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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X]  ( X )
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 26, 200924, 2011

[  ]  (     )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM               __________ TO __________

Commission File No. 0-14616


J & J SNACK FOODS CORP.

(Exact name of registrant as specified in its charter)

New Jersey
22-1935537
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer Identification No.)
   
22-1935537
(I.R.S. Employer Identification No.)
 6000 Central Highway  
6000 Central Highway, Pennsauken, New Jersey
(Address
08109
 (Address of principal executive offices) 
08109
(Zip Code)

Registrant’sRegistrant's telephone number, including area code:  (856) 665-9533

Securities Registered Pursuant to Section 12(b) of the Act: Common Stock, no par value

Title of Each ClassName of Each Exchange on Which Registered
 Common Stock, no par value  The NASDAQ Global Select Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes [  ]___  No  [X]  X  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes [  ]___  No  [X]  X  

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ]  X    No [  ]___ 


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not con­tained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    X  

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

Large accelerated filer [  ]( )Accelerated filer (X)
   Accelerated filer [X]
Non-accelerated filer [  ]( ) Smaller reporting company [  ]( )
(Do not check if a smaller reporting company)  

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

As of December 4, 2009,November 25, 2011, the latest practicable date, 18,392,04518,734,376 shares of the Registrant’s common stock were issued and outstanding.  The aggregate market value of shares held by non-affiliates of the Registrant on such date was $497,864,393$674,816,674 based on the last sale price on March 27, 200925, 2011 of $34.95$45.91 per share.  March 27, 200925, 2011 was the last business day of the registrant’s most recently completed second fiscal quarter.


DOCUMENTS INCORPORATED BY REFERENCE


Portions of the registrant’s definitive proxy statement for its Annual Meeting of Shareholders scheduled for February 8, 20102012 are incorporated by reference into Part III of this report.





J & J SNACK FOODS CORP.
2009
2011 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

PART I

Page
Item 1
PART I
   
Item 1Business1
Item 1A
Risk Factors6
Item 1BUnresolved Staff Comments8
Item 2Properties9
Item 3Legal Proceedings10
Item 4[Removed and reserved]10
   
Risk Factors6PART II
Item 1B
   Unresolved Staff Comments8
Item 2
5		Properties8
Item 3
Legal Proceedings9
Item 4
Submission Of Matters To A Vote Of Security Holders9
PART II
Item 5
Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities1011
Item 6
Selected Financial Data1112
Item 7
Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
1213
Item 7A
Quantitative And Qualitative Disclosures About Market Risk
2123
Item 8
Financial Statements And Supplementary Data2124
Item 9
Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
2124
Item 9A
Controls and Procedures24
Item 9BOther Information25
   
Controls and Procedures21PART III
Item 9B
   Other Information22
PART III
Item 10
Item 10
Directors, Executive Officers and Corporate Governance2225
Item 11
Executive Compensation2326
Item 12
Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters
2426
Item 13
Certain Relationships And Related Transactions, and Director Independence
2427
Item 14
Principal Accountant Fees and Services2427
PART IV
Item 15
   
PART IV
Item 15Exhibits, Financial Statement Schedules2427

In addition to historical information, this document and analysis contains forward-looking statements. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements.  Important factors that might cause such a difference include, but are not limited to, those discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof.  We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof.


Table of Contents

Part I

Item 1.Business

General

PART I

Item 1.Business

General

J & J Snack Foods Corp. (the “Company” or “J & J”) manufactures nutritional snack foods and distributes frozen beverages which it markets nationally to the food service and retail supermarket industries.  The Company’s principal snack food products are soft pretzels marketed primarily under the brand name SUPERPRETZEL and frozen juice treats and desserts marketed primarily under the LUIGI’S, FRUIT-A-FREEZE,FRUIT–A-FREEZE, WHOLE FRUIT, ICEE, BARQ’S*BARQ’S* and MINUTE MAID*MAID** brand names.  J & J believes it is the largest manufacturer of soft pretzels in the United States, Mexico and Canada.  Other snack food products include churros (an Hispanic pastry), funnel cake, dough enrobed handheld products and bakery products. The Company’s principal frozen beverage products are the ICEE brand frozen carbonated beverage and the SLUSH PUPPIE brand frozen uncarbonated beverage.


The Company’s Food Service and Frozen Beverages sales are made primarily to food service customers including snack bar and food stand locations in leading chain, department, discount, warehouse club and convenience stores; malls and shopping centers; fast food outlets; stadiums and sports arenas; leisure and theme parks; movie theatres; independent retailers; and schools, colleges and other institutions.  The Company’s retail supermarket customers are primarily supermarket chains. The Company’s restaurant group sells direct to the public through its chains of specialty snack food retail outlets, BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET, located primarily in the Mid-Atlantic States.

The Company was incorporated in 1971 under the laws of the State of New Jersey.


The Company has made no material acquisitions in fiscal year 2009 but has made material acquisitions2011 and in prior years as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto.


The Company operates in fourthree business segments: Food Service, Retail Supermarkets The Restaurant Group and Frozen Beverages.  These segments are described below.


The Chief Operating Decision Maker for Food Service and Retail Supermarkets and The Restaurant Group and the Chief Operating Decision Maker for Frozen Beverages monthly review and evaluatedetailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment.  Sales is considered to be the one and only key variable monitored by the Chief Operating Decision Makers and management when determining each segment’s and the company’s financial condition and operating performance.  In addition, the Chief Operating Decision Makers review and evaluate depreciation, capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment (see Item 7 —– Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8 —– Financial Statements and Supplementary Data for financial information about segments).


Food Service


The primary products sold by the food service segment are soft pretzels, frozen juice treats and desserts, churros, dough enrobed handheld products and baked goods.  Our customers in the food service segment include snack bars and food stands in chain, department and discount stores; malls and shopping centers; fast food outlets; stadiums and sports arenas; leisure and theme parks; convenience stores; movie theatres; warehouse club stores; schools, colleges and other institutions.  Within the food service industry, our products are purchased by the consumer primarily for consumption at the point-of-sale.

Retail Supermarkets


The primary products sold to the retail supermarket industrychannel are soft pretzel products —– including SUPERPRETZEL, frozen juice treats and desserts including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE FRUIT frozen fruit bars and sorbet, BARQ’S FLOATZ and ICEE Squeeze-Up Tubes, anddough enrobed handheld products including PATIO burritos, TIO PEPE’S Churros.Churros and CALIFORNIA CHURROS.  Within the retail supermarket industry,channel, our frozen and prepackaged products are purchased by the consumer for consumption at home.

*
BARQ’S is a registered trademark of Barq’s Inc.

**MINUTE MAID is a registered trademark of the Coca-Cola Company

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The Restaurant Group

We sell direct to the public through our Restaurant Group, which operates BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET, our chain of specialty snack food retail outlets.

Frozen Beverages


We sell frozen beverages to the food service industry primarily under the names ICEE, SLUSH PUPPIE, PARROT ICE and ARCTIC BLAST in the United States, Mexico and Canada.  We also provide repair and maintenance service to customers for customers’ owned equipment.


Products


Soft Pretzels


The Company’s soft pretzels are sold under many brand names; some of which are: SUPERPRETZEL, PRETZEL FILLERS, PRETZELFILS, GOURMET TWISTS, MR. TWISTER, SOFT PRETZEL BITES, SOFTSTIX, SOFT PRETZEL BUNS, HOT KNOTS, DUTCH TWIST, TEXAS TWIST, SANDWICH TWIST, CINNAPRETZEL* and SERIOUSLY TWISTED!; and, to a lesser extent, under private labels.

Soft pretzels are sold in the Food Service and Retail Supermarket and The Restaurant Group segments. Soft pretzel sales amounted to 20%18% of the Company’s revenue in fiscal year 2009,2011, 19% in 2010, and 20% in 2008, and 22% in 2007.2009.


The Company’s soft pretzels qualify under USDA regulations as the nutritional equivalent of bread for purposes of the USDA school lunch program, thereby enabling a participating school to obtain partial reimbursement of the cost of the Company’s soft pretzels from the USDA.

The Company’s soft pretzels are manufactured according to a proprietary formula.  Soft pretzels, ranging in size from one to ten ounces in weight, are shaped and formed by the Company’s twister machines.  These soft pretzel tying machines are automated, high-speed machines for twisting dough into the traditional pretzel shape. Additionally, we make soft pretzels which are extruded or shaped by hand.  Soft pretzels, after processing, are primarily quick-frozen in either raw or baked form and packaged for delivery.


The Company’s principal marketing program in the Food Service segment includes supplying ovens, mobile merchandisers, display cases, warmers and similar merchandising equipment to the retailer to prepare and promote the sale of soft pretzels.  Some of this equipment is proprietary, including combination warmer and display cases that reconstitute frozen soft pretzels while displaying them, thus eliminating the need for an oven. The Company retains ownership of the equipment placed in customer locations, and as a result, customers are not required to make an investment in equipment.


Frozen Juice Treats and Desserts


The Company’s frozen juice treats and desserts are marketed primarily under the LUIGI’S, FRUIT-A-FREEZE, WHOLE FRUIT, ICEE, BARQ’S and MINUTE MAID brand names. Frozen juice treats and desserts are sold in the Food Service and Retail Supermarkets segments. Frozen juice treats and dessert sales were 13%14% of the Company’s revenue in 2009, 13%2011, 14% in fiscal year 20082010 and 14%13% in 2007.2009.


The Company’s school food service MINUTE MAID and WHOLE FRUIT frozen juice fruit bars are manufactured from an apple or pear juice base to which water, sweeteners, coloring (in some cases) and flavorings are added.  The juice bars contain two to three ounces of apple or pear juice and the minimum daily requirement of vitamin C, and qualify as reimbursable items under the USDA school lunch program.  The juice bars are produced in various flavors and are packaged in a sealed push-up paper container referred to as the Milliken M-pak, which the Company believes has certain sanitary and safety advantages.


The balance of the Company’s frozen juice treats and desserts products are manufactured from water, sweeteners and fruit juice concentrates in various flavors and packaging including cups, tubes, sticks, M-paks, pints and tubs.  Several of the products contain ice cream and FRUIT-A-FREEZE and WHOLE FRUIT contain pieces of fruit.

*CINNAPRETZEL is a registered trademark of Cinnabon, Inc.

2
Churros


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Churros

The Company’s churros are sold primarily under the LA CHURROS, and TIO PEPE’S and CALIFORNIA CHURROS brand names. Churros are sold to the Food Service and Retail Supermarkets segments. Churro sales were 5%6% of the Company’s sales in fiscal year 2009, 4%2011, 5% in 20082010 and 4%5% in 2007.2009.  Churros are Hispanic pastries in stick form which the Company produces in several sizes according to a proprietary formula.  The churros are deep fried, frozen and packaged.  At food service point-of-sale they are reheated and topped with a cinnamon sugar mixture.  The Company also sells fruit and crème-filled churros.  The
Company supplies churro merchandising equipment similar to that used for its soft pretzels.


Handheld Products

The Company's dough enrobed handheld products are marketed under the PATIO, HAND FULLS, HOLLY RIDGE BAKERY, VILLA TALIANO, TOP PICKS brand names and under private labels.  Handheld products are sold to the Food Service and Retail Supermarket segments.   Handheld product sales amounted to 2% of the Company's sales in 2011.
Bakery Products


The Company’s bakery products are marketed under the MRS. GOODCOOKIE, CAMDEN CREEK BAKERY, READI-BAKE, COUNTRY HOME, MARY B’S, DADDY RAY’S and PRETZEL COOKIE brand names, and under private labels.  Bakery products include primarily biscuits, fig and fruit bars, cookies, muffins and donuts.  In 2007, biscuits and dumplings under the MARY B’S name and fruit and fig bars, under the DADDY RAY’S name, were added through acquisitions. Bakery products are sold to the Food Service segment.  Bakery products sales amounted to 35%32% of the Company’s sales in fiscal year 2009,2011, 34% in 2010 and 35% in 2008 and 32% in 2007.2009.


Frozen Beverages


The Company markets frozen beverages primarily under the names ICEE, SLUSH PUPPIE, PARROT ICE and ARCTIC BLAST in the United States, Mexico and Canada.  Additional frozen beverages are JAVA FREEZE and CALIFORNIA NATURAL.  Frozen beverages are sold in The Restaurant Group andthe Frozen Beverages segments. segment.
Frozen beverage sales amounted to 17%18% of revenue in fiscal 2009,2011, 18% in 20082010 and 19%17% in 2007.2009.

Under the Company’s principal marketing program for frozen carbonated beverages, it installs frozen beverage dispensers for its ICEE and ARCTIC BLAST brands at customer locations and thereafter services the machines, arranges to supply customers with ingredients required for production of the frozen beverages, and supports customer retail sales efforts with in-store promotions and point-of-sale materials.  In most cases, the Company retains ownership of its dispensers, and as a result, customers are not required to make an investment in equipment or arrange for the ingredients and supplies necessary to produce and market the frozen beverages.  The Company also provides managedrepair and maintenance service to customers for customers’ owned equipment and sells equipment in its Frozen Beverages segment, revenue from which amounted to 9%7% of sales in 2009, 9%2011, 8% of sales in 20082010 and 8% of the Company’s sales in fiscal year 2007.2009.  The Company sells frozen uncarbonated beverages under the SLUSH PUPPIE brandand PARROT ICE brands through a distributor network and through its own distribution network.

Each new frozen carbonated customer location requires a frozen beverage dispenser supplied by the Company or by the customer.  Company-supplied frozen carbonated dispensers are purchased from outside vendors, built new or rebuilt by the Company.

The Company provides managed service and/or products to approximately 87,00082,000 Company-owned and customer-owned dispensers.

The Company has the rights to market and distribute frozen beverages under the name ICEE to the entire continental United States (except for portions of nine states) as well as internationally.

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Other Products


Other products sold by the Company include soft drinks, funnel cakes sold under the FUNNEL CAKE FACTORY brand name and smaller amounts of various other food products.  These products are sold in the Food Service The Restaurant Group and Frozen Beverages segments.

Customers


The Company sells its products to two principal customer groups:channels: food service and retail supermarkets. The primary products sold to the food service groupchannel are soft pretzels, frozen beverages, frozen juice treats and desserts, churros, dough enrobed handheld products and baked goods.  The primary products sold to the retail supermarket industrychannel are soft pretzels, and frozen

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juice treats and desserts. Additionally, the Company sells soft pretzels, frozen beveragesdesserts and various other food products direct to the public through its restaurant group, which operates BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET, our chain of specialty snack food retail outlets.dough enrobed handheld products.

We have several large customers that account for a significant portion of our sales. Our top ten customers accounted for 43%, 42% and 42%43% of our sales during fiscal years 2009, 20082011, 2010 and 2007,2009, respectively, with our largest customer accounting for 9%8% of our sales in 2009,2011, 8% in 2010 and 9% in 2008 and 8% in 2007.2009. Three of the ten customers are food distributors who sell our product to many end users.  The loss of one or more of our large customers could adversely affect our results of operations. These customers typically do not enter into long-term contracts and make purchase decisions based on a combination of price, product quality, consumer demand and customer service performance.  If our sales to one or more of these customers are reduced, this reduction may adversely affect our business.  If receivables from one or more of these customers become uncollectible, our operating income would be adversely impacted.


The Food Service The Restaurant Group and the Frozen Beverages segments sell primarily to the food service industry.channels.  The Retail Supermarkets segment sells to the retail supermarket industry.channel.


The Company’s customers in the food service segment include snack bars and food stands in chain, department and mass merchandising stores, malls and shopping centers, fast food outlets, stadiums and sports arenas, leisure and theme parks, convenience stores, movie theatres, warehouse club stores, schools, colleges and other institutions, and independent retailers.  Machines and machine parts are sold to other food and beverage companies.  Within the food service industry, the Company’s products are purchased by the consumer primarily for consumption at the point-of-sale.

The Company sells its products to an estimated 85-90% of supermarkets in the United States.  Products sold to retail supermarket customers are primarily soft pretzel products, including SUPERPRETZEL, frozen juice treats and desserts including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE FRUIT frozen fruit bars, WHOLE FRUIT Sorbet, MARY B’S biscuits and dumplings, DADDY RAY’S fig and fruit bars, BARQ’S FLOATZ and ICEE Squeeze-Up Tubes, PATIO burritos and TIO PEPE’S Churros.  Within the retail supermarket industry, the Company’s frozen and prepackaged products are purchased by the consumer for consumption at home.


Marketing and Distribution


The Company has developed a national marketing program for its products.  For Food Service and Frozen Beverages segments’ customers, this marketing program includes providing ovens, mobile merchandisers, display cases, warmers, frozen beverage dispensers and other merchandising equipment for the individual customer’s requirements and point-of-sale materials as well as participating in trade shows and in-store demonstrations.  The Company’s ongoing
advertising and promotional campaigns for its Retail Supermarket segment’s products include trade shows, newspaper advertisements with coupons, in-store demonstrations and consumer advertising campaigns.


The Company develops and introduces new products on a routine basis.  The Company evaluates the success of new product introductions on the basis of sales levels, which are reviewed no less frequently than monthly by the Company’s Chief Operating Decision Makers.


The Company’s products are sold through a network of about 200 food brokers and over 1,000 independent sales distributors and the Company’s own direct sales force.  For its snack food products, the Company maintains warehouse and distribution facilities in Pennsauken, Bellmawr and Bridgeport, New Jersey; Vernon (Los Angeles), and Colton, California; Scranton, Pittsburgh, Hatfield and Lancaster, Pennsylvania; Carrollton (Dallas), Texas; Atlanta, Georgia; Moscow Mills (St. Louis), Missouri; Pensacola, Florida;  Solon, Ohio; Weston, Oregon; and Solon, Ohio.Holly Ridge, North Carolina.  Frozen beverages are distributed from 128134 Company managed warehouse and distribution facilities located in 44 states, Mexico and Canada, which allow the Company to directly service its customers in the surrounding areas.  The Company’s products are shipped in refrigerated and other vehicles from the Company’s manufacturing and warehouse facilities on a fleet of Company operated tractor-trailers, trucks and vans, as well as by independent carriers.

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Seasonality

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Seasonality

The Company’s sales are seasonal because frozen beverage sales and frozen juice treats and desserts sales are generally higher during the warmer months.


Trademarks and Patents


The Company has numerous trademarks, the most important of which are SUPERPRETZEL, DUTCH TWIST, TEXAS TWIST, MR. TWISTER, SOFT PRETZEL BITES, SOFTSTIX, PRETZEL FILLERS and PRETZELFILS for its pretzel products; FROSTAR, SHAPE-UPS, MAMA TISH’S, FRUIT-A-FREEZE, WHOLE FRUIT and LUIGI’S for its frozen juice treats and desserts; TIO PEPE’S and CALIFORNIA CHURROS for its churros; ARCTIC BLAST, and SLUSH PUPPIE and PARROT ICE for its frozen beverages; FUNNEL CAKE FACTORY for its funnel cake products, PATIO for its handheld burritos and MRS. GOODCOOKIE, READI-BAKE, COUNTRY HOME, CAMDEN CREEK, MARY B’S and DADDY RAY’S for its bakery products.


