Stockholder's Report First Quarter 2001

February 20, 2001

Dear Stockholder:

Net income for the second quarter of fiscal 2001 was approximately $4.8 million or 52 cents per share versus approximately $4.6 million or 50 cents per share for the second quarter of fiscal 2000. The $4.8 million net income is the highest quarterly net income the company has reported since it became public in 1991. For the six-month period ended December 28, 2000, net income was approximately $6.0 million or 66 cents per share compared to approximately $5.2 million or 57 cents per share for the first six months of fiscal 2000.

Net sales for the second quarter of fiscal 2001 were approximately $115.3 million compared to approximately $124.0 million last year. The 7% decrease in quarterly net sales was primarily attributable to a decline in sales within the consumer distribution channel. Notwithstanding the decrease in quarterly net sales, the gross profit margin of 18.7% of net sales was relatively consistent with the 19.0% gross profit margin for the second quarter of 2000. Net sales for the first six months of this fiscal year were approximately $202.5 million, down slightly from approximately $203.6 million for the first six-month period of fiscal 2000. Year-to-date gross profit margin of 17.8% of net sales for fiscal 2001 marginally improved over the gross profit margin of 17.7% of net sales for the first six months of fiscal 2000.

Selling and administrative expenses for the second quarter of fiscal 2001 were 10.1% of net sales compared to 11.5% of net sales for the second quarter of fiscal 2000. The decrease in selling expenses was due to lower promotional spending in anticipation of the decreased consumer sales for the quarter. For the first six-month period of the current fiscal year, selling and administrative expenses were 10.9% of net sales versus 11.8% of net sales for the same period of fiscal 2000. Quarterly income from operations increased to approximately $9.9 million in the second quarter of fiscal 2001 from approximately $9.3 million in the second quarter of last year. Income from operations for the current six-month period was approximately $13.9 million compared to approximately $12.0 million for the first six months of fiscal 2000. Higher inventory levels in the current fiscal year resulted in a quarterly interest expense of approximately $2.1 million compared to approximately $1.8 million in the second quarter of fiscal 2000. Interest expense for the current six-month period was approximately $4.2 million versus approximately $3.7 million for the first six months of fiscal 2000.

We are very pleased with our record earnings performance for the quarter, especially in light of the decrease in net sales. Management’s effort to control costs in the face of the sales decrease and improve quarterly earnings reaffirms its commitment to enhance stockholder value through consistent improvement in profitability. We will work hard to replace these decreased sales so that we can look forward to another year of growth.

Jasper B. Sanfilippo
Chairman and Chief Executive Officer

The statements of Jasper B. Sanfilippo in this letter are forward looking. These forward-looking statements are based on the company’s current expectations and involve risks and uncertainties. Consequently, the company’s actual results could differ materially. Among the factors that could cause results to differ materially from current expectations are: (i) sales activity for the company’s products for the remainder of the fiscal year; (ii) changes in the availability and costs of raw materials for the production of the company’s products; (iii) fluctuations in the value of the company’s inventories of pecans, walnuts or other nuts due to fluctuations in the market prices of these nuts; (iv) the company’s ability to lessen the negative impact of competitive pressures by reducing its selling prices and increasing sales volume while at the same time maintaining profit margins by reducing costs; (v) the time and occurrence (or non-occurrence) of other transactions and events which may be subject to circumstances beyond the company’s control.

Consolidated Statements of Operations & Balance Sheets