 1, 2006, by and between the City of Elgin, an Illinois municipal corporation, the Registrant, Arthur/Busse Limited Partnership, an Illinois limited partnership, and 300 East Touhy Avenue Limited Partnership, an Illinois limited partnership, filed herewith
 
    
11
.31 Not applicable
 
    
31
.1 Certification of Jasper B. Sanfilippo pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended, filed herewith
 
    
31
.2 Certification of Michael J. Valentine pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended, filed herewith
 
    
32
.1 Certification of Jasper B. Sanfilippo pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith
 
    
32
.2 Certification of Michael J. Valentine pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith
 
    
33
.99 Not applicable
(1)   Incorporated by reference to the Registrant’s Registration Statement on Form S-1, Registration No. 33-43353, as filed with the Commission on October 15, 1991 (Commission File No. 0-19681).
(2)   Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (Commission File No. 0-19681), as amended by the certificate of amendment filed as an appendix to the Registrant’s 2004 Proxy Statement filed on September 8, 2004.
(3)   Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (Amendment No. 3), Registration No. 33-43353, as filed with the Commission on November 25, 1991 (Commission File No. 0-19681).
(4)   Incorporated by reference to the Registrant’s Current Report on Form 8-K dated September 29, 1992 (Commission File No. 0-19681).
(5)   Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (Commission File No. 0-19681).
(6)   Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (Commission File No. 0-19681).
(7)   Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the third quarter ended September 28, 1995 (Commission File No. 0-19681).
(8)   Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the third quarter ended March 26, 1998 (Commission File No. 0-19681).

30

Table of Contents

(9)   Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 25, 1998 (Commission File No. 0-19681).
(10)   Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the first quarter ended September 24, 1998 (Commission File No. 0-19681).
(11)   Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 29, 2000 (Commission File No. 0-19681).
(12)   Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the second quarter ended December 28, 2000 (Commission File No. 0-19681).
(13)   Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 27, 2002 (Commission File No. 0-19681).
(14)   Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 26, 2003 (Commission File No. 0-19681).
(15)   Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the second quarter ended December 25, 2003 (Commission File No. 0-19681).
(16)   Incorporated by reference to the Registrant’s Registration Statement on Form S-3 (Amendment No. 2), Registration No. 333-112221, as filed with the Commission on March 10, 2004.
(17)   Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 24, 2004 (Commission File No. 0-19681).
(18)   Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the first quarter ended September 23, 2004 (Commission File No. 0-19681).
(19)   Incorporated by reference to the Registrant’s Current Report on Form 8-K dated December 1, 2004 (Commission File No. 0-19681).
(20)   Incorporated by reference to the Registrant’s Current Report on Form 8-K dated December 2, 2004 (Commission File No. 0-19681).
(21)   Incorporated by reference to the Registrant’s Current Report on Form 8-K dated December 16, 2004 (Commission File No. 0-19681).
(22)   Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 2, 2005 (Commission File No. 0-19681).
(23)   Incorporated by reference to the Registrant’s Current Report on Form 8-K dated April 15, 2005 (Commission File No. 0-19681).
(24)   Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the third quarter ended March 24, 2005 (Commission File No. 0-19681).
(25)   Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2005 (Commission File No. 0-19681).

31