The Company markets frozen beverages under the trademark ICEE in all of the continental United States, except for portions of nine states, and in Mexico and Canada. Additionally, the Company has the international rights to the trademark ICEE.


The trademarks, when renewed and continuously used, have an indefinite term and are considered important to the Company as a means of identifying its products.  The Company considers its trademarks important to the success of its business.


The Company has numerous patents related to the manufacturing and marketing of its product.


Supplies


The Company’s manufactured products are produced from raw materials which are readily available from numerous sources.  With the exception of the Company’s soft pretzel twisting equipment and funnel cake production equipment, which are made for J & J by independent third parties, and certain specialized packaging equipment, the Company’s manufacturing equipment is readily available from various sources.  Syrup for frozen beverages is purchased primarily from The Coca-Cola Company, Dr Pepper/Seven Up, Inc., the Pepsi Cola Company, and Jogue, Inc.  Cups, straws and lids are readily available from various suppliers.  Parts for frozen beverage dispensing machines are purchased from several sources.  Frozen beverage dispensers are purchased primarily from IMI Cornelius, Inc. and FBD Partnership.

Competition


Snack food and bakery products markets are highly competitive.  The Company’s principal products compete against similar and different food products manufactured and sold by numerous other companies, some of which are substantially larger and have greater resources than the Company.  As the soft pretzel, frozen juice treat and dessert, bakery products and related markets grow, additional competitors and new competing products may enter the markets.  Competitive factors in these markets include product quality, customer service, taste, price, identity and brand name awareness, method of distribution and sales promotions.


The Company believes it is the only national distributor of soft pretzels.  However, there are numerous regional and local manufacturers of food service and retail supermarket soft pretzels as well as several chains of retail pretzel stores.


In Frozen Beverages the Company competes directly with other frozen beverage companies.  These include several companies which have the right to use the ICEE name in portions of nine states.  There are many other regional frozen beverage competitors throughout the country and one large retail chain which uses its own frozen beverage brand.

5

The Company competes with large soft drink manufacturers for counter and floor space for its frozen beverage dispensing machines at retail locations and with products which are more widely known than the ICEE, SLUSH PUPPIE, PARROT ICE and ARCTIC BLAST frozen beverages.


The Company competes with a number of other companies in the frozen juice treat and dessert and bakery products markets.

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Risks Associated with Foreign Operations


Foreign operations generally involve greater risk than doing business in the United States.  Foreign economies differ favorably or unfavorably from the United States’ economy in such respects as the level of inflation and debt, which may result in fluctuations in the value of the country’s currency and real property.  Sales of our foreign operations were $11,658,000, $11,078,000$18,025,000, $14,301,000 and $9,785,000$11,658,000 in fiscal years 2009, 20082011, 2010 and 2007,2009, respectively.  At September 26, 2009,24, 2011, the total assets of our foreign operations were approximately $8.5$13.7 million or 2.5% of total assets.  At September 25, 2010, the total assets of our foreign operations were approximately $10.4 million or 2% of total assets.


Employees


The Company has approximately 2,700 full-3,100 full and part-part time employees as of September 26, 2009.24, 2011.  Certain production and distribution employees at the Pennsauken and Bridgeport,Bellmawr, New Jersey plants are covered by a collective bargaining agreement which expires in September 2013. Certain production and distribution employees at the Bridgeport, New Jersey plant are covered by a collective bargaining agreement which expires February 2, 2013.

The production employees at our Atlanta, Georgia, plant are covered by a collective bargaining agreement which expires in January 2011. 2015.
The production employees at our Weston, Oregon, plant are covered by a collective bargaining agreement which expires September 30, 2013.
The Company considers its employee relations to be good.


Available Information


The Company’s internet address iswww.jjsnack.com.  On the investor relations section of its website, the Company provides free access to its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).  The information on the website listed above is not and should not be considered part of this annual report on Form 10-K and is not incorporated by reference in this document.

Item 1A. Risk Factors

Item 1A.Risk Factors

You should carefully consider the risks described below, together with all of the other information included in this report, in considering our business and prospects. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem insignificant may also impair our business operations. Following is a discussion of known potentially significant risks which could result in harm to our business, financial condition or results of operations.


Risks of Shortages or Increased Cost of Raw Materials

We are exposed to the market risks arising from adverse changes in commodity prices, affecting the cost of our raw materials and energy. The raw materials and energy which we use for the production and distribution of our products are largely commodities that are subject to price volatility and fluctuations in availability caused by changes in global supply and demand, weather conditions, agricultural uncertainty or governmental controls. We purchase these materials and energy mainly in the open market. If commodity price changes result in increases in raw materials and energy costs, we may not be able to increase our prices to offset these increased costs without suffering reduced volume, revenue and operating income.

6
General Risks of the Food Industry


Food processors are subject to the risks of adverse changes in general economic conditions; evolving consumer preferences and nutritional and health-related concerns; changes in food distribution channels; federal, state and local food processing controls or other mandates; consumer product liability claims; and risks of product tampering.  The increased buying power of large supermarket chains, other retail outlets and wholesale food vendors could result in greater resistance to price increases and could alter the pattern of customer inventory levels and access to shelf space.

Environmental Risks


The disposal of solid and liquid waste material resulting from the preparation and processing of foods are subject to various federal, state and local laws and regulations relating to the protection of the environment.  Such

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laws and regulations have an important effect on the food processing industry as a whole, requiring substantially all firms in the industry to incur material expenditures for modification of existing processing facilities and for construction of upgraded or new waste treatment facilities.


We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist.  Enactment of more stringent laws or regulations or more strict interpretation of existing laws and regulations may require additional expenditures by us, some of which could be material.

Risks Resulting from Several Large Customers


We have several large customers that account for a significant portion of our sales. Our top ten customers accounted for 43%, 42% and 42%43% of our sales during fiscal years 2009, 20082011, 2010 and 2007,2009, respectively, with our largest customer accounting for 9%8% of our sales in 2009,2011, 8% in 2010 and 9% in 2008 and 8% in 2007.2009. Three of the ten customers are food distributors who sell our product to many end users.  The loss of one or more of our large customers could adversely affect our results of operations. These customers typically do not enter into long-term contracts and make purchase decisions based on a combination of price, product quality, consumer demand and customer service performance.  If our sales to one or more of these customers are reduced, this reduction may adversely affect our business.  If receivables from one or more of these customers become uncollectible, our operating income would be adversely impacted.


Competition


Our businesses operate in highly competitive markets. We compete against national and regional manufacturers and distributors on the basis of price, quality, product variety and effective distribution.  Many of our major competitors in the market are larger and have greater financial and marketing resources than we do. Increased competition and anticipated actions by our competitors could lead to downward pressure on prices and/or a decline in our market share, either of which could adversely affect our results. See “Competition” in Item 1 for more information about our competitors.

Risks Relating to Manufacturing

Our ability to purchase, manufacture and distribute products is critical to our success. Damage or disruption to our manufacturing or distribution capabilities due to weather, natural disaster, fire or explosion, terrorism, pandemic, political upheaval, strikes or other reasons could impair our ability to manufacture or distribute our products.

7

Our Certificate of Incorporation may inhibit a change in control that you may favor


Our Certificate of Incorporation contains provisions that may delay, deter or inhibit a future acquisition of J & J Snack Foods Corp. not approved by our Board of Directors. This could occur even if our shareholders are offered an attractive value for their shares or if a substantial number or even a majority of our shareholders believe the takeover is in their best interest. These provisions are intended to encourage any person interested in acquiring us to negotiate with and obtain the approval of our Board of Directors in connection with the transaction. Provisions that could delay, deter or inhibit a future acquisition include the following:


—-- a classified Board of Directors;

—--the requirement that our shareholders may only remove Directors for cause;

—-- limitations on share holdings and voting of certain persons;

—-- special Director voting rights; and

—-- the ability of the Board of Directors to consider the interests of various constituencies, including our employees, customers, suppliers, creditors and the local communities in which we operate.

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Risks Relating to the Control by Gerald B. Shreiber


Gerald B. Shreiber is the founder of the Company and the current beneficial owner of 22%21% of its outstanding stock.  Our Certificate of Incorporation provides that he has three votes on the Board of Directors (subject to certain adjustments).  Therefore, he and one other director have voting control of the Board.  The performance of this Company is greatly impacted by his leadership and decisions.  His voting control reduces the restrictions on his actions.  His retirement, disability or death willmay have a significant impact on our future operations.

Risk Related to Product Changes


There are risks in the marketplace related to trade and consumer acceptance of product improvements, packing initiatives and new product introductions.

Risks Related to Change in the Business


Our ability to successfully manage changes to our business processes, including selling, distribution, product capacity, information management systems and the integration of acquisitions, will directly affect our results of operations.


Risks Associated with Foreign Operations


Foreign operations generally involve greater risk than doing business in the United States.  Foreign economies differ favorably or unfavorably from the United States’ economy in such respects as the level of inflation and debt, which may result in fluctuations in the value of the country’s currency and real property.  Further, there may be less government regulation in various countries, and difficulty in enforcing legal rights outside the United States.  Additionally, in some foreign countries, there is the possibility of expropriation or confiscatory taxation limitations on the removal of property or other assets, political or social instability or diplomatic developments which could affect the operations and assets of U.S. companies doing business in that country.  Sales of our foreign operations were $11,658,000, $11,078,000,$18,025,000, $14,301,000 and $9,785,000$11,658,000 in fiscal years 2009, 20082011, 2010 and 2007,2009, respectively.  At September 26, 2009,24, 2011, the total assets of our foreign operations were approximately $8.5$13.7 million or   2.5% of total assets.  At September 25, 2010, the total assets of our foreign operations were approximately $10.4 million or 2% of total assets.

Seasonality and Quarterly Fluctuations


Our sales are affected by the seasonal demand for our products.  Demand is greater during the summer months primarily as a result of the warm weather demand for our ICEE and frozen juice treats and desserts products.  Because of seasonal fluctuations, there can be no assurance that the results of any particular quarter will be indicative of results for the full year or for future years.

Item 1B.Unresolved Staff Comments

Item 1B.Unresolved Staff Comments

We have no unresolved SEC staff comments to report.

Item 2.Properties

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Item 2.Properties

The Company’s primary east coast manufacturing facility is located in Pennsauken, New Jersey in a 70,000 square foot building on a two-acre lot.  Soft pretzels are manufactured at this Company-owned facility which also serves as the Company’s corporate headquarters. This facility operates at approximately 65%60% of capacity. The Company leasesowns a 101,200128,000 square foot building adjacent to its manufacturing facility in Pennsauken, New Jersey through March 2022.Jersey.  The Company has constructed a large freezer within this facility for warehousing and distribution purposes.  The warehouse has a utilization rate of 80-90% depending on product demand.  The Company also leases, through January 2022, 16,00052,000 square feet of office and warehouse space located next to the Pennsauken, New Jersey plant. The Company leases through January 2011 an additional 23,000 square feet of warehouse space several blocks distant from these facilities.


The Company owns a 150,000 square foot building on eight acres in Bellmawr, New Jersey.  The facility is used by the Company to manufacture some of its products including funnel cake, pretzels, churros and cookies. The facility operates at about 85%75% of capacity.

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The Company’s primary west coast manufacturing facility is located in Vernon (Los Angeles), California.  It consists of a 137,000 square foot facility in which soft pretzels, churros and various lines of baked goods are produced and warehoused.  Included in the 137,000 square foot facility is a 30,000 square foot freezer used for warehousing and distribution purposes which was constructed in 1996.  The facility is leased through November 2017.2030.  The Company leases an additional 45,00080,000 square feet of office and warehouse space, adjacent to its manufacturing facility, through November 2017.2030.  The manufacturing facility operates at approximately 55%50% of capacity.

The Company leases through June 2015 a 45,000 square foot churros manufacturing facility located in Colton, California which operates at approximately 65% of capacity.

The Company leases through November 2017 a 25,000 square foot frozen juice treat and dessert manufacturing facility located in Norwalk (Los Angeles), California which operates at approximately 50%45% of capacity.

The Company leases an 85,000 square foot bakery manufacturing facility located in Atlanta, Georgia.  The lease runs through December 2010.2020.  The facility operates at about 55%50% of capacity.


The Company owns a 46,000 square foot frozen juice treat and dessert manufacturing facility and a 42,000 square foot dry storage warehouse located on six acres in Scranton, Pennsylvania.  The manufacturing facility, which was expanded from 26,000 square feet in 1998, operates at approximately 60%65% of capacity.


The Company leases a 29,600 square foot soft pretzel manufacturing facility located in Hatfield, Pennsylvania.  The lease runs through June 2017.  The facility operates at approximately 60%65% of capacity.


The Company leases a 19,200 square foot soft pretzel manufacturing facility located in Carrollton, Texas.  The lease runs through April 2016.  The facility operates at approximately 80% of capacity.near capacity with an additional line to be added early in fiscal year 2012. The Company leases an additional property containing a 6,500 square foot storage freezer across the street from the manufacturing facility, which lease expires May 2016.


The Company leases an 18,000 square foot soft pretzel manufacturing facility located in Chambersburg, Pennsylvania.  The lease runs through September 20102013 with options to extend the term.  The facility operates at approximately 50%60% of capacity.


The Company’s fresh bakery products manufacturing facility and offices are located in Bridgeport, New Jersey in three buildings totaling 133,000 square feet.  The buildings are leased through December 2015.  The manufacturing facility operates at approximately 45% of capacity.

The Company owns a 65,000 square foot fig and fruit bar manufacturing facility located on 9-1/2 acres in Moscow Mills (St. Louis), Missouri.  Upon completion of construction that is in progress and that we expect to be completed in the second fiscal quarter of 2012, the facility will increase to approximately 155,000 square feet.  The facility operates at about 65%60% of capacity.

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The Company leases a building in Pensacola, Florida for the manufacturing, packing and warehousing of dumplings.  The building is approximately 14,000 square feet and the lease runs through December 2010.2013. The manufacturing facility operates at approximately 75% of capacity.


The Company’s Bavarian Pretzel Bakery headquarters and warehouse and distribution facilities are owned and located inCompany owns an 11,00084,000 square foot buildinghandheld products manufacturing facility in Lancaster, Pennsylvania.Holly Ridge, North Carolina, which operates at about 35% of capacity.


The Company leases a 70,000 square foot handheld products manufacturing facility in Weston, Oregon, which operates at about 25% of capacity.  The facility is leased through May 13, 2021.

The Company also leases approximately 134136 warehouse and distribution facilities in 44 states, Mexico and Canada.

Item 3.Legal Proceedings

Item 3. Legal Proceedings

The Company has no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is subject.

Item 4.Submission Of Matters To A Vote Of Security Holders

There were no matters submitted to a vote of the security holders during the quarter ended September 26, 2009.

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Item 4. [Removed and reserved]

PART II


Item 5.
Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities

The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “JJSF.”  The following table sets forth the high and low sale price quotations as reported by NASDAQ and dividend information for the common stock for each quarter of the years ended September 27, 200825, 2010 and September 26, 2009.24, 2011.

Common Stock Market Price

     High
   Low
   Declared
Dividend
Fiscal 2008
                                          
First quarter           $38.76       $29.01       $.0925   
Second quarter             31.85         23.38         .0925   
Third quarter             29.97         26.74         .0925   
Fourth quarter             36.07         27.00         .0925   
Fiscal 2009
                                          
First quarter           $34.50       $24.07       $.0975   
Second quarter             36.57         30.12         .0975   
Third quarter             40.14         32.10         .0975   
Fourth quarter             44.75         35.17         .0975   
 
Common Stock Market Price
          
        Dividend 
  High  Low  Declared 
          
Fiscal 2010         
First quarter $44.00  $35.19  $0.1075 
Second quarter  44.90   36.80   0.1075 
Third quarter  48.51   42.56   0.1075 
Fourth quarter  45.22   37.00   0.1075 
             
Fiscal 2011            
First quarter $49.88  $41.27  $0.1175 
Second quarter  50.25   41.91   0.1175 
Third quarter  53.44   45.55   0.1175 
Fourth quarter  55.58   43.25   0.1175 

As of November 20, 2009,25, 2011, there were about 6,0007,950 beneficial shareholders.


In our fiscal year ended September 24, 2011, we did not purchase and retire any shares of our common stock. There remains 210,772 shares that can be purchased under a million share buyback authorization approved by the Company's Board of Directors in February 2008.
In our fiscal year ended September 25, 2010, we purchased and retired 203,507 shares of our common stock at a cost of $7,768,000.

In our fiscal year ended September 26, 2009, we purchased and retired 450,597 shares of our common stock at a cost of $12,510,000 under a million share buyback authorization approved by the Company’s Board of Directors in February 2008. No shares were repurchased in the fourth quarter of the year.$12,510,000.  Of the shares purchased and retired in 2009, 400,000 shares were purchased at the purchase price of $27.90 per share from Gerald B. Shreiber, Chairman of the Board, Chief Executive Officer and Director of the Company.

In our 2008 fiscal year ended September 27, 2008, we purchased and retired 135,124 shares of our common stock at a cost of $3,539,000. The Company did not repurchase any of its common stock in fiscal year 2007.

For information on the Company’s Equity Compensation Plans, please see Item 12 herein.

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Item 6. Selected Financial Data

Table of Contents

Stock Performance Graph



Item 6.Selected Financial Data

The selected financial data for the last five years was derived from our audited consolidated financial statements.  The following selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto, especially as the information pertains to fiscal 2007, 20082009, 2010 and 2009.2011.

     Fiscal year ended in September
(In thousands except per share data)
   
     2009
   2008
   2007
   2006
   2005
Net Sales           $653,047       $629,359       $568,901       $514,831       $457,112  
Net Earnings           $41,312       $27,908       $32,112       $29,450       $26,043  
Total Assets           $439,827       $408,408       $380,288       $340,808       $305,924  
Long-Term Debt           $—        $—        $—        $—        $—   
Capital Lease Obligations           $381        $474        $565        $—        $—   
Stockholders’ Equity           $342,844       $316,778       $295,582       $263,656       $234,762  
 
Common Share Data
                                                                  
Earnings Per Diluted Share           $2.21       $1.47       $1.69       $1.57       $1.40  
Earnings Per Basic Share           $2.23       $1.49       $1.72       $1.60       $1.43  
Book Value Per Share           $18.51       $16.90       $15.80       $14.28       $12.85  
Common Shares Outstanding At Year End             18,526         18,748         18,702         18,468         18,272  
Cash Dividends Declared
Per Common Share		           $.39        $.37        $.34        $.30        $.25   
 

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  Fiscal year ended in September 
  
(In thousands except per share data)
 
                
  2011  2010  2009  2008  2007 
                
Net Sales $744,071  $696,703  $653,047  $629,359  $568,901 
Net Earnings $55,063  $48,409  $41,312  $27,908  $32,112 
Total Assets $550,816  $483,994  $439,827  $408,408  $380,288 
Long-Term  Debt $-  $-  $-  $-  $- 
Capital Lease                    
  Obligations $801  $863  $381  $474  $565 
Stockholders' Equity $432,388  $380,575  $342,844  $316,778  $295,582 
Common Share Data                    
Earnings Per Diluted                    
  Share $2.93  $2.59  $2.21  $1.47  $1.69 
Earnings Per Basic                    
  Share $2.95  $2.61  $2.23  $1.49  $1.72 
Book Value Per Share $23.09  $20.58  $18.51  $16.90  $15.80 
Common Shares Outstanding                    
  At Year End  18,727   18,491   18,526   18,748   18,702 
Cash Dividends Declared                    
  Per Common Share $0.47  $0.43  $0.39  $0.37  $0.34 
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Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations


Table of Contents

Item 7.Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

In addition to historical information, this document and analysis contains forward-looking statements. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements.  Important factors that might cause such a difference include, but are not limited to, those discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof.  We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof.

Critical Accounting Policies, Judgments and Estimates


We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America.  The preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of those financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.


The Company discloses its significant accounting policies in the accompanying notes to its audited consolidated financial statements.


Judgments and estimates of uncertainties are required in applying the Company’s accounting policies in certain areas. Following are some of the areas requiring significant judgments and estimates: revenue recognition, accounts receivable, cash flow and valuation assumptions in performing asset impairment tests of long-lived assets, estimates of the value and useful lives of intangible assets and insurance reserves.


There are numerous critical assumptions that may influence accounting estimates in these and other areas.  We base our critical assumptions on historical experience, third-party data and various other estimates we believe to be reasonable. A description of the aforementioned policies follows:


Revenue Recognition — - We recognize revenue from our products when the products are shipped to our customerscustomers.  Repair and whenmaintenance equipment service revenue is recorded when it is performed for our customers whoprovided the customer terms are that the customer is to be charged on a time and material basis. We also sell equipment service contracts with terms of coverage ranging between 12 and 60 months. We record deferred incomebasis or on equipment service contracts which is amortized by thea straight-line methodbasis over the term of the contracts.contract when the customer has signed a service contract.  Revenue is recognized only where persuasive evidence of an arrangement exists, our price is fixed or determinableestimable and collectability is reasonably assured. We record offsets to revenue for allowances, end-user pricing adjustments, trade spending, coupon redemption costs and returned product.  Customers generally do not have the right to return product unless it is damaged or defective.  Off-invoice allowances are deducted directly from the amount invoiced to our customer when our products are shipped to the customer. Offsets to revenue for allowances, end-user pricing adjustments and trade spending are recorded primarily as a reduction of accounts receivable based on our estimates of liability which are based on customer programs and historical experience. These offsets to revenue are based primarily on the quantity of product purchased over specific time periods.  For our Retail Supermarket and Frozen Beverages segments, we accrue for the liability based on products sold multiplied by per product offsets. Offsets to revenue for our Food Service segment are calculated in a similar manner for offsets owed to our direct customers; however, because shipments to end-users are unknown to us until reported by our direct customers or by the end-users, there is a greater degree of uncertainty as to the accuracy of the amounts accrued for end-user offsets.  Additional uncertainty may occur as customers take deductions when they make payments to us.  This creates complexities because our customers do not always provide reasons for the deductions taken.  Additionally, customers may take deductions to which they are not entitled and the length of time customers take deductions to which they are entitled can vary from two weeks to well over a year. Because of the aforementioned uncertainties, the process to determine the amount of liability to record is cumbersome and subject to inaccuracies. However, wethese estimates requires judgment.  We feel that due to constant monitoring of the process, any inaccuracies wouldincluding but not be material.limited to comparing actual results to estimates made on a monthly basis, these estimates are reasonable in all material respects.  Our recorded liability for allowances, end-user pricing adjustments and trade spending was approximately $14,000,000$12 million and $12,090,000$13 million at September 26, 200924, 2011 and September 27, 2008,25, 2010, respectively.

Accounts Receivable — - We record accounts receivable at the time revenue is recognized. Bad debt expense is recorded in marketing and administrative expenses. The amount of the allowance for doubtful accounts is based

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on our estimate of the accounts receivable amount that is uncollectable. It is comprised of a general reserve based on historical experience and amounts for specific customers’ accounts receivable balances that we believe are at risk due to our knowledge of facts regarding the customer(s).  We continually monitor our estimate of the allowance for doubtful accounts and adjust it monthly. We usually have approximately 10 customers with accounts receivable balances of between $1 million to $7$10 million. Failure of these customers, and others with lesser balances, to pay us the amounts owed, could have a material impact on our consolidated financial statements.

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Accounts receivable due from any of our customers is subject to risk. Our total bad debt expense was $492,000, $502,000$423,000, $493,000 and $189,000$492,000 for the fiscal years 2009, 20082011, 2010 and 2007,2009, respectively. At September 26, 200924, 2011 and September 27, 2008,25, 2010, our accounts receivables were $59,734,000$75,000,000 and $61,176,000,$69,875,000 net of an allowance for doubtful accounts of $623,000$653,000 and $926,000.$591,000.

Asset Impairment — – We have threetwo reporting units with goodwill totaling $60,314,000$70,070,000 as of September 26, 2009. We utilize24, 2011. Goodwill is not amortized but is evaluated annually by management for impairment.  Our impairment analysis for 2011 is a qualitative assessment in which we have considered historical reporting unitnet cash flows (defined as reporting unitprovided by operating income plus depreciationactivities and  amortization) as a proxy for expected future reporting unit cash flowspurchases of property, plant and equipment, their relationship to evaluate the fair value of these reporting units. If the fair value estimated substantially exceeds the carrying value of goodwill, recent fair value calculations of our reporting units and our assessment of the reporting unit, includinglikelihood, based on an assessment of what we know about our Company’s products and markets, costs and general economic conditions, that the relationship of cash flow to the carrying value of goodwill if any, associated withwill change significantly in the foreseeable future. We have concluded that unit, we dogoodwill is not recognize any impairment loss. We generally do not engage a third party to assist in this analysis as we believe that our in-house expertise is adequate to perform the analysis.impaired. 

Licenses and rights, customer relationships and non compete agreements are being amortized by the straight-line method over periods ranging from 3 to 20 years and amortization expense is reflected throughout operating expenses.  Long-lived assets, including fixed assets and amortizing intangibles, are reviewed for impairment as events or changes in circumstances occur indicating that the carrying amount of the asset may not be recoverable.  Indefinite lived intangibles are reviewed annually for impairment. Cash flow and sales analyses are used to assess impairment. The estimates of future cash flows and sales involve considerable management judgment and are based upon assumptions about expected future operating performance.  Assumptions used in these forecasts are consistent with internal planning. The actual cash flows and sales could differ from management’s estimates due to changes in business conditions, operating performance, economic conditions, competition and consumer preferences.


Useful Lives of Intangible Assets — - Most of our trade names which have carrying value have been assigned an indefinite life and are not amortized because we plan to receive the benefit from them indefinitely.  If we decide to curtail or eliminate the use of any of the trade names or if sales that are generated from any particular trade name do not support the carrying value of the trade name, then we would record an impairment or assign an estimated useful life and amortize over the remaining useful life.  Rights such as prepaid licenses and non compete agreements are amortized over contractual periods.  The useful lives of customer relationships are based on the discounted cash flows expected to be received from sales to the customers adjusted for an attrition rate.  The loss of a major customer or declining sales in general could create an impairment charge.

Insurance Reserves — - We have a self-insured medical plan which covers approximately 1,2001,300 of our employees. We record a liability for incurred but not yet reported or paid claims based on our historical experience of claims payments and a calculated lag time period. We maintain a spreadsheet that includes claims payments made each month according to the date the claim was incurred. This enables us to have an historical record of claims incurred but not yet paid at any point in the past. We then compare our accrued liability to the more recent claims incurred but not yet paid amounts and adjust our recorded liability up or down accordingly. Our recorded liability at September 26, 200924, 2011 and September 27, 200825, 2010 was $1,157,000$1,427,000 and $772,000,$1,106,000, respectively. Considering that we have stop loss coverage of $175,000$200,000 for each individual plan subscriber, the general consistency of claims payments and the short time lag, we believe that there is not a material exposure for this liability. Because of the foregoing, we do not engage a third party actuary to assist in this analysis.


We self-insure, up to loss limits, worker’s compensation and automobile liability claims. Accruals for claims under our self-insurance program are recorded on a claims-incurred basis. Under this program, the estimated liability for claims incurred but unpaid in fiscal years 20092011 and 20082010 was $2,300,000$1,100,000 and $1,600,000,$2,200,000, respectively. Our total recorded liability for all years’ claims incurred but not yet paid was $7,100,000$5,700,000 and $6,400,000$7,300,000 at September 26, 200924, 2011 and September 27, 2008,25, 2010, respectively.  We estimate the liability based on total incurred claims and paid claims adjusting for loss development factors which account for the development of open claims over time. We estimate the amounts we expect to pay for some insurance years by multiplying incurred losses

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by a loss development factor which is based on insurance industry averages and the age of the incurred claims; our estimated liability is then the difference between the amounts we expect to pay and the amounts we have already paid for those years. Loss development factors that we use range from 1.0 to 2.0.  However, for some years, the estimated liability is the difference between the amounts we have already paid for that year and the maximum we could pay under the program in effect for that particular year because the calculated amount we expect to pay is higher than the maximum.  For other years, where there are few claims open, the estimated liability we record is the amount the insurance company has reserved for those claims. We evaluate our estimated liability on a continuing basis and adjust it accordingly. Due to the multi-year length of these insurance programs, there is exposure to claims coming in lower or higher than anticipated; however, due to constant monitoring and stop loss coverage of $350,000 on individual claims, we believe our exposure is not material. Because of the foregoing, we do not engage a third party actuary to assist in this analysis.  In connection with these self-insurance agreements, we customarily enter into letters of credit arrangements with our insurers. At each of September 26, 200924, 2011 and September 27, 2008,25, 2010, we had outstanding letters of credit totaling $8,675,000 and $9,475,000, respectively.$8,175,000.

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Refer to Note A to the accompanying consolidated financial statements for additional information on our accounting policies.


RESULTS OF OPERATIONS


Fiscal 20092011 (52 weeks) Compared to Fiscal 20082010 (52 weeks)


Net sales increased $23,688,000,$47,368,000, or 4%7%, to $653,047,000$744,071,000 in fiscal 20092011 from $629,359,000$696,703,000 in fiscal 2008.2010.


Excluding sales from the acquisition of Parrot Ice in February 2010, California Churros in June 2010 and the frozen handheld business of ConAgra Foods in May 2011, sales increased 3% for the year.

We have fourthree reportable segments, as disclosed in the accompanying notes to the consolidated financial statements: Food Service, Retail Supermarkets The Restaurant Group and Frozen Beverages.


The Chief Operating Decision Maker for Food Service and Retail Supermarkets and The Restaurant Group and the Chief Operating Decision Maker for Frozen Beverages monthly review and evaluatedetailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment. Sales is considered to be the one and only key variable monitored by the Chief Operating Decision Makers and management when determining each segment’s and the company’s financial condition and operating performance.  In addition, the Chief Operating Decision Makers review and evaluate depreciation, capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment.

Food Service

15

FOOD SERVICE

Sales to food service customers increased $17,559,000,$25,756,000 or 4%6%, to $417,753,000$463,562,000 in fiscal 2009.2011. Excluding sales from the acquisition of California Churros and handheld sales, food service sales increased 2% for the year. Soft pretzel sales to the food service market decreased $313,000, or about 1/3 of one percent,increased 3% to $99,471,000$103,943,000 for the year. Unityear aided by increased sales of soft pretzels were down 3%to restaurant chains in the fourth quarter. Frozen juice bar and ices sales increased $2,467,000 or 5%, to $49,740,000 for the year.year primarily as the result of higher sales to school food service accounts.  Churro sales to food service customers increased 31% to $41,583,000 in 2011.  Without sales from California Churros, churro sales for the year would have been up about 2%.  Sales of bakery products, excluding biscuit and dumpling sales and fruit and fig bar sales, increased $6,607,000,$9,190,000, or 4%5%, for the year.year due primarily to increased sales to private label customers and to school food service.  Biscuit and dumpling sales were up 8%increased 4% to $32,845,000 due to increased distribution and new product offerings.$34,774,000.  Sales of fig and fruit bars increaseddecreased 11% to $29,497,000$28,363,000 due primarily to strong volume growth spreadlower sales across our customer base. Churro sales were up 16% for the year with $29,404,000 of sales in 2009 with over 80% of the sales increase comingbase resulting from decreased demand.  Handheld sales to one customer. Frozen juice barfood service customers were $8,865,000 in 2011. Funnel cake and icesrelated funnel cake product sales decreased $934,000 or 2%by $6,207,000 to $50,272,000 for the year. Sales of our funnel cake products were up $2,872,000, or 49%,$16,597,000 with sales to one customer accountingdown $9,570,000 or 75%. Sales of new products in the first twelve months since their introduction were approximately $12.5 million for about one-halfthe year. Price increases accounted for approximately $10.5 million of sales for the increase. The changesyear and net volume increases, including new product sales as defined above and sales resulting from the acquisitions of California Churros and handheld sales, accounted for approximately $15.3 million of sales for the year. Operating income in sales throughout theour Food Service segment decreased from $50,220,000 in 2010 to $46,171,000 in 2011 primarily as a result of higher ingredients and packaging costs of about $16 million and increased freight and distribution costs caused by higher freight rates and the integration of the handhelds business, which were from a combinationpartially offset by the benefit of volume changes and price increases.higher pricing.

Retail Supermarkets

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $8,046,000$14,980,000 or 14%20% to $65,158,000$91,099,000 in fiscal 2009. Total softyear 2011.  Excluding handheld sales, sales increased 7% for the year.  Soft pretzel sales to retail supermarkets were $30,506,000, an increase of 11% from fiscal 2008,$32,044,000 compared to $30,463,000 in 2010 on a unit volume decreaseincrease of 2%.  Sales of frozen juice barsjuices and ices increased 19%$3,652,000 or 8% to $37,819,000 in 2009$51,940,000 on a caseunit volume increase of 25%9%.  Increased trade spending of $1.3 million for the introduction of new frozen novelty items and a shift in product mix reduced sales dollars in relation to the unit volume increases. Coupon redemption costs, a reduction of sales, increased 38%13% or about $1,029,000$458,000 for the year.

The Restaurant Group

  Handheld sales to retail supermarket customers were $9,424,000 in 2011.  Sales of our Restaurant Group, which operates BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET retail storesproducts in the Mid-Atlantic region, declined by 23% primarily due to closings or licensingsfirst twelve months since their introduction were approximately $4.5 million in fiscal year 2011. Price increases accounted for approximately $3.1 million of stores insales for the

14


Table year and net volume increases, including new product sales as defined above and handheld sales and net of Contents


past year. At September 26, 2009, we had 4 stores open. Salesdecreased coupon costs, accounted for approximately $12.0 million of stores open for both years were down 7%sales for the year. Operating income in our Retail Supermarkets segment increased from $11,281,000 in 2010 to $11,830,000 in 2011.  Operating income benefited by lower advertising expense of approximately $800,000 and higher volume and pricing, which was partially offset by higher product costs related to ingredient and packaging cost increases.

Frozen Beverages

FROZEN BEVERAGES

Frozen beverage and related product sales decreased $1,539,000 or 1%increased 4% to $168,879,000$189,410,000 in fiscal 2009.2011. Beverage sales alone were down 1%increased 4% to $133,372,000 for the year. Gallonyear with a 31% increase in sales in Mexico accounting for over 50% of the increase.  Domestic gallon sales were down 2% for the yearflat in our base ICEE business. Service revenue increased $3,210,000, or 8%,5% to $42,013,000$42,608,000 for the year with increases and decreases spread across our customer base.  Sales of beverage machines, which tend to fluctuate from year to year while following no specific trend, decreased from $11,964,000 in 2010 to $11,362,000 in 2011.  The estimated number of Company owned frozen beverage dispensers was 40,800 and 38,600 at September 24, 2011 and September 25, 2010, respectively.  Operating income in our Frozen Beverage segment increased from $15,661,000 in 2010 to $18,582,000 in 2011 as we continue to grow this parta result of our business. Frozen carbonated machine sales decreased $2,834,000 to $10,004,000 forincreased volume as discussed above and controlled expenses.  Higher gasoline costs of approximately $1.4 million impacted the year.year’s operating income.

Consolidated

CONSOLIDATED
Other than as commented upon above by segment, there are no material specific reasons for the reported sales increases or decreases.  Sales levels can be impacted by the appeal of our products to our customers and consumers and their changing tastes, competitive and pricing pressures, sales execution, marketing programs, seasonal weather, customer stability and general economic conditions.


Gross profit as a percent of sales increased 2.28 percentage points in 2009 from 2008 to 32%.

Lower commodity costs in excess of $11,000,000, higher pricing and increased efficiencies due to volume in some of our product lines partially offset by higher workers’ compensation and group health insurance expense were the primary drivers causing the gross profit percentage increase.

Total operating expenses decreased $1,665,000 to $141,906,000 in fiscal 2009 and as a percentage of sales decreased 1.08to 30.88% in 2011 from 32.69% in 2010.  Higher ingredient and packaging costs compared to last year of approximately $18 million and the mid single digit gross profit margin of handheld sales were primarily responsible for the decreased gross profit percentage.  Ingredient and packaging costs can be extremely volatile and may be significantly different from what we are presently expecting and therefore we cannot project the impact of ingredient and packaging costs on our business going forward; however, there has been a very significant increase in the market cost of ingredient and packaging costs over the past eighteen months which we anticipate will result in higher costs over some portions of our fiscal year 2012.  The impact of these higher costs and increased costs in operational areas may result in lower net earnings in 2012 than in 2011.
16

Total operating expenses increased $2,543,000 to $153,191,000 in fiscal 2011 but as a percentage of sales decreased a full percentage point to 21% of sales.  Marketing expenses decreased .86 percentage points to 22%9% of sales in 2009. Other general income was $5,000 this year. Other general incomebecause of $375,000 last year primarily consistedreduced advertising of gains on the disposition of assets and insurance gains$800,000 in our Food Serviceretail supermarket segment and Frozen Beverages segments offset by store closing costs in our Restaurant Group segment of $102,000. Marketingcontrolled spending elsewhere.  Distribution expenses decreased .45increased .24 percentage points and remained at 11% of sales. Controlled spending in our Food Service and Frozen Beverages segments accounted for the overall decline. Distribution expenses decreased .75 of a percentage point and remained atto 8% of sales due to lowerhigher fuel costs and freight and fuel costs.rates.  Administrative expenses decreased .18 percentage points and were about 3-1/2%3% of sales in both years. Other general expense of $524,000 this year compared to other general expense of $2,087,000 in 2010.  Included in other general expense in 2010 is $1.6 million for an unclaimed property assessment and $577,000 of acquisition costs. Included in other general expense in 2011 is $546,000 of acquisition costs.


Operating income increased $23,602,000,decreased $579,000 or 54%,1% to $66,938,000$76,583,000 in fiscal 2009year 2011 as a result of the aforementioned items.


Gain on the bargain purchase of a business of $6,580,000 in the third quarter resulted from the fair value of the identifiable assets acquired in the handhelds acquisition exceeding the purchase price.
Investment income decreased by $1,279,000$73,000 to $1,386,000$1,041,000 due to the general decline in the level of interest rates.


The effective income tax rate was 39%decreased 3.51 percentage points to 35% from 38% last year.  Adjusting out the effect of the gain on bargain purchase of a business, the effective tax rate in both fiscal years.2011 is 37%.


Net earnings increased $13,404,000,$6,654,000 or 48%14%, in fiscal 20092011 to $41,312,000,$55,063,000, or $2.21$2.93 per diluted share as a result of the aforementioned items.  Without the benefit of the gain on bargain purchase of a business, net earnings were $48,483,000 compared to $48,409,000 last year.


There are many factors which can impact our net earnings from year to year and in the long run, among which are the supply and cost of raw materials and labor, insurance costs, factors impacting sales as noted above, the continuing consolidation of our customers, our ability to manage our manufacturing, marketing and distribution activities, our ability to make and integrate acquisitions and changes in tax laws and interest rates.


RESULTS OF OPERATIONS

Fiscal 20082010 (52 weeks) Compared to Fiscal 20072009 (52 weeks)


Net sales increased $60,548,000,$43,656,000, or 11%7%, to $629,359,000$696,703,000 in fiscal 20082010 from $568,901,000$653,047,000 in fiscal 2007. Adjusting for2009.

Excluding sales related tofrom the acquisitionsacquisition of DADDY RAY’SParrot Ice in February 2010 and Hom/Ade FoodsCalifornia Churros in January 2007, and WHOLE FRUIT Sorbet and FRUIT-A-FREEZE Frozen Fruit Bar brands in April 2007,June 2010, sales increased approximately 7%6% for the year.

Approximately $12.7 million, or 29%, or $41,681,000.of the increased sales were sales of funnel cake fries to one customer, which is carrying the product in virtually all of its domestic locations.  Although we are not able to provide an estimate of the sales going forward, we anticipate that these sales will be significantly less in fiscal year 2011.


We have fourthree reportable segments, as disclosed in the accompanying notes to the consolidated financial statements: Food Service, Retail Supermarkets The Restaurant Group and Frozen Beverages.

The Chief Operating Decision Maker for Food Service and Retail Supermarkets and The Restaurant Group and the Chief Operating Decision Maker for Frozen Beverages monthly review and evaluatedetailed operating income statements and sales

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Table of Contents


reports in order to assess performance and allocate resources to each individual segment. Sales is considered to be the one and only key variable monitored by the Chief Operating Decision Makers and management when determining each segment’s and the company’s financial condition and operating performance.  In addition, the Chief Operating Decision Makers review and evaluate depreciation, capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment.

Food Service

17

FOOD SERVICE

Sales to food service customers increased $44,430,000,$18,796,000, or 12%4%, to $400,194,000$437,806,000 in fiscal 2008.2010.  Excluding the benefit of sales from acquisitions,the acquisition of California Churros, food service sales would have increased approximately 7%.4% for the year.  Sales of funnel cake fries to one customer accounted for over 67% of the food service sales increase.  Soft pretzel sales to the food service market increased $925,000, or 1%, to $99,784,000$100,694,000 for the year. Sales of bakery products excluding Hom/Ade and DADDY RAY’S, increased $19,768,000, or 14%, for the year. Hom/Ade and DADDY RAY sales were $30,380,000 and $26,596,000, respectively, for the year. Churro sales were up 15% for the year with $25,286,000 of sales in 2008. Frozen juice bar and ices sales decreased $2,999,000, or 6%, to $47,273,000 for the year primarily as the result of lower sales to one contract packing customer and to school food service accounts.  Churro sales to food service customers increased $3,635,000 or 8% to $51,206,000$31,732,000 in 2010.  Without sales from California Churros, churro sales for the year. Without WHOLE FRUITyear would have been down about ½ of one percent.  Sales of bakery products, excluding biscuit and FRUIT-A-FREEZE,dumpling sales and fruit and fig bar sales, increased 5%$5,606,000, or 3%, for the year.year due primarily to increased sales to private label customers.  Biscuit and dumpling sales increased 1% to $33,326,000.  Sales of ourfig and fruit bars decreased 4% to $31,715,000 due primarily to lower sales to one customer who discontinued a particular product.  Funnel cake and related funnel cake products were down $835,000, or 12%, asproduct sales declinedincreased by $14,083,000 to $22,804,000 primarily due to the sales to one customer. The changesSales of new products in the first twelve months since their introduction were approximately $29 million in fiscal year 2010.  Net volume increases, including new product sales throughoutas defined above and sales resulting from the acquisition of California Churros, accounted for all but approximately $1,500,000 of the sales increases this year. Price increases accounted for the remaining $1,500,000.  Operating income in our Food Service segment wereincreased from $44,960,000 in 2009 to $50,220,000 in 2010 primarily as a combinationresult of increased volume changesas discussed above and price increases.lower ingredients and packaging costs of about $2 million.

Retail Supermarkets

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $4,981,000$10,961,000 or 10%17% to $57,112,000$76,119,000 in fiscal 2008. Total softyear 2010.  Soft pretzel sales to retail supermarkets were $27,559,000, an increase$30,463,000 compared to $30,506,000 in 2009 on a unit volume decrease of 11% from fiscal 2007 virtually all due to pricing.less than 1%.  This makes the third consecutive year of flat or modestly up or down unit sales.  Sales of frozen juice barsjuices and ices increased 8%$10,469,000 or 28% to $31,742,000$48,288,000 on a unit volume increase of 24%.  Reduced trade spending of $1.5 million for the introduction of new frozen novelty items and a shift in 2008 dueproduct mix increased sales dollars in relation to increasedthe overall unit volume of WHOLE FRUIT and FRUIT-A-FREEZE and reduced allowances on our other products.increases.  Coupon redemption costs, a reduction of sales, were essentially unchangeddecreased 9% or about $354,000 for the year.

The Restaurant Group

Sales of our Restaurant Group, which operates BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET retail storesproducts in the Mid-Atlantic region, declined by 41%first twelve months since their introduction were approximately $4.2 million in fiscal year 2010.  Net volume increases, including new product sales as defined above and net of decreased coupon costs and reduced trade spending for new product introductions, accounted for virtually all of the sales increases in 2010.  Operating income in our Retail Supermarkets segment increased from $7,442,000 in 2009 to $11,281,000 in 2010 primarily due to closings or licensingsas a result of stores in the past year. At September 27, 2008, we had 5 stores open. Sales of stores open for both years were down 4%volume increases and reduced trade spending for the year.introduction of new frozen novelty items.

Frozen Beverages

FROZEN BEVERAGES
Frozen beverage and related product sales increased $12,178,000 or 8% to $170,418,000$182,778,000 in fiscal 2008.2010.  Excluding sales from the acquisition of Parrot Ice, sales would have increased 7% for the year.  Beverage sales alone were up 6%increased 13% to $128,125,000 for the year with approximately 2/3increased sales to two new customers and one existing customer, sales from Parrot Ice and a 26% increase in sales in Mexico accounting for over 80% of the increase resulting from a change in distribution to one customer and the balance resulting from pricing.increase.  Gallon sales were down 4% for the yearup 10% in our base ICEE business.business with sales to three customers accounting for almost all of the increase.  Service revenue increased $7,554,000, or 24%,decreased 4% to $38,803,000$40,410,000 for the year with declines spread across our customer base.  Sales of beverage machines, which tend to fluctuate from year to year while following no specific trend, increased from $11,729,000 in 2009 to $11,964,000 in 2010.  The estimated number of Company owned frozen beverage dispensers was 38,600 and 35,700 at September 25, 2010 and September 26, 2009, respectively.  Operating income in our Frozen Beverage segment increased from $14,536,000 in 2009 to $15,661,000 in 2010 as we continue to grow this parta result of our business. Frozen carbonated machine sales decreased $1,680,000 to $14,793,000 forincreased volume as discussed above.  Higher gasoline costs of approximately $867,000 impacted the year.year’s operating income.

Consolidated

CONSOLIDATED

Other than as commented upon above by segment, there are no material specific reasons for the reported sales increases or decreases.  Sales levels can be impacted by the appeal of our products to our customers and consumers and their changing tastes, competitive and pricing pressures, sales execution, marketing programs, seasonal weather, customer stability and general economic conditions.

Gross profit as a percentpercentage of sales decreased 3.09 percentage pointsincreased to 32.69% in 20082010 from 200731.98% in 2009.  Lower ingredient and packaging costs compared to 30%.

Welast year of approximately $2.2 million, the benefit of higher volumes leveraging our fixed manufacturing costs and reduced trade spending for new product introductions in our Retail Supermarket segment were impacted by higher unit commodity costs of over $30,000,000primarily responsible for the year. This compares to anincreased gross profit percentage.  Ingredient and packaging costs can be extremely volatile and may be significantly different from what we are presently expecting and therefore we cannot project the impact of ingredient and packaging costs on our business going forward; however, there has been a very significant increase in the market cost of less than $10,000,000 in 2007 compared to 2006. We expect to be impacted by higher commodity costs going forward, at leastflour and other commodities over the short term; however,past six months which we do expect the magnitudeanticipate will result in higher costs over some portions of theour fiscal year over year increases to continue the decline which began2011.  The impact of these higher costs and increased costs in our fourth quarter. Reduced trade spending of about $2,700,000operational areas may result in our retail supermarket segment benefitted gross profit and contributed to the improved operating incomelower net earnings in the Retail Supermarkets segment. Pricing and lower liability insurance costs of approximately $1,900,000 also helped to partially offset some of the commodity costs’ increase.2011 than in 2010.

18

Total operating expenses increased $5,624,000$8,712,000 to $143,571,000$150,618,000 in fiscal 2008 but2010 and as a percentage of sales decreased 1.44 percentage points to 23% of sales in 2008. Other general income of $375,000 this year primarily

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consists of gains on the disposition of assets and insurance gains in our Food Service and Frozen Beverages segments offset by store closing costs in our Restaurant Group segment of $102,000. Last year, other general income consisted of primarily $495,000 and $321,000 insurance gains in the Frozen Beverages and The Restaurant Group segments, respectively and a royalty settlement of $569,000 in the Food Service segment reduced by other general expense items. Marketing expenses decreased 1.26 percentage points to 11% of sales. Controlled spending in our Food Service and Retail Supermarket segments accounted for the decline with lower advertising expense of approximately $2,000,000 accounting for about 25% of the percentage point decline. Distribution expenses decreased .24.11 of a percentage point and remained at 22% of sales.  Marketing expenses decreased .29 percentage points to 8%10% of sales even though our fuel costs were approximately $2 million higher in our Frozen Beverages segment and administrativesales.  Distribution expenses decreased .13 percentage points to 7% of sales.  Administrative expenses were about 3-1/2% of sales in both years.  Other general expense of $2,087,000 this year compared to other general income of $5,000 in 2009.  Included in other general expense this year is $1.6 million for an unclaimed property assessment and $577,000 of acquisition costs.

Operating income decreased $5,244,000,increased $10,224,000 or 11%,15% to $43,336,000$77,162,000 in fiscal 2008year 2010 as a result of the aforementioned items.

Investment income decreased by $55,000$272,000 to $2,665,000 primarily$1,114,000 due to lower investment returnsthe general decline in the fourth quarter.level of interest rates.


The effective income tax rate increaseddecreased 1.42 percentage points to 38% from 39% in fiscal year 2008last year.  About 2/3 of this decrease was from 37% in fiscal 2007. Last year included the benefitreduction of the resolution$750,000 of state and foreignunrecognized tax matters. This year had a lower benefit from stock based compensation as well as additional expense resulting from changes in state tax requirements.benefits.


Net earnings decreased $4,204,000,increased $7,097,000, or 13%17%, in fiscal 20082010 to $27,908,000,$48,409,000, or $1.47$2.59 per diluted share as a result of the aforementioned items.


There are many factors which can impact our net earnings from year to year and in the long run, among which are the supply and cost of raw materials and labor, insurance costs, factors impacting sales as noted above, the continuing consolidation of our customers, our ability to manage our manufacturing, marketing and distribution activities, our ability to make and integrate acquisitions and changes in tax laws and interest rates.


ACQUISITIONS

In March 2005, we acquired all of the assets of Snackworks LLC, d/b/a Bavarian Brothers, a manufacturer of soft pretzels headquartered in Rancho Cucamonga, California. Snackworks operates production facilities in California and Chambersburg, Pennsylvania and markets its products under the brand names SERIOUSLY TWISTED!, BAVARIAN BROTHERS and CINNAPRETZEL. Snackworks sells throughout the continental United States primarily to mass merchandisers and theatres.

On January 31, 2006, we acquired the stock of ICEE of Hawaii. ICEE of Hawaii, headquartered in Waipahu, Hawaii, distributes ICEE frozen beverages and related products throughout the Hawaiian islands.

On May 26, 2006, The ICEE Company, our frozen carbonated beverage distribution company, acquired the SLUSH PUPPIE branded business from Dr. Pepper/Seven Up, Inc., a Cadbury Schweppes Americas Beverages Company for $18.1 million plus approximately $4.3 million in working capital. SLUSH PUPPIE, North America’s leading brand for frozen non-carbonated beverages, is sold through an existing established distributor network to over 20,000 locations in the United States and Canada as well as to certain international markets.

On January 9, 2007, we acquired the assets of Hom/Ade Foods, Inc. Hom/Ade Foods, Inc., based in Pensacola, Florida is a manufacturer and distributor of biscuits and dumplings sold under the MARY B’s and private label store brands predominatelypredominantly to the retail supermarket trade.  Annual sales of the business were approximately $30 million for the year ended December 2006.


On January 31, 2007, we acquired the assets of Radar, Inc.  Radar, Inc. is a manufacturer and seller of fig and fruit bars selling its products under the brand DADDY RAY’S.  Headquartered and with its manufacturing facility in Moscow Mills, Missouri (outside of St. Louis), Radar, Inc. had annual sales of approximately $23 million dollars selling to the retail grocery segment and mass merchandisers, both branded and private label.

On April 2, 2007, we acquired the WHOLE FRUIT Sorbet and FRUIT-A-FREEZE Frozen Fruit Bar brands, along with related assets including a manufacturing facility located in Norwalk, California, selling primarily to the supermarket industry.  Sales for 2007 were $2,429,000.

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On June 25, 2007, we acquired the assets of an ICEE distributor in Kansas with annual sales of less than $1 million.


In February 2010, we acquired the assets of Parrot Ice, a manufacturer and distributor of a premium brand frozen beverage sold primarily in convenience stores.  Revenues from Parrot Ice were approximately $1.5 million for our 2010 fiscal year.

On June 10, 2010 we acquired the assets of California Churros, Inc., a manufacturer and seller of premium brand churros selling its products under the brand CALIFORNIA CHURROS.  Headquartered and with its manufacturing facility in Colton, CA, California Churros had sales of approximately $2.5 million in our 2010 fiscal year.
19

In May 2011, we acquired the frozen handheld business of ConAgra Foods.  This business had sales of approximately $50 million over the prior twelve months to food service and retail supermarket customers and sales of $18.3 million in our 2011 fiscal year from the acquisition date.  We do not expect this business to contribute operating income to the Company over the short term.

These acquisitions were accounted for under the purchase method of accounting, and their operations are included in the accompanying consolidated financial statements from their respective acquisition dates.


LIQUIDITY AND CAPITAL RESOURCES


Although there are many factors that could impact our operating cash flow, most notably net earnings, we believe that our future operating cash flow, along with our borrowing capacity, our current cash and cash equivalent balances and our investment securities is sufficient to fund future growth and expansion.  See Note C to these financial statements for a discussion of our investment securities.


Fluctuations in the value of the Mexican and Canadian currencies and the resulting translation of the net assets of our Mexican and Canadian subsidiaries caused an increase of $1,428,000$1,060,000 in accumulated other comprehensive loss in 20092011 and a decrease of $3,000$577,000 in 20082010 and an increase of $42,000$1,428,000 in 2007.2009.  In 2009,2011, sales of the two subsidiaries were $11,658,000$18,025,000 as compared to $11,078,000$14,301,000 in 20082010 and $9,785,000$11,658,000 in 2007.2009.

In our fiscal year ended September 24, 2011, we did not purchase and retire any shares of our common stock. There remains 210,772 shares that can be purchased under a million share buyback authorization approved by the Company's Board of Directors in February 2008.
In our fiscal year ended September 25, 2010, we purchased and retired 203,507 shares of our common stock at a cost of $7,768,000.

In our fiscal year ended September 26, 2009, we purchased and retired 450,597 shares of our common stock at a cost of $12,510,000 under a million share buyback authorization approved by the Company’s Board of Directors in February 2008.$12,510,000.  Of the shares purchased and retired in 2009, 400,000 shares were purchased at the purchase price of $27.90 per share from Gerald B. Shreiber, Chairman of the Board, Chief Executive Officer and Director of the Company.

In our 2008 fiscal year ended September 27, 2008, we purchased and retired 135,124 shares of our common stock at a cost of $3,539,000. The Company did not repurchase any of its common stock in fiscal year 2007.

In December 2006,November 2011, we entered into an amendment and modification to an amended and restated loan agreement with our existing banks which provides for up to a $50,000,000 revolving credit facility repayable in December 2011.November 2016. The agreement contains restrictive covenants and requires commitment fees in accordance with standard banking practice. There were no outstanding balances under the prior facility at September 26, 200924, 2011 and September 27, 2008.25, 2010. The significant financial covenants are:

Earnings before interest expense and income taxes divided by interest expense shall not be less than 1.5 to 1.
.Tangible net worth must initially be more than $294 million.
.Total funded indebtedness divided by earnings beforeinterest expense, income taxes, depreciation and amortization shall not be greater than 2.25 to 1.

Tangible net worth must initially be more than $170 million.

Total funded indebtedness divided by earnings before interest expense, income taxes, depreciation and amortization shall not be greater than 2.25 to 1.

Total liabilities divided by tangible net worth shall not be more than 2.0 to 1.

We were in compliance with the financial covenants described above at September 26, 2009.24, 2011.


We self-insure, up to loss limits, certain insurable risks such as worker’sworker's compensation and automobile liability claims. Accruals for claims under our self-insurance program are recorded on a claims-incurred basis. Under this program, the estimated liability for claims incurred but unpaid in fiscal years 20092011 and 20082010 was $2,300,000$1,100,000 and $1,600,000,$2,200,000, respectively. In connection with certain self-insurance agreements, we customarily enter into letters of credit arrangements with our insurers. At each of September 26, 200924, 2011 and September 27, 2008,25, 2010, we had outstanding letters of credit totaling $8,675,000 and $9,475,000, respectively.$8,175,000.

18

The following table presents our contractual cash flow commitments on long-term debt, operating leases, construction contracts and purchase commitments for raw materials and packaging. See Notes to the consolidated financial statements for additional information on our long-term debt and operating leases.

     Payments Due by Period
(in thousands)
   
     Total
   Less
Than
1 Year
   1-3
Years
   4-5
Years
   After

5 Years
Long-term debt, including
current maturities		           $—        $—        $—        $—        $—   
Capitalized lease obligations             381          96          199          86          —   
Purchase commitments             46,000         46,000         —          —          —   
Operating leases             43,176         9,167         13,893         7,626         12,490  
Total           $89,557       $55,263       $14,092       $7,712       $12,490  
 

  
Payments Due by Period
 
  (in thousands) 
     Less          
     Than  1-3  4-5  After 
  Total  1 Year  Years  Years  5 Years 
                  
Long-term debt, including current maturities
 $-  $-  $-  $-  $- 
Capital lease obligations
  801   278   422   65   36 
Purchase commitments  60,000   60,000   -   -   - 
Construction Contracts  4,300   4,300   -   -   - 
Operating leases  49,298   8,809   12,451   7,377   20,661 
Total $114,399  $73,387  $12,873  $7,442  $20,697 
The purchase commitments do not exceed our projected requirements over the related terms and are in the normal course of business.


Fiscal 20092011 Compared to Fiscal 20082010


Cash and cash equivalents and marketable securities held to maturity net of a decline in auction market preferred stock increased $37,055,000,$38,539,000, or 45%33%, to $118,990,000$154,985,000 from a year ago primarily becausefor reasons described below.
Accounts receivables, net cash provided by operating activities of $80,633,000 was more than cash used for purchases of property, plant and equipment by $53,443,000, which was partially offset by cash used in financing activities of $15,740,000.

Trade receivables decreased $1,442,000,increased $5,125,000, or 2%7%, to $59,734,000$75,000,000 in 2009 due primarily to better management of receivables. Inventories decreased $3,091,000 or 6% to $46,004,000 in 20092011 due to lowerprimarily increased sales levels in our fourth quarter which resulted primarily from the handhelds acquisition.  Inventories increased $12,831,000 or 25% to $63,461,000 in 2011 due to higher unit costs of inventories, improved managementinventory and timing.inventory of handhelds which accounted for over 60% of the increase.


Prepaid expenses and other decreased to $4,196,000 from $6,067,000 last year because of higher estimated federal income tax payments made in 2010 prior to the enactment of the law extending bonus depreciation.

Net property, plant and equipment increased $4,109,000$14,558,000 to $97,173,000$124,650,000 because purchases of fixed assets for the improvement and expansion of our manufacturing capabilities and frozen carbonated beverage business exceeded depreciation on existing assets.assets, and because of the addition of $11,036,000 in fixed assets acquired in the handhelds acquisition.


Other intangible assets, less accumulated amortization decreased $4,508,000$3,279,000 to $49,125,000$52,005,000 due completely to amortization.intangible assets of $1,532,000 acquired in the handhelds acquisition net of amortization expense of $4,811,000.

Goodwill was unchanged at $60,314,000 from September 27, 2008 to September 26, 2009.

Accounts payable and accrued liabilities decreased $14,000.increased $3,904,000 due to increased levels of business and higher purchase costs of ingredients and packaging.


Accrued compensation expense increased 14%5% to $11,656,000$12,859,000 due to an increase in our employee base and a general increase in the level of pay rates and higher bonuses due to be paid.rates.


Deferred income tax liabilities increased by $3,977,000$10,649,000 to $27,033,000$41,050,000 which related primarily to amortization of goodwill and other intangible assets and depreciation of property, plant and equipment.equipment and deferred taxes of $4,137,000 resulting from the gain on bargain purchase of a business.


Other long-term liabilities at September 26, 200924, 2011 include $1,895,000$973,000 of gross unrecognized tax benefits.benefits which decreased from $1,249,000 a year ago due to reductions for tax positions of prior years.

21

Common stock decreased $6,638,000increased $6,564,000 to $41,777,000$45,017,000 in 20092011 because of increases totalling $4,923,000totaling $6,564,000 from the exercise of incentive and nonqualified stock options, stock issued under our stock purchase plan for employees, stock issued under our deferred stock plan and share-based compensation expense were less than the repurchase of common stock of $12,510,000 by $6,638,000.expense.

Net cash provided by operating activities increased $25,736,000$12,448,000 to $80,633,000$80,456,000 in 20092011 primarily because of thea decrease in prepaid expenses and other of $1,870,000 compared to an increase to net earningsin prepaid expense and other of $13,404,000 and decreases$4,101,000 in 2010, an increase of accounts receivable inventories and prepaid expenses totalling $4,174,000of $5,231,000 in 2011 compared to increasesan increase of $8,629,000 in those assets totalling $7,686,000 last year.2010 and an increase in deferred income taxes of $6,108,000 in 2011 compared to an increase of $3,219,000 in 2010.


Net cash used in investing activities increased $28,971,000$22,450,000 to $47,825,000$63,905,000 in 20092011 from $18,854,000$41,455,000 in 20082010 primarily because of increasednet purchases of marketable securities of $25,725,000 in 2011 compared to net proceeds from marketable securities of proceeds.

19


Table$16,866,000 in 2010.  This change of Contents

$42,591,000 was partially offset by lower spending of $16,379,000 and $4,407,000 on the purchase of companies and property, plant and equipment, respectively.

Net cash used in financing activities of $15,740,000$3,407,000 in 20092011 compared to net cash used by financing activities of $7,600,000$12,609,000 in 2008.2010.  The increasedecrease was caused primarily by an increasea decrease of $8,971,000$7,768,000 in payments to repurchase common stock.

In 2009,2011, the major variables in determining our net increase in cash and cash equivalents and marketable securities were our net earnings, depreciation and amortization of fixed assets, purchases of property, plant and equipment, purchases of companies, payments of cash dividend and the repurchase of common stock. Other variables which in the past have had a significant impact on our change in cash and cash equivalents are payments for the purchase of companies, proceeds from borrowings and payments of long-term debt. As discussed in results of operations, our net earnings may be influenced by many factors. Depreciation and amortization of fixed assets is primarily determined by past purchases of property, plant and equipment although it could be impacted by a significant acquisition. Purchases of property, plant and equipment are primarily determined by our ongoing normal manufacturing and marketing requirements but could be increased significantly for manufacturing expansion requirements or large frozen beverage customer needs. From time to time, we have repurchased common stock and we anticipate that we will do so again in the future. We are actively seeking acquisitions that could be a significant use of cash.  Although the balance of our long-term debt is $0 at September 26, 2009,24, 2011, we may borrow in the future depending on our needs.

Fiscal 20082010 Compared to Fiscal 20072009


Cash and cash equivalents and marketable securities held to maturity and auction market preferred stock increased $24,916,000,decreased $2,544,000, or 44%2%, to $81,935,000$116,446,000 from a year ago primarily because net cash provided by operating activities of $54,897,000 was more than cash used for purchases of property, plant and equipment and for purchase of companies by $32,116,000, which was partially offset by cash used in financing activities of $7,600,000.ago.


Trade receivables increased $4,404,000,$8,449,000, or 8%14%, to $61,176,000$68,183,000 in 20082010 due primarily to higher net sales.increased sales levels in our fourth quarter.  Inventories increased $2,496,000$4,626,000 or 5%10% to $49,095,000$50,630,000 in 20082010 due primarily to higher unit costsincreased sales levels and an increase in equipment parts needed to support our frozen beverage business.

Prepaid expenses and other increased to $6,067,000 from $1,910,000 last year because of inventories.estimated federal income tax payments made prior to the enactment of the law extending bonus depreciation.


Net property, plant and equipment was essentially unchanged at $93,064,000increased $12,919,000 to $110,092,000 because purchases of fixed assets were essentially offset byfor the improvement and expansion of our manufacturing capabilities and frozen carbonated beverage business exceeded depreciation on existing assets, and because of the addition of $3,508,000 in fixed assets.assets acquired in acquisitions and the purchase of a distribution freezer warehouse building which had previously been leased, for a purchase price of $5,794,000.


Other intangible assets, less accumulated amortization decreased $4,700,000increased $6,159,000 to $53,633,000$55,284,000 due completely to amortization.intangible assets of $10,846,000 acquired in acquisitions net of amortization of $4,687,000.

Goodwill was unchanged at $60,314,000increased $9,756,000 to $70,070,000 from September 29, 200726, 2009 to September 27, 2008.25, 2010 as a result of the acquisition of California Churros.


Accounts payable and accrued liabilities increased $550,000, or 1% from 2007$2,484,000 due to 2008 primarily becauseincreased levels of business.
22

Accrued compensation expense increased 5% to $12,244,000 due to an increase in our employee base, a general increase in the level of pay rates and higher costs of raw materials and packaging.bonuses due to be paid.


Deferred income tax liabilities increased by $3,876,000$3,368,000 to $23,056,000$30,401,000 which related primarily to amortization of goodwill and other intangible assets and depreciation of property, plant and equipment.

Other long-term liabilities at September 27, 200825, 2010 include $1,735,000$1,249,000 of gross unrecognized tax benefits.benefits which decreased from $1,895,000 a year ago due to reductions for tax positions of prior years.


Common stock increased $1,135,000decreased $3,324,000 to $48,415,000$38,453,000 in 20082010 because increases totaling $4,444,000 from the exercise of incentive and nonqualified stock options, stock issued under our stock purchase plan for employees, stock issued under our deferred stock plan and share-based compensation expense exceededwere less than the repurchase of common stock of $3,539,000$7,768,000 by $1,135,000.$3,324,000.


Net cash provided by operating activities decreased $2,946,000$12,625,000 to $54,897,000$68,008,000 in 20082010 primarily because of the decreaseincreases in accounts receivable, inventories and prepaid expenses and other of $8,629,000, $4,422,000 and $4,101,000, respectively, compared to decreases in accounts receivable, inventories and prepaid expenses and other in 2009 of $1,144,000, $2,993,000 and $37,000, respectively.  The net change in accounts receivable and inventories of $21,326,000 was partially offset by higher net earnings of $4,204,000.$7,097,000 and higher depreciation and amortization of fixed assets of $1,835,000.


Net cash used in investing activities decreased $38,980,000$6,370,000 to $18,854,000$41,455,000 in 20082010 from $57,834,000$47,825,000 in 20072009 primarily because we did not make any acquisitionsof increased proceeds from marketable securities, net of purchases, which netted $16,866,000 compared to net purchases of marketable securities of $20,976,000 in 2008.2009; which were partially offset by payments for purchases of companies, net of cash acquired in 2010, of $25,185,000 and by increased purchases of property, plant and equipment of $6,341,000 in 2010 compared to 2009.


Net cash used in financing activities of $7,600,000$12,609,000 in 20082010 compared to net cash used by financing activities of $1,769,000$15,740,000 in 2007.2009.  The increasedecrease was caused by $3,539,000a decrease of $4,742,000 in payments to repurchase common stock along with a decrease in proceeds from the issuance of common stock upon the exercise of stock options.stock.

In 2008,2010, the major variables in determining our net increase in cash and cash equivalents and marketable securities were our net earnings, depreciation and amortization of fixed assets, and purchases of property, plant and equipment. Additionally, in 2008, due toequipment, purchases of companies, payments of cash dividend and the failurerepurchase of the auction market, we reclassified a portion of our investment

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Table of Contents


securities to long-term assets (see Note C to these financial statements).common stock. Other variables which in the past have had a significant impact on our change in cash and cash equivalents are payments for the repurchase of common stock, payments for the purchases of companies, proceeds from borrowings and payments of long-term debt. As discussed in results of operations, our net earnings may be influenced by many factors. Depreciation and amortization of fixed assets is primarily determined by past purchases of property, plant and equipment although it could be impacted by a significant acquisition. Purchases of property, plant and equipment are primarily determined by our ongoing normal manufacturing and marketing requirements but could be increased significantly for manufacturing expansion requirements or large frozen beverage customer needs. From time to time, we have repurchased common stock and we anticipate that we will do so again in the future. We are actively seeking acquisitions that could be a significant use of cash.  Although the balance of our long-term debt is $0 at September 27, 2008,25, 2010, we may borrow in the future depending on our needs.

Item 7A.Quantitative And Qualitative Disclosures About Market Risk

Item 7A.Quantitative And Qualitative Disclosures About Market Risk

The following is the Company’s quantitative and qualitative analysis of its financial market risk:


Interest Rate Sensitivity


The Company has in the past entered into interest rate swaps to limit its exposure to interest rate risk and may do so in the future if the Board of Directors feels that such non-trading purpose is in the best interest of the Company and its shareholders.  As of September 26, 2009,24, 2011, the Company had no interest rate swap contracts.


Interest Rate Risk


At September 26, 2009,24, 2011, the Company had no long-term debt obligations.

23

Purchasing Risk


The Company’s most significant raw material requirements include flour, shortening, corn syrup, sugar, juice, cheese, chocolate, and a variety of nuts.  The Company attempts to minimize the effect of future price fluctuations related to the purchase of raw materials primarily through forward purchasing to cover future manufacturing requirements, generally for periods from 1 to 12 months.  FuturesFuture contracts are not used in combination with forward purchasing of these raw materials.  The Company’s procurement practices are intended to reduce the risk of future price increases, but also may potentially limit the ability to benefit from possible price decreases.

Foreign Exchange Rate Risk


The Company has not entered into any forward exchange contracts to hedge its foreign currency rate risk as of September 26, 200924, 2011, because it does not believe its foreign exchange exposure is significant.

Item 8.Financial Statements And Supplementary Data

Item 8. Financial Statements And Supplementary Data

The financial statements of the Company are filed under this Item 8, beginning on page F-1 of this report.

Item 9.Changes In And Disagreements With Accountants On Accounting And Financial Disclosure

Item 9. Changes In And Disagreements With Accountants OnAccounting And Financial Disclosure

None.

Item 9A.Controls And Procedures

Item 9A.Controls And Procedures

Disclosure Controls and Procedures

We carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”"Exchange Act"), as amended for financial reporting, as of September 26, 2009.24, 2011. Based on that evaluation, our chief executive officer and chief financial officer concluded that these controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits

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under the Exchange Act is recorded, processed, summarized, and reported as specified in Securities and Exchange Commission rules and forms. There were no changes in these controls or procedures identified in connection with the evaluation of such controls or procedures that occurred during our last fiscal quarter, or in other factors that have materially affected, or are reasonably likely to materially affect these controls or procedures.  There were no changes in the Company’s internal controls over financial reporting that occurred during our last fiscal quarter.

Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. These disclosure controls and procedures include, among other things, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.


Management’s Report on Internal Control over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the chief executive officer and chief financial officer and effected by the board of directors and management to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
24

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and board of directors;
·Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
·Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and board of directors;

·Provide reasonable assurance regarding prevention or  timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Our management assessed the effectiveness of our internal control over financial reporting as of September 26, 2009.24, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.


Based on our assessment, our management believes that, as of September 26, 2009,24, 2011, our internal control over financial reporting is effective.  There have been no changes that occurred during our fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our independent registered public accounting firm, Grant Thornton LLP, audited our internal control over financial reporting as of September 24, 2011.  Their report, dated December 6, 2011, expressed an unqualified opinion on our internal control over financial reporting.  That report appears in Item 9B.Other Information15 of Part IV of this Annual Report on Form 10-K and is incorporated by reference to this Item 9A.


Item 9B. Other Information

There was no information required on Form 8-K during the quarter that was not reported.


PART III

Item 10.Directors, Executive Officers and Corporate Governance

Item 10. Directors, Executive Officers and CorporateGovernance

Portions of the information concerning directors and executive officers, appearing under the captions “Information Concerning Nominees For Election To Board” and “Information Concerning Continuing Directors And Executive Officers” and information concerning Section 16(a) Compliance appearing under the caption

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Table of Contents

“Compliance “Compliance with Section 16(a) of the Securities Exchange Act of 1934” in the Company’s Proxy Statement filed with the Securities and Exchange Commission in connection with the Annual Meeting of Shareholders to be held on February 8, 2012 (“2010 (“2009 Proxy Statement”) is incorporated herein by reference.

Portions of the information concerning the Audit Committee, the requirement for an Audit Committee Financial Expert and the Nominating Committee in the Company’s 20092010 Proxy Statement filed with the Securities and Exchange Commission in connection with the Annual Meeting of Shareholders to be held on February 8, 2010,2012 is incorporated herein by reference.


The Company has adopted a Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act of 2002, which applies to the Company’s principal executive officer and senior financial officer.  The Company has also adopted a Code of Business Conduct and Ethics which applies to all employees. The Company will furnish any person, without charge, a copy of the Code of Ethics upon written request to J & J Snack Foods Corp., 6000 Central Highway, Pennsauken, New Jersey 08109, Attn: Dennis Moore.  A copy of the Code of Ethics can also be found on our website atwww.jjsnack.com.www.jjsnack.com.  Any waiver of any provision of the Code of Ethics granted to the principal executive officer or senior financial officer may only be granted by a majority of the Company’s disinterested directors.  If a waiver is granted, information concerning the waiver will be posted on our website www.jjsnack.com for a period of 12 months.

Item 11.Executive Compensation

25
Item 11. Executive Compensation

Information concerning executive compensation appearing in the Company’s 20092011 Proxy Statement under the caption “Management Remuneration” is incorporated herein by reference.


The following is a list of the executive officers of the Company and their principal past occupations or employment.  All such persons serve at the pleasure of the Board of Directors and have been elected to serve until the Annual Meeting of Shareholders on February 8, 20102012 or until their successors are duly elected.

Name
Age
Position
Gerald B. Shreiber 69
Chairman of the Board, President, Chief Executive Officer and Director
   68 Chairman of the Board, President, Chief Executive Officer and Director
Dennis G. Moore 56
Senior Vice President, Chief Financial Officer, Secretary, Treasurer and Director
   54 Senior Vice President, Chief Financial Officer, Secretary, Treasurer and Director
Robert M. Radano 62 60
Senior Vice President, Sales and Chief Operating Officer
Dan Fachner    
49Dan Fachner 51
President of The ICEE Company Subsidiary
Vincent Melchiorre    
49Gerard G. Law37
Senior Vice President and Assistant to the President
  Executive
Robert J. Pape54
Senior Vice President, and Chief Marketing OfficerSales

Gerald B. Shreiber is the founder of the Company and has served as its Chairman of the Board, President, and Chief Executive Officer since its inception in 1971.  His term as a director expires in 2010.2015.


Dennis G. Moore joined the Company in 1984.  He served in various controllership functions prior to becoming the Chief Financial Officer in June 1992.  His term as a director expires in 2012.


Robert M. Radano joined the Company in 1972 and in May 1996 was named Chief Operating Officer of the Company.  Prior to becoming Chief Operating Officer, he was Senior Vice President, Sales responsible for national food service sales of J & J.

Dan Fachner has been an employee of ICEE-USA Corp., which was acquired by the Company in May 1987, since 1979.  He was named Senior Vice President of The ICEE Company in April 1994 and became President in May 1997.

Vincent Melchiorre
Gerard G. Law joined the Company in June 2007. Prior1992.  He served in various manufacturing and sales management capacities prior to joiningbecoming Senior Vice President, Western Operations in 2009.  He was named to his present position in 2011 in which he has responsibility for marketing, research and development and overseeing a number of the manufacturing facilities of J & J. 

Robert J. Pape joined the Company he had been employed in 1998.  He served in various sales and sales management positions with Weston Foods, USA for one year, The Tasty Baking Company for three years and The Campbell Soup Company for over twenty years.capacities prior to becoming Senior Vice President, Sales in 2010.

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Table of Contents

Item 12.
Security Ownership Of Certain Beneficial Owners And ManagementAndManagement And Related Stockholder Matters

Information concerning the security ownership of certain beneficial owners and management appearing in the Company’s 20092011 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management” is incorporated herein by reference.

26

The following table details information regarding the Company’s existing equity compensation plans as of September 26, 2009.24, 2011.

     (a)   (b)   (c)
 Plan Category
     Number of
securities to
be issued upon
exercise of
outstanding
options, warrants
and rights
   Weighted-average
exercise price
of outstanding
options, warrants
and rights
   Number of
securities remaining
available for future
issuance under
equity compensation
plans (excluding
securities reflected
in column (a))
Equity compensation plans approved
by security holders		             746,000       $23.70         1,321,000  
Equity compensation plans not approved
by security holders		             —          —          —   
Total             746,000       $23.70         1,321,000  
 

Item 13.
  ( a )  ( b )  ( c ) 
Plan Category 
Number of securities to be issued upon exercise of outstanding options, warrants and rights
  
Weighted-average exercise price of outstanding options, warrants and rights
  
Number of Securities Remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) )
 
        
Equity compensation plans approved by security holders
  559,287  $37.55   1,054,000 
             
Equity compensation plans not approved by security holders
  -   -   - 
             
Total  559,287  $37.55   1,054,000 
Column C includes 473,000 from a stock option plan that has been replaced subsequent to September 24, 2011.  That plan has been replaced by a plan, subject to shareholder approval in February 2012, that has 800,000 shares available for future issuance as of the date of this Form 10-K.

Item 13. Certain Relationships And Related Transactions, andDirector Independence

Information concerning the Certain Relationships and Related Transactions, and Director Independence in the Company’s 2011 Proxy Statement is incorporated herein by reference.

None to report.

Item 14.Principal Accounting Fees And Services
Item 14.Principal Accounting Fees And Services


Information concerning the Principal Accountant Fees and Services in the Company’s 20092011 Proxy Statement is incorporated herein by reference.


PART IV

Item 15.Exhibits, Financial Statement Schedules

(a)Item 15. The following documents are filed as part of this Report:Exhibits, Financial Statement Schedules

(a)           The following documents are filed as part of this Report:
(1)         Financial Statements


The financial statements filed as part of this report are listed on the Index to Consolidated Financial Statements and Financial Statements Schedule on page F-1.


(2)         Financial Statement Schedule —– Page S-1


Schedule II —– Valuation and Qualifying Accounts


All other schedules are omitted either because they are not applicable or because the information required is contained in the financial statements or notes thereto.

27

(b)           Exhibits

(b) Exhibits

3.1Amended and Restated Certificate of Incorporation filed February 28, 1990.1990 (Incorporated by reference from the Company’s Form 10-Q dated May 4, 1990.)1990).

3.23.2**Revised Bylaws adopted May 17, 2006. (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006.)November 19, 2007.

4.34.3Amended and Restated Loan Agreement dated December 1, 2006 by and among J & J Snack Foods Corp. and Certain of its Subsidiaries and Citizens Bank of Pennsylvania, as Agent.Agent (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006.)2006).

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Table of Contents

10.1 Proprietary Exclusive Manufacturing Agreement dated July 17, 1984 between J & J Snack Foods Corp.4.4**First Amendment and Wisco Industries, Inc. (Incorporated by reference from the Company’s Form S-1 dated February 4, 1986, file no. 33-2296).Modification to Amended and Restated Loan Agreement.

10.2*
10.2*
J & J Snack Foods Corp. Stock Option Plan.Plan (Incorporated by reference from the Company’s Definitive Proxy Statement dated December 19, 2002.)2002).

10.3*
10.3*
Adoption Agreement for MFS Retirement Services, Inc. Non-Standardized 401(K) Profit Sharing Plan and Trust, effective September 1, 2004.2004 (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006.)2006).

10.4*
10.4*
J & J Snack Foods Corp. Directors’ and Consultants’ Deferred Compensation Plan adopted November 21, 2005.2005 (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006.)2006).

10.6 Lease dated September 24, 1991 between J & J Snack Foods Corp. of New Jersey and A & H Bloom Construction Co. for the 101,200 square foot building next to the Company’s manufacturing facility in Pennsauken, New Jersey. (Incorporated by reference from the Company’s Form 10-K dated December 17, 1991.)

10.7Lease dated August 29, 1995 between J & J Snack Foods Corp. and 5353 Downey Associated Ltd. for the lease of the Vernon, CA facility.facility  (Incorporated by reference from the Company’s Form 10-K dated December 21, 1995.)1995).

10.8*
10.8*
J & J Snack Foods Corp. Employee Stock Purchase Plan (Incorporated by reference from the Company’s Form S-8 dated May 16, 1996).

10.1110.11Amendment No. 1 to Lease dated August 29, 1995 between J & J Snack Foods Corp. and 5353 Downey Associated Ltd. for the lease of the Vernon, CA facility.facility (Incorporated by reference from the Company’s Form 10-K dated December 18, 2002).

10.12 Employment agreement between Vincent A. Melchiorre and J & J Snack Foods Corp. (Incorporated by reference from the Company’s 8-K dated June 5, 2007).

10.13**Lease dated July 15, 2009 between J & J Snack Foods Sales Corp. and The Bloom Organization of South Jersey, LLC for the 101,200 square foot building next to the Company’s manufacturing facility in Pennsauken, New Jersey.

10.14**10.14Leases and amendments to leases between Liberty Venture I, LP and J & J Snack Foods Corp. for the three buildings located in Bridgeport, New Jersey.Jersey (Incorporated by reference from the Company’s Form 10-K dated December 8, 2009).

14.110.15Amendment No. 2 to Lease dated August 29, 1995 between J & J Snack Foods Corp. and 5353 Downey Associated Ltd. for the lease of the Vernon, CA facility (Incorporated by reference from the Company's Form 10-K dated December 6, 2010).
10.16Amendment to Lease dated January 1, 1996 between Country Home Bakers, LLC and Borck Associates Limited Partnership for the lease of the Atlanta, GA facility (Incorporated by reference from the Company's Form 10-k dated December 6, 2011).

14.1 Code of Ethics Pursuant to Section 406 of the Sarbanes-OxleytheSarbanes-Oxley Act of 2002. (Incorporated2002(Incorporated by reference from the Company’s 10-Q dated July 20, 2004).

21.1**
21.1**
Subsidiaries of J & J Snack Foods Corp.

23.1**
23.1**
Consent of Independent Registered Public Accounting Firm.

31.1**
31.1**
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2**
31.2**
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**
32.1**
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002.

32.2**
32.2**
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002.

28

101.1**The following financial information from J&J Snack Foods Corp.'s Form 10-K for the year ended September 24, 2011, formatted in XBRL (eXtensible Business Reporting Language):
(i)Consolidated Statements of Earnings,
(ii)Consolidated Balance Sheets
(iii)Consolidated Statements of Cash Flows and
(iv)Consolidated Statement of Changes in Stockholders' Equity
*Compensatory Plan

**Filed Herewith

25

SIGNATURES

Pursuant to the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused report to be signed on its behalf by the undersigned, thereunto duly authorized.


 
J & J SNACK FOODS CORP.
December 8, 2009 By
/s/ Gerald B. Shreiber
    
December 6, 2011 By:/s/ Gerald B. Shreiber
  
Gerald B. Shreiber,
Chairman of the Board,
President, Chief Executive
Officer and Director
(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

December 8, 2009  
/s/ Gerald B. Shreiber
December 6, 2011 
Gerald B. Shreiber,
Chairman of the Board,
President, Chief Executive
Officer and Director
(Principal Executive Officer)
    
  Gerald B. Shreiber,
Chairman of the Board,
President, Chief Executive
Officer and Director
(Principal Executive Officer)
December 8, 2009
/s/ Dennis G. Moore
December 6, 2011Dennis G. Moore, Senior Vice
President, Chief Financial
Officer and Director
(Principal Financial Officer)
(Principal Accounting Officer)
December 8, 2009 
/s/ Sidney R. Brown
Sidney R. Brown, Director
December 8, 2009
/s/ Peter G. Stanley
Peter G. Stanley, Director
December 8, 2009
/s/ Leonard M. Lodish
Leonard M. Lodish, Director

26


Table of Contents

J & J SNACK FOODS CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE

Financial Statements:
    
/s/ Sidney R. Brown 
December 6, 2011Sidney R. Brown, Director
/s/ Peter G. Stanley 
December 6, 2011 Peter G. Stanley, Director
/s/ Leonard M. Lodish 
December 6, 2011 Leonard M. Lodish, Director

30

J & J SNACK FOODS CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Financial Statements:
Report of Independent Registered Public Accounting Firm
F-2
 
Consolidated Balance Sheets as of September 26, 2009 24, 2011 and September 27, 2008
25, 2010F-3
 
Consolidated Statements of Earnings for fiscal years ended September 24, 2011, September 25, 2010 and September 26, 2009
September 27, 2008 and September 29, 2007		F-4
 
Consolidated Statement of Changes in Stockholders’ Equity for the fiscal years
ended September 24, 2011, September 25, 2010 and September 26, 2009 September 27, 2008 and September 29, 2007
F-5
 
Consolidated Statements of Cash Flows for fiscal years ended September 24, 2011, September 25, 2010 and September 26, 2009
September 27, 2008 and September 29, 2007		F-6
 
Notes to Consolidated Financial StatementsF-7
 F-7 
Financial Statement Schedule:
 
  
Schedule II —– Valuation and Qualifying AccountsS-1

F-1


Table of Contents

Report of Independent Registered Public Accounting Firm


Shareholders and Board of Directors
J & J&J Snack Foods Corp. and Subsidiaries


We have audited the accompanying consolidated balance sheets of J & J&J Snack Foods Corp. and Subsidiaries as of September 26, 200924, 2011 and September 27, 2008,25, 2010, and the related consolidated statements of earnings, changes in stockholders’ equity, and cash flows for each of the three fiscal years in the period ended September 26, 200924, 2011 (52 weeks, 52 weeks, and 52 weeks, respectively).  Our audits of the basic consolidated financial statements included the financial statement schedule, listed in the index appearing under Item 15(a)(2).15. We have also audited J & J&J Snack Foods Corp. and Subsidiaries’ internal control over financial reporting as of September 26, 2009,24, 2011, based on criteria established inInternal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  J & J&J Snack Foods Corp. and Subsidiaries’ management is responsible for these consolidated financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, which is included in the accompanying Management’s Report on Internal Control over Financial Reporting.  Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule and an opinion on J & J&J Snack Foods Corp. and Subsidiaries’ internal control over financial reporting based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances.  We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of J & J&J Snack Foods Corp. and Subsidiaries as of September 26, 200924, 2011 and September 27, 2008,25, 2010, and the consolidated results of its operations and its consolidated cash flows for each of the three fiscal years in the period ended September 26, 200924, 2011 (52 weeks, 52 weeks, and 52 weeks)weeks, respectively) in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also inIn our opinion, J & J&J Snack Foods Corp. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of September 26, 2009,24, 2011, based on criteria established inInternal Control-Integrated Framework, issued by COSO.

As discussed in Note A to the consolidated financial statements, the Company has adopted Accounting Standards Codification No. 740, Income Taxes, relating to uncertainties in income taxes in 2008.

/s/ GRANT THORNTONGrant Thornton LLP

Philadelphia, Pennsylvania

December 8, 20096, 2011

F-2


Table of Contents

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

     September 26,
2009
   September 27,
2008
     (in thousands, except share amounts)   
Assets
                              
Current Assets
                              
Cash and cash equivalents           $60,343       $44,265  
Marketable securities held to maturity             38,653         2,470  
Auction market preferred stock             —          14,000  
Receivables
                              
Trade, less allowances of $623 and $926, respectively             59,734         61,176  
Other             808          677   
Inventories             46,004         49,095  
Prepaid expenses and other             1,910         1,962  
Deferred income taxes             3,659         3,555  
Total current assets             211,111         177,200  
 
Property, Plant and Equipment, at cost             383,156         364,164  
Less accumulated depreciation and amortization             285,983         271,100  
              97,173         93,064  
Other Assets
                              
Goodwill             60,314         60,314  
Other intangible assets, net             49,125         53,633  
Marketable securities held to maturity             19,994         —   
Auction market preferred stock             —          21,200  
Other             2,110         2,997  
              131,543         138,144  
            $439,827       $408,408  
Liabilities and Stockholders’ Equity
                              
Current Liabilities                              
Current obligations under capital leases           $96        $93   
Accounts payable             48,204         48,580  
Accrued liabilities             5,919         5,557  
Accrued compensation expense             11,656         10,232  
Dividends payable             1,804         1,732  
Total current liabilities             67,679         66,194  
 
Long-term obligations under capital leases             285          381   
Deferred income taxes             27,033         23,056  
Other long-term liabilities             1,986         1,999  
Stockholders’ Equity
                              
Preferred stock, $1 par value; authorized,
10,000,000 shares; none issued		             —          —   
Common stock, no par value; authorized, 50,000,000 shares;
issued and outstanding 18,526,000 and 18,748,000 respectively		             41,777         48,415  
Accumulated other comprehensive loss             (3,431)         (2,003)  
Retained earnings             304,498         270,366  
              342,844         316,778  
            $439,827       $408,408  
 

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
       
  September 24,  September 25, 
  2011  2010 
Assets      
Current assets      
  Cash and cash equivalents $87,479  $74,665 
  Marketable securities held to maturity
  25,506   15,481 
  Accounts receivable, net  75,000   69,875 
  Inventories, net  63,461   50,630 
  Prepaid expenses and other  4,196   6,067 
  Deferred income taxes  4,208   3,813 
     Total current assets  259,850   220,531 
         
Property, plant and equipment, at cost  446,856   414,403 
  Less accumulated depreciation and amortization
  322,206   304,311 
   124,650   110,092 
         
Other assets        
  Goodwill  70,070   70,070 
  Other intangible assets, net  52,005   55,284 
  Marketable securities held to maturity  42,000   26,300 
  Other  2,241   1,717 
   166,316   153,371 
  $550,816  $483,994 
         
Liability and Stockholder's Equity        
Current Liabilities        
  Current obligations under capital leases $278  $244 
  Accounts payable  55,918   52,338 
  Accrued liabilities  4,593   4,269 
  Accrued compensation expense  12,859   12,244 
  Dividends payable  2,200   1,986 
     Total current liabilities  75,848   71,081 
         
Long-term obligations under capital leases  523   619 
Deferred income taxes  41,050   30,401 
Other long-term liabilities  1,007   1,318 
         
Stockholders' Equity        
         
Preferred stock, $1 par value; authorized 10,000,000 shares; none issued
  -   - 
Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding 18,727,000 and 18,491,000 respectively
  45,017   38,453 
Accumulated other comprehensive loss  (3,914)  (2,854)
Retained Earnings  391,285   344,976 
   432,388   380,575 
  $550,816  $483,994 
         
The accompanying notes are an integral part of these statements.        
F-3
J & J SNACK FOODS CORP. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF EARNINGS 
 
(in thousands, except per share information) 
  
     Fiscal year ended    
          
  September 24,  September 25,  September 26, 
  2011  2010  2009 
  (52 weeks)  (52 weeks)  (52 weeks) 
          
Net Sales $744,071  $696,703  $653,047 
Cost of goods sold (1)
  514,297   468,923   444,203 
Gross Profit  229,774   227,780   208,844 
             
Operating expenses            
Marketing (2)
  70,637   72,103   69,493 
Distribution (3)
  57,462   52,146   49,705 
Administrative (4)
  24,568   24,282   22,713 
Other general expense (income)  524   2,087   (5)
   153,191   150,618   141,906 
Operating Income  76,583   77,162   66,938 
             
Other income (expenses)            
Gain on bargain purchase of a business
  6,580   -   - 
Investment income  1,041   1,114   1,386 
Interest expense & other  (138)  (179)  (115)
             
Earnings before income taxes
  84,066   78,097   68,209 
             
Income taxes  29,003   29,688   26,897 
             
NET EARNINGS $55,063  $48,409  $41,312 
             
Earnings per diluted share $2.93  $2.59  $2.21 
             
Weighted average number of diluted shares
  18,789   18,703   18,713 
             
Earnings per basic share $2.95  $2.61  $2.23 
             
Weighted average number of basic shares
  18,672   18,528   18,516 
(1)Includes share-based compensation expense of $157 for the year ended September 24, 2011, $182 for the year ended September 25, 2010, and $211 for the year ended September 26, 2009.
(2)Includes share-based compensation expense of $347 for the year ended September 24, 2011, $448 for the year ended September 25, 2010, and $729 for the year ended September 26, 2009.
(3)Includes share-based compensation expense of $18 for the year ended September 24, 2011, $21 for the year ended September 25, 2010, and $21 for the year ended September 26, 2009.
(4)Includes share-based compensation expense of $396 for the year ended September 24, 2011, $597 for the year ended September 25, 2010, and $755 for the year ended September 26, 2009.
The accompanying notes are an integral part of these statements.

F-3

J & J SNACK FOODS CORP. AND SUBSIDIARIES 
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY 
(in thousands) 
                   
        Accumulated          
        Other          
  Common Stock  Comprehensive  Retained     Comprehensive 
  Shares  Amount  Loss  Earnings  Total  Income 
                   
Balance at September 28, 2008  18,748  $48,415  $(2,003) $270,366  $316,778    
Issuance of common stock upon exercise of stock options
  198   3,284   -   -   3,284    
Issuance of common stock for employee stock purchase plan
  26   687   -   -   687    
Foreign currency translation adjustment
  -   -   (1,428)  -   (1,428) $(1,428)
Issuance of common stock under deferred stock plan
  5   368   -   -   368     
Dividends declared  -   -   -   (7,180)  (7,180)    
Share-based compensation  -   1,533   -   -   1,533     
Repurchase of common stock  (451)  (12,510)  -   -   (12,510)    
Net earnings  -   -   -   41,312   41,312   41,312 
Comprehensive income  -   -   -   -   -  $39,884 
                         
Balance at September 26, 2009  18,526  $41,777  $(3,431) $304,498  $342,844     
Issuance of common stock upon exercise of stock options
  142   2,325   -   -   2,325     
Issuance of common stock for employee stock purchase plan
  22   726   -   -   726     
Foreign currency translation adjustment
  -   -   577   -   577  $577 
Issuance of common stock under deferred stock plan
  5   280   -   -   280     
Dividends declared  -   -   -   (7,931)  (7,931)    
Share-based compensation  -   1,113   -   -   1,113     
Repurchase of common stock  (204)  (7,768)  -   -   (7,768)    
Net earnings  -   -   -   48,409   48,409   48,409 
Comprehensive income  -   -   -   -   -  $48,986 
                         
Balance at September 25, 2010  18,491  $38,453  $(2,854) $344,976  $380,575     
Issuance of common stock upon exercise of stock options
  214   4,608   -   -   4,608     
Issuance of common stock for employee stock purchase plan
  20   769   -   -   769     
Foreign currency translation adjustment
  -   -   (1,060)  -   (1,060) $(1,060)
Issuance of common stock to directors
  2   75   -   -   75     
Dividends declared          -   (8,754)  (8,754)    
Share-based compensation      1,112   -   -   1,112     
Repurchase of common stock  -   -   -   -   -     
Net earnings  -   -   -   55,063   55,063   55,063 
Comprehensive income  -   -   -   -   -  $54,003 
                         
Balance at September 24, 2011  18,727  $45,017  $(3,914) $391,285  $432,388     
                         
The accompanying notes are an integral part of this statement.
F-5
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
          
     Fiscal Year Ended    
          
  September 24,  September 25,  September 26, 
  2011  2010  2009 
  (52 weeks)  (52 weeks)  (52 weeks) 
          
Operating activities:         
Net earnings $55,063  $48,409  $41,312 
Adjustments to reconcile net earnings to net cash provided by operating activities:
            
Depreciation of fixed assets  25,046   24,498   22,663 
Amortization of intangibles and deferred costs
  5,188   5,354   5,090 
Losses(gains) from disposals and impairment of property & equipment
  52   (14)  (31)
Share-based compensation  918   1,248   1,716 
Gain on bargain purchase of a business  (6,580)  -   - 
Deferred income taxes  6,108   3,219   3,839 
Changes in assets and liabilities net of effects from purchase of companies:
            
(Increase)decrease in accounts receivable  (5,231)  (8,629)  1,144 
(Increase)decrease in inventories  (6,262)  (4,422)  2,993 
Decrease(increase) in prepaid expenses and other  1,870   (4,101)  37 
Increase in accounts payable and accrued liabilities
  4,284   2,446   1,870 
Net cash provided by operating activities  80,456   68,008   80,633 
Investing activities:            
Payments for purchases of companies, net of cash acquired
  (8,806)  (25,185)  - 
Purchases of property, plant and equipment
  (29,124)  (33,531)  (27,190)
Purchases of marketable securities  (63,293)  (50,496)  (66,380)
Proceeds from redemption and sales of marketable securities
  37,568   67,362   10,204 
Proceeds from redemption and sales of auction market preferred stock
  -   -   35,200 
Proceeds from disposal of property and equipment
  394   407   326 
Other  (644)  (12)  15 
Net cash used in investing activities  (63,905)  (41,455)  (47,825)
Financing activities:            
Payments to repurchase common stock  -   (7,768)  (12,510)
Proceeds from issuance of common stock  5,377   3,051   3,971 
Payments on capitalized lease obligations  (244)  (143)  (93)
Payment of cash dividend  (8,540)  (7,749)  (7,108)
Net cash used in financing activities  (3,407)  (12,609)  (15,740)
Effect of exchange rate on cash and cash equivalents
  (330)  378   (990)
Net increase in cash and cash equivalents  12,814   14,322   16,078 
Cash and cash equivalents at beginning of year
  74,665   60,343   44,265 
Cash and cash equivalents at end of year
 $87,479  $74,665  $60,343 
             
The accompanying notes are an integral part of these statements.            
F-6
J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands, except per share information)SUBSIDIARES

     Fiscal year ended
   
     September 26,
2009
(52 weeks)
   September 27,
2008
(52 weeks)
   September 29,
2007
(52 weeks)
Net Sales           $653,047       $629,359       $568,901  
Cost of goods sold(1)             444,203         442,452         382,374  
Gross profit             208,844         186,907         186,527  
Operating expenses                                          
Marketing(2)             69,493         69,792         70,248  
Distribution(3)             49,705         52,609         48,945  
Administrative(4)             22,713         21,545         20,142  
Other general income             (5)         (375)         (1,388)  
              141,906         143,571         137,947  
Operating income             66,938         43,336         48,580  
 
Other income (expenses)
                                          
Investment income             1,386         2,665         2,720  
Interest expense and other             (115)         (116)         (142)  
              1,271         2,549         2,578  
Earnings before income taxes             68,209         45,885         51,158  
 
Income taxes             26,897         17,977         19,046  
 
NET EARNINGS           $41,312       $27,908       $32,112  
 
Earnings per diluted share           $2.21       $1.47       $1.69  
 
Weighted average number of diluted shares             18,713         19,008         19,005  
 
Earnings per basic share           $2.23       $1.49       $1.72  
 
Weighted average number of basic shares             18,516         18,770         18,635  
 

(1)Includes share-based compensation expense of $211 for the year ended September 26, 2009, $229 for the year ended September 27, 2008 and $227 for the year ended September 29, 2007.

(2)Includes share-based compensation expense of $729 for the year ended September 26, 2009, $799 for the year ended September 27, 2008 and $716 for the year ended September 29, 2007.

(3)Includes share-based compensation expense of $21 for the year ended September 26, 2009, $23 for the year ended September 27, 2008 and $50 for the year ended September 29, 2007.

(4)Includes share-based compensation expense of $755 for the year ended September 26, 2009, $800 for the year ended September 27, 2008 and $747 for the year ended September 29, 2007.

The accompanying notes are an integral part of these statements.

F-4


Table of Contents

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands)

     Common Stock
   
     Shares
   Amount
   Accumulated
Other
Comprehensive
Loss
   Retained
Earnings
   Total
   Comprehensive
Income
Balance at October 1, 2006             18,468       $41,098       $(1,964)       $224,522       $263,656              
Issuance of common stock upon
exercise of stock options		             211          3,669         —          —          3,669              
Issuance of common stock for
employee stock purchase plan		             23          700          —          —          700               
Foreign currency translation adjustment             —          —          (42)         —          (42)       $(42)  
Issuance of common stock under
deferred stock plan		             —          275          —          —          275               
Dividends declared             —          —          —          (6,326)         (6,326)              
Share-based compensation             —          1,538         —          —          1,538              
Net earnings             —          —          —          32,112         32,112         32,112  
Comprehensive income             —          —          —          —          —        $32,070  
Balance at September 29, 2007             18,702       $47,280       $(2,006)       $250,308       $295,582              
Cumulative effective of change in
accounting for income taxes		             —          —          —          (925)         (925)              
Issuance of common stock upon
exercise of stock options		             150          2,029         —          —          2,029              
Issuance of common stock for
employee stock purchase plan		             31          782          —          —          782               
Foreign currency translation adjustment             —          —          3          —          3        $3   
Issuance of common stock under deferred stock plan             —          388          —          —          388               
Dividends declared             —          —          —          (6,925)         (6,925)              
Share-based compensation       ��     —          1,475         —          —          1,475              
Repurchase of common stock             (135)         (3,539)         —          —          (3,539)              
Net earnings             —          —          —          27,908         27,908         27,908  
Comprehensive income             —          —          —          —          —        $27,911  
Balance at September 27, 2008             18,748       $48,415       $(2,003)       $270,366       $316,778              
Issuance of common stock upon exercise of stock options             198          3,284         —          —          3,284              
Issuance of common stock for employee stock purchase plan             26          687          —          —          687               
Foreign currency translation adjustment             —          —          (1,428)         —          (1,428)       $(1,428)  
Issuance of common stock under
deferred stock plan		             5          368          —          —          368               
Dividends declared             —          —          —          (7,180)         (7,180)              
Share-based compensation             —          1,533         —          —          1,533              
Repurchase of common stock             (451)         (12,510)         —          —          (12,510)              
Net earnings             —          —          —          41,312         41,312         41,312  
Comprehensive income             —          —          —          —          —        $39,884  
Balance at September 26, 2009             18,526       $41,777       $(3,431)       $304,498       $342,844              
 

The accompanying notes are an integral part of these statements.

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Table of Contents

J & J SNACK FOODS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

     Fiscal year ended
   
     September 26,
2009
(52 weeks)
   September 27,
2008
(52 weeks)
   September 29,
2007
(52 weeks)
Operating activities:
                                          
Net earnings           $41,312       $27,908       $32,112  
Adjustments to reconcile net earnings to net
cash provided by operating activities:
                                          
Depreciation and amortization of fixed assets             22,663         22,181         22,451  
Amortization of intangibles and deferred costs             5,090         5,289         4,557  
Gains from disposals and impairment
of property & equipment		             (31)         (174)         (49)  
Other             —          —          (150)  
Share-based compensation             1,716         1,851         1,740  
Deferred income taxes             3,839         3,446         557   
Changes in assets and liabilities, net of effects
from purchase of companies:
                                          
Decrease (increase) in accounts receivable             1,144         (4,701)         (569)  
Decrease (increase) in inventories             2,993         (2,448)         (5,722)  
Decrease (increase) in prepaid expenses and other             37          (537)         (65)  
Increase in accounts payable and
accrued liabilities		             1,870         2,082         2,981  
Net cash provided by operating activities             80,633         54,897         57,843  
Investing activities:
                                          
Purchases of property, plant and equipment             (27,190)         (22,781)         (22,765)  
Payments for purchases of companies,
net of cash acquired		             —          —          (52,747)  
Purchase of marketable securities             (66,380)         (2,470)         —   
Proceeds from redemption and sales of marketable securities             10,204         —          —   
Purchase of auction market preferred stock             —          (10,500)         (60,875)  
Proceeds from redemption and sales of auction market preferred stock             35,200         16,500         78,882  
Proceeds from disposal of property and equipment             326          932          592   
Other             15          (535)         (921)  
Net cash used in investing activities             (47,825)         (18,854)         (57,834)  
 
Financing activities:
                                          
Payments to repurchase common stock             (12,510)         (3,539)         —   
Proceeds from issuance of common stock             3,971         2,811         4,369  
Payments of cash dividend             (7,108)         (6,781)         (6,123)  
Payments on capitalized lease obligations             (93)         (91)         (15)  
Net cash used in financing activities             (15,740)         (7,600)         (1,769)  
Effect of exchange rate on cash and
cash equivalents		             (990)         3          (42)  
Net increase (decrease) in cash and
cash equivalents		             16,078         28,446         (1,802)  
Cash and cash equivalents at beginning of year             44,265         15,819         17,621  
Cash and cash equivalents at end of year           $60,343       $44,265       $15,819  
 

The accompanying notes are an integral part of these statements.

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Table of Contents

J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A —– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


J & J Snack Foods Corp. and Subsidiaries (the Company) manufactures, markets and distributes a variety of nutritional snack foods and beverages to the food service and retail supermarket industries.  A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows.


1.  Principles of Consolidation


The consolidated financial statements include the accounts of J & J Snack Foods Corp. and its wholly-owned subsidiaries.  Intercompany balances and transactions have been eliminated in the consolidated financial statements.


2.  Revenue Recognition


We recognize revenue from our products when the products are shipped to our customerscustomers.  Repair and whenmaintenance equipment service revenue is recorded when it is performed for our customers whoprovided the customer terms are that the customer is to be charged on a time and material basis. We also sell equipment service contracts with terms of coverage ranging between 12 and 60 months. We record deferred incomebasis or on equipment service contracts which is amortized by thea straight-line methodbasis over the term of the contracts.contract when the customer has signed a service contract.  Revenue is recognized only where persuasive evidence of an arrangement exists, our price is fixed or determinableestimable and collectability is reasonably assured.  We record offsets to revenue for allowances, end-user pricing adjustments, trade spending, coupon redemption costs and returned product.  Customers generally do not have the right to return product unless it is damaged or defective.


All amounts billed to customers related to shipping and handling are classified as revenues. Our product costs include amounts for shipping and handling, therefore, we charge our customers shipping and handling fees at the time the products are shipped or when services are performed. The cost of shipping products to the customer is recognized at the time the products are shipped to the customer and our policy is to classify them as Distribution expenses.  The cost of shipping products to the customer classified as Distribution expenses was $49,705,000, $52,609,000$57,462,000, $52,146,000 and $48,945,000$49,705,000 for the fiscal years ended 2011, 2010 and 2009, 2008 and 2007, respectively.


During the years ended September 24, 2011, September 25, 2010 and September 26, 2009, September 27, 2008 and September 29, 2007, we sold $16,745,000, $11,881,000$18,711,000, $16,185,000 and $9,000,000,$16,745,000, respectively, of repair and maintenance service contracts related to frozen beverage machines. At September 26, 200924, 2011 and September 27, 2008,25, 2010, deferred income on repair and maintenance service contracts was $1,424,000$1,383,000 and $1,130,000,$1,416,000, respectively, of which $90,000$34,000 and $144,000$67,000 is included in other long-term liabilities as of September 26, 200924, 2011 and September 27, 2008,25, 2010, respectively and the balance is reflected as short-term and included in accrued liabilities on the consolidated balance sheet.  ServiceRepair and maintenance service contract income of $16,451,000, $11,911,000$18,744,000, $16,192,000 and $9,612,000$16,451,000 was recognized for the fiscal years ended 2011, 2010 and 2009, 2008 and 2007, respectively.

3.  Foreign Currency


Assets and liabilities in foreign currencies are translated into U.S. dollars at the rate of exchange prevailing at the balance sheet date. Revenues and expenses are translated at the average rate of exchange for the period. The cumulative translation adjustment is recorded as a separate component of stockholders’ equity and changes to such are included in comprehensive income.


4.  Use of Estimates


In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

5.  Cash Equivalents


Cash equivalents are short-term, highly liquid investments with original maturities of three months or less.

F-7
J & J SNACK FOODS CORP. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
6.  Concentrations of Credit Risk and Accounts Receivable


We maintain cash balances at financial institutions located in various states. Some of our accounts are insured by the Federal Deposit Insurance Corporation up to $250,000. We customarily maintain cash balances in excess of these insurance limits. Some of ourOur cash is in bank accounts which are insured by the Federal Deposit Insurance Corporation with no limit.

Other financial
Financial instruments that could potentially subject us to concentrations of credit risk are trade accounts receivable; however, such risks are limited due to the large number of customers comprising our customer base and their dispersion across geographic regions.  We usually have approximately 10 customers with accounts receivable balances of between $1 million toand $7 million.

We have several large customers that account for a significant portion of our sales.   Our top ten customers accounted for    43%, 42% and 42%43% of our sales during fiscal years 2009, 20082011, 2010 and 2007,2009, respectively, with our largest customer accounting for 9%8% of our sales in 2009,2011, 8% in 2010 and 9% in 2008 and 8% in 2007.2009. Three of the ten customers are food distributors who sell our product to many end users.


The majority of our accounts receivable are due from trade customers.  Credit is extended based on evaluation of our customers’ financial condition and collateral is not required.  Accounts receivable payment terms vary and are stated in the financial statements at amounts due from customers net of an allowance for doubtful accounts.  Accounts outstanding longer than the payment terms are considered past due.  We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss history, customers’ current ability to pay their obligations to us, and the condition of the general economy and the industry as a whole.  We write off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts.


7.  Inventories


Inventories are valued at the lower of cost (determined by the first-in, first-out or weighted-average method) or market. We recognize abnormal amounts of idle facilities, freight, handling costs, and spoilage as charges of the current period.  Additionally, we allocate fixed production overheads to inventories based on the normal capacity of our production facilities.  We calculate normal capacity as the production expected to be achieved over a number of periods or seasons under normal circumstances, taking into account the loss of capacity resulting from planned maintenance. This requires us to use judgment to determine when production is outside the range of expected variation in production (either abnormally low or abnormally high).  In periods of abnormally low production (for example, periods in which there is significantly lower demand, labor and material shortages exist, or there is unplanned equipment downtime) the amount of fixed overhead allocated to each unit of production is not increased.  However, in periods of abnormally high production the amount of fixed overhead allocated to each unit of production is decreased to assure inventories are not measured above cost.


We review for slow moving and obsolete inventory and a reserve is established for the value of inventory that we estimate will not be used.  At September 26, 200924, 2011 and September 27, 2008,25, 2010, our reserve for inventory was $4,209,000$4,615,000 and $3,817,000,$4,189,000, respectively.

8.  Investment Securities


We classify our investment securities in one of three categories: held to maturity, trading, or available for sale; however, we have classified our auction market preferred stock separately on our balance sheet and in our statement of cash flows because of the failure of the auction market beginning in February 2008.  The balance of our investment

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J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


portfolio consists solely of investments classified as held to maturity. See Note C for further information on our holdings of investment securities.


9.  Depreciation and Amortization

Depreciation of equipment and buildings is provided for by the straight-line method over the assets’ estimated useful lives. We review our equipment and buildings to ensure that they provide economic benefit and are not impaired.

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J & J SNACK FOODS CORP. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Amortization of improvements is provided for by the straight-line method over the term of the lease or the assets’ estimated useful lives, whichever is shorter.  Licenses and rights, arising from acquisitionscustomer relationships and non compete agreements are being amortized by the straight-line method over periods ranging from 3 to 20 years.

We use market value testsyears and discounted cash flow models to test goodwillamortization expense is reflected throughout operating expenses.
Long-lived assets, including fixed assets and other intangible assets for impairment. These assetsamortizing intangibles, are reviewed for impairment as events or changes in circumstances occur indicating that the carrying amount of the asset may not be recoverable.  Indefinite lived intangibles are reviewed annually or more frequently as a triggering event, such as the lossfor impairment. Cash flow and sales analyses are used to assess impairment. The estimates of a major customer, might occur.future cash flows and sales involve considerable management judgment and are based upon assumptions about expected future operating performance.  Assumptions used in these forecasts are consistent with internal planning. The actual cash flows and sales could differ from management’s estimates due to changes in business conditions, operating performance, economic conditions, competition and consumer preferences.


10. Fair Value of Financial Instruments


The carrying value of our short-term financial instruments, such as accounts receivables and accounts payable, approximate their fair values, based on the short-term maturities of these instruments.

11. Income Taxes


We account for our income taxes under the liability method.  Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse.  Deferred tax expense is the result of changes in deferred tax assets and liabilities.

Additionally, we recognize a liability for income taxes and associated penalties and interest for tax positions taken or expected to be taken in a tax return which are more likely than not to be overturned by taxing authorities (“uncertain tax positions”).  We have not recognized a tax benefit in our financial statements for these uncertain tax positions.

On September 30, 2007, the first day of the 2008 fiscal year, we recognized a $925,000 decrease to opening retained earnings from the cumulative effect of recognizing a liability for uncertain tax positions.
As of September 26, 2009,24, 2011 and September 25, 2010, the total amount of gross unrecognized tax benefits is $1,895,000,$973,000 and $1,249,000, respectively, all of which would impact our effective tax rate over time, if recognized.  We recognize interest and penalties related to income tax matters as a part of the provision for income taxes.  The Company had $742,000$335,000 and $588,000$429,000 of accrued interest and penalties as of September 26, 200924, 2011 and September 27, 2008,25, 2010, respectively.  We recognized $3,000$8,000 and $6,000$7,000 of penalties and interest in the years ended September 26, 200924, 2011 and September 27, 2008,25, 2010, respectively.  A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(in thousands)
Balance at September 27, 2008  $1,735
Additions based on tax positions
related to the current year		246
Reductions for tax positions of prior years(86)  
Settlements—
Balance at September 26, 2009  $1,895

  (in thousands) 
Balance at September 25, 2010 $1,249 
Additions based on tax positions related to the current year
  110 
Reductions for tax positions of prior years  (386)
Settlements  - 
Balance at September 24, 2011 $973 
In addition to our federal tax return and tax returns for Mexico and Canada, we file tax returns in all states that have a corporate income tax.  Virtually all the returns noted above are open for examination for three to four years.

J & J SNACK FOODS CORP. AND SUBSIDIARIES
SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE A —– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

12. Earnings Per Common Share


Basic earnings per common share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period.  Diluted EPS takes into consideration the potential dilution that could occur if securities (stock options) or other contracts to issue common stock were exercised and converted into common stock.

Our calculation of EPS is as follows:


     Fiscal Year Ended September 26, 2009
   
     Income
(Numerator)
   Shares
(Denominator)
   Per Share
Amount
     (in thousands, except per share amounts)   
Earnings Per Basic Share
Net Income available to common stockholders           $41,312         18,516       $2.23  
Effect of Dilutive Securities
Options             —          197          (.02)  
Earnings Per Diluted Share
Net Income available to common stockholders
plus assumed conversions		           $41,312         18,713       $2.21  
 

114,236 anti-dilutive shares have been excluded in the computation of 2009 diluted EPS because the options’ exercise price is greater than the average market price of the common stock.
  Fiscal Year Ended September 24, 2011 
  Income  Shares  Per Share 
  (Numerator)  (Denominator)  Amount 
  (in thousands, except per share amounts) 
Earnings Per Basic Share         
Net Income available to common stockholders
 $55,063   18,672  $2.95 
             
Effect of Dilutive Securities            
Options  -   117  $(0.02)
             
Earnings Per Diluted Share            
Net Income available to common stockholders plus assumed conversions
 $55,063   18,789  $2.93 
             
143,515 anti-dilutive shares have been excluded in the computation of 2011 diluted EPS because the options' exercise price is greater than the average market price of the common stock.

     Fiscal Year Ended September 27, 2008
   
     Income
(Numerator)
   Shares
(Denominator)
   Per Share
Amount
     (in thousands, except per share amounts)   
Earnings Per Basic Share
Net Income available to common stockholders           $27,908         18,770       $1.49  
Effect of Dilutive Securities
Options             —          238          (.02)  
Earnings Per Diluted Share
Net Income available to common stockholders
plus assumed conversions		           $27,908         19,008       $1.47  
 

273,471 anti-dilutive shares have been excluded in the computation of 2008 diluted EPS because the options’ exercise price is greater than the average market price of the common stock.
  Fiscal Year Ended September 25, 2010 
  Income  Shares  Per Share 
  (Numerator)  (Denominator)  Amount 
  (in thousands, except per share amounts) 
Earnings Per Basic Share         
Net Income available to common stockholders
 $48,409   18,528  $2.61 
             
Effect of Dilutive Securities            
Options  -   175   (0.02)
             
Earnings Per Diluted Share            
Net Income available to common stockholders plus assumed conversions
 $48,409   18,703  $2.59 
             
110,910 anti-dilutive shares have been excluded in the computation of 2010 diluted EPS because the options' exercise price is greater than the average market price of the common stock.

     Fiscal Year Ended September 29, 2007
   
     Income
(Numerator)
   Shares
(Denominator)
   Per Share
Amount
     (in thousands, except per share amounts)   
Earnings Per Basic Share
Net Income available to common stockholders           $32,112         18,635       $1.72  
Effect of Dilutive Securities
Options             —          370          (.03)  
 
Earnings Per Diluted Share
                                          
Net Income available to common stockholders
plus assumed conversions		           $32,112         19,005       $1.69  
 

J & J SNACK FOODS CORP. AND SUBSIDIARIES
SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE A —– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

128,200 anti-dilutive shares have been excluded in the computation of 2007 diluted EPS because the options’ exercise price is greater than the average market price of the common stock.

  Fiscal Year Ended September 26, 2009 
  Income  Shares  Per Share 
  (Numerator)  (Denominator)  Amount 
  (in thousands, except per share amounts) 
Earnings Per Basic Share         
Net Income available to common stockholders
 $41,312   18,516  $2.23 
             
Effect of Dilutive Securities            
Options  -   197   (0.02)
             
Earnings Per Diluted Share            
Net Income available to common stockholders plus assumed conversions
 $41,312   18,713  $2.21 
             
114,236 anti-dilutive shares have been excluded in the computation of 2009 diluted EPS because the options' exercise price is greater than the average market price of the common stock.
13. Accounting for Stock-Based Compensation


At September 26, 2009,24, 2011, the Company has three stock-based employee compensation plans.  Share-based compensation was recognized as follows:

     September 26,
2009
   September 27,
2008
   September 29,
2007
     (in thousands, except per share amounts)   
Stock options           $508        $1,019       $833   
Stock purchase plan             237          137          146   
Deferred stock issued to outside directors             138          138          138   
Restricted stock issued to an employee             87          100          31   
            $970        $1,394       $1,148  
Per diluted share           $.05        $.07        $.06   
The above compensation is net of tax benefits           $746        $457        $592   
 

  
Fiscal year ended
 
  September 24,  September 25,  September 26, 
  2011  2010  2009 
  (in thousands, except per share amounts) 
          
Stock options $288  $592  $508 
Stock purchase plan  203   184   237 
Deferred stock issued to outside directors
  46   138   138 
Restricted stock issued to an employee
  -   28   87 
  $537  $942  $970 
             
Per diluted share $0.03  $0.05  $0.05 
             
The above compensation is net of tax benefits
 $381  $306  $746 
At September 26, 2009,24, 2011, the Company has unrecognized compensation expense of approximately $650,000$2.4 million to be recognized over the next three fiscal years.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model with the following weighted average assumptions used for grants in fiscal 2009, 20082011, 2010 and 2007:2009: expected volatility of 23.3%28.6% for fiscal year 2009, 25.2%2011, 29.0% for fiscal year 2010 and 23.3% for year 2008 and 27.4% for year 2007;2009: weighted average risk-free interest rates of 2.70%1.56%, 3.60%2.21% and 4.57%2.70%; dividend rate of 1.2%.9%, 1.1%1.2% and .9%1.2% and expected lives ranging between 5 and 10 years for all years.  ExpectedAn expected forfeiture ratesrate of 15% were13% was used for all years.fiscal years 2011 and 2010 and 15% was used for 2009.

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J & J SNACK FOODS CORP. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Expected volatility is based on the historical volatility of the price of our common shares over the past 50 to 5154 months for 5 year options and 10 years for 10 year options.  We use historical information to estimate expected life and forfeitures within the valuation model.  The expected term of awards represents the period of time that options granted are expected to be outstanding.  The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.  Compensation cost is recognized using a straight-line method over the vesting or service period and is net of estimated forfeitures.

14. Advertising Costs


Advertising costs are expensed as incurred.  Total advertising expense was $2,267,000, $1,666,000,$1,919,000, $2,751,000 and $4,084,000$2,267,000 for the fiscal years 2011, 2010 and 2009, 2008 and 2007, respectively.


15. Commodity Price Risk Management


Our most significant raw material requirements include flour, shortening, corn syrup, sugar, juice, cheese, chocolate, and a variety of nuts. We attempt to minimize the effect of future price fluctuations related to the purchase of raw materials primarily through forward purchasing to cover future manufacturing requirements, generally for periods from 1 to 12 months. As of September 26, 2009,24, 2011, we have approximately $46$60 million of such commitments. Futures contracts are not used in combination with forward purchasing of these raw materials. Our procurement practices are intended to reduce the risk of future price increases, but also may potentially limit the ability to benefit from possible price decreases.  Our policy is to recognize estimated losses on purchase commitments when they occur.  At each of the last three fiscal year ends, we did not have any material losses on our purchase commitments.

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J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

16. Research and Development Costs


Research and development costs are expensed as incurred.  Total research and development expense was $761,000, $571,000$941,000, $866,000 and $529,000$761,000 for the fiscal years 2011, 2010 and 2009, 2008 and 2007, respectively.


17. Recent Accounting Pronouncements


In December 2007, the FASB issued guidance expanding the definition of a business combination and requiring the fair value of the purchase price of an acquisition, including the issuance of equity securities, to be determined on the acquisition date. The guidance also requires that all assets, liabilities, contingent considerations, and contingencies of an acquired business be recorded at fair value at the acquisition date. In addition, the guidance requires that acquisition costs generally be expensed in the period incurred and changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period to impact income tax expense. We will adhere to this guidance effective for our first quarter of Fiscal 2010.

In August 2008,January 2010, the FASB issued guidance that revises the factors that a company should consider to develop renewal or extension assumptions usedamends existing disclosure requirements of fair value measurements adding required disclosures about items transferring into and out of Levels 1 and 2 in estimating the useful life of a recognized intangible asset. The new guidance will apply to all intangible assets acquired after the guidance’s effective date. The guidance also requires new disclosures for all intangible assets recognized as of, and subsequent to, the effective date. The underlying purpose of the guidance is to improve the consistency between the period of expected cash flows used to measure the fair value hierarchy; adding separate disclosures about purchases, sales, issuances, and settlements relative to Level 3 measurements; and clarifying, among other things, the existing fair value disclosures about the level of disaggregation. This guidance was effective for our fiscal year beginning September 26, 2010, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a recognized intangible assetgross basis, which will be effective for our fiscal year beginning September 25, 2011. Since this standard impacts disclosure requirements only, its adoption has not and will not have any impact on the useful lifeCompany’s consolidated results of an intangible asset.operations or financial condition.
In December 2010, the FASB issued guidance which requires that if a company presents comparative financial statements to include business combinations, the company should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. This guidance also expands the supplemental pro forma adjustments to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This guidance is effective for our 2010 fiscal year. We are evaluating the effect the implementationyear beginning September 25, 2011. The adoption of this guidance will not have a material impact on our consolidatedthe Company’s financial statements.position, results of operations or cash flows.


In April 2009,May 2011, the FASB issued guidance thatwhich amends the provisions in its guidance issued in December 2007 for the initial recognition and measurement, subsequentcurrent fair value measurement and accounting,disclosure guidance to include increased transparency around valuation inputs and disclosuresinvestment categorization. This guidance results in common principles and requirements for assetsmeasuring fair value and liabilities arising from contingenciesfor disclosing information about fair value measurements. This guidance will be effective for our second quarter of fiscal year 2012, and is not expected to have a material impact on our financial statements.
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J & J SNACK FOODS CORP. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In June 2011, the FASB issued guidance which gives us the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in business combinations.a single continuous statement of comprehensive income or in two separate but consecutive statements. In both options, we are required to present each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This revised guidance eliminates the distinction between contractual and non-contractual contingencies, includingoption to present the initial recognition and measurement criteria, included in the December 2007 guidance and carries forward mostcomponents of other comprehensive income as part of the provisionsstatement of changes in stockholders' equity. The amendments in this guidance do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.  This guidance will be effective for our fiscal year 2013, and is not expected to have a material impact on our financial statements.

In December 2010, the FASB issued guidance related to acquired contingencies in its June 2001 guidance.goodwill impairment testing for reporting entities with a zero or negative carrying amount.  Under the amended guidance, we must consider whether it is more likely than not that a goodwill impairment exists for reporting units with a zero or negative carrying amount.  If it is more likely than not that a goodwill impairment exists, the second step of the goodwill impairment test must be performed to measure the amount of the goodwill impairment loss, if any.   This guidance is effective for contingent assets and contingent liabilities acquired in business combinations for which the acquisition date is on or after the beginning of our fiscal year 2010.2012 and is not expected to have a material impact on our financial statements.
In September 2011, the FASB issued guidance to simplify the current two-step goodwill impairment test. This guidance permits entities to first perform a qualitative assessment to determine whether it is more likely than not (a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. If the entity determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, it would then perform the first step of the current two-step goodwill impairment test; otherwise, no further impairment test would be required. Entities are permitted to make the election to perform the qualitative assessment on a period-by-period basis. Under the new guidance, an entity applying the qualitative assessment must (1) consider the totality of the relevant factors (existing events or circumstances) and (2) weigh those factors according to their effect on the difference between a reporting unit’s fair value and its carrying amount. In addition to the factors described in the amended guidance, an entity must also consider other positive and mitigating events and circumstances that might impact its qualitative assessment. Also under the amended guidance, an entity is no longer permitted to carry forward the calculation of a reporting unit’s fair value from a prior year when performing step one of the goodwill impairment test. The effectamended guidance further clarifies that the requirements to disclose certain quantitative information about significant unobservable inputs used in a Level 3 fair value measurement do not apply to measurements related to accounting and reporting for goodwill after its initial recognition in a business combination. The amended guidance requires entities that perform the qualitative assessment to consider the difference between the fair value and the carrying amount from a recent fair value calculation of a reporting unit, if available, as a factor in determining whether the reporting unit’s fair value more likely than not exceeds its carrying amount. The amended guidance is effective prospectively for annual and interim goodwill impairment tests performed for our fiscal year 2013. We are permitted to apply, and have applied, the amended guidance for our annual impairment tests for our 2011 year.  The adoption of this guidance had no effect on our consolidated financial statements will depend upon the nature, terms and size of any acquired contingencies consummated in fiscal year 2010 or later.statements.   

In June 2009, the FASB issued the FASB Accounting Standards Codification (“the Codification”), which establishes the Codification as the source of authoritative accounting guidance to be applied in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”). The Codification, which changes the referencing of financial standards, became effective for interim and annual periods ending on or after September 15, 2009. The codification is now the single official source of authoritative U.S. GAAP (other than guidance issued by the Securities and Exchange Commission), superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and related literature. Only one level of authoritative U.S. GAAP now exists. All other literature is considered non-authoritative. The Codification does not change U.S. GAAP. We adopted the Codification during our fiscal year ended September 26, 2009.

18. Reclassifications

Certain prior year financial statement amounts have been reclassified to be consistent with the presentation for the current year.

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J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE B —– ACQUISITIONS

On March 17, 2005, we acquired all of the assets of Snackworks LLC, d/b/a Bavarian Brothers, a manufacturer of soft pretzels headquartered in Rancho Cucamonga, California for $14.8 million plus approximately $600,000 for inventory. Snackworks operated production facilities in California and Chambersburg, Pennsylvania and markets its products under the brand names SERIOUSLY TWISTED!, BAVARIAN BROTHERS and CINNAPRETZEL. Snackworks sells throughout the continental United States primarily to mass merchandisers and theatres.

On January 31, 2006, we acquired the stock of ICEE of Hawaii. ICEE of Hawaii, headquartered in Waipahu, Hawaii, distributes ICEE frozen beverages and related products throughout the Hawaiian islands. Annual sales are approximately $2.3 million.

On May 26, 2006, The ICEE Company, our frozen carbonated beverage distribution company, acquired the SLUSH PUPPIE branded business from Dr. Pepper/Seven Up, Inc., a Cadbury Schweppes Americas Beverages Company for $18.1 million plus approximately $4.3 million in working capital. SLUSH PUPPIE, North America’s leading brand for frozen non-carbonated beverages, is sold through an existing established distributor network to over 20,000 locations in the United States and Canada as well as to certain international markets.

On January 9, 2007 we acquired the assets of Hom/Ade Foods, Inc., a manufacturer and distributor of biscuits and dumplings sold under the MARY B’S and private label store brands to the supermarket industry.  Hom/Ade is headquartered in Pensacola, Florida.

F-13
J & J SNACK FOODS CORP. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B – ACQUISITIONS (Continued)

On January 31, 2007 we acquired the assets of Radar Inc., a manufacturer and seller of fig and fruit bars selling its products under the brand DADDY RAY’S.  Headquartered and with its manufacturing facility in Moscow Mills, Missouri (outside of St. Louis), Radar, Inc. had annual sales of approximately $23 million dollars sellingsells to the retail grocery segment and mass merchandisers, both branded and private label.


On April 2, 2007, we acquired the WHOLE FRUIT Sorbet and FRUIT-A-FREEZE Fruit Bar brands, along with related assets including a manufacturing facility located in Norwalk, California which sells primarily to the supermarket industry.


On June 25, 2007, we acquired the assets of an ICEE distributor in Kansas with annual salesKansas.

In February 2010, we acquired the assets of less than $1 million.Parrot Ice, a manufacturer and distributor of a premium brand frozen beverage sold primarily in convenience stores.  Revenues from Parrot Ice were approximately $1.5 million for our 2010 fiscal year.


In June 2010, we acquired the assets of California Churros, a manufacturer and distributor of a premium brand churro.  Revenues from California Churros were approximately $2.5 million for our 2010 fiscal year.

The allocation of the purchase pricesprice allocation for the Hom/Ade and Radar acquisitionsCalifornia Churros acquisition and other acquisitions, including Parrot Ice, which were made during the 20072010 fiscal year is as follows:

     Hom/Ade
   Radar
   Other
     (in thousands)   
Working Capital           $1,410       $1,284       $989   
Property, plant & equipment             233          5,750         1,442  
Trade Names             6,220         1,960         3,086  
Customer Relationships             17,250         10,730         58   
Covenant not to Compete             301          109          —   
Goodwill             476          1,287         603   
            $25,890       $21,120       $6,178  
 

Included
  California Churros  Other 
  (in thousands) 
    
Working Capital $1,075  $- 
Property, plant & equipment  2,373    1,135 
Trade Names   4,024    - 
Customer Relationships   6,737   - 
Covenant not to Compete   35   50 
Goodwill   9,756    - 
  $24,000  $1,185 
Acquisition costs of $184,000 for these acquisitions are included in administrative and other general expense for the purchase price for Hom/Ade is a pre-acquisition contingency which was settledyear ended September 25, 2010.

In May 2011, we acquired the frozen handheld business of ConAgra Foods.  This business had sales of approximately $50 million over the prior twelve months to food service and retail supermarket customers and sales of $18.3 million in the first quarter ofour 2011 fiscal year 2008 for approximately $1.9 million.

The following pro forma information discloses net sales, net earnings and earnings per share forfrom the three fiscal years ended September 26, 2009 including the sales and net earnings of Hom/Ade, Radar and Slush Puppie for all periods.acquisition date.

F-13

J & J SNACK FOODS CORP. AND SUBSIDIARIES
SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE B —– ACQUISITIONS (Continued)


The impactpurchase price allocation for the handhelds acquisition is as follows:
  (in thousands) 
    
Working Capital $6,955 
Property, plant & equipment  11,036 
Trade Names  1,325 
Customer Relationships  207 
Deferred tax liability  (4,137)
     
     
Net Assets Acquired  15,386 
     
Purchase Price   8,806 
     
Gain on bargain purchase $6,580 
The purchase price allocation resulted in the recognition of a gain on bargain purchase of approximately $6,580,000 which is included in other income in the consolidated statement of earnings for the year ended September 24, 2011.  The gain on bargain purchase resulted from the fair value of the other acquisitions made during the periods onidentifiable net sales, net earnings and earnings per share was not significant.

     Pro Forma   
     Fiscal year ended
   
     September 26,
2009
(52 weeks)
   September 27,
2008
(52 weeks)
   September 29,
2007
(52 weeks)
     (in thousands except per share information)   
Net Sales           $653,047       $629,359       $581,024  
Net Earnings           $41,312       $27,908       $33,235  
Earnings per diluted share           $2.21       $1.47       $1.75  
Earnings per basic share           $2.23       $1.49       $1.78  
 

These acquisitions were accounted for underassets acquired exceeding the purchase methodprice.

Acquisition costs of accounting, and their operations$546,000 for the handhelds acquisition are included in other general expense in the accompanying consolidated financial statements from their acquisition dates.of earnings for the year ended September 24, 2011.


The goodwill and intangible assets acquired in the business combinations are recorded at fair value.  To measure fair value for such assets, we use techniques including discounted expected future cash flows (Level 3 input).

NOTE C —– INVESTMENT SECURITIES

We have classified our investment securities as marketable securities held to maturity and auction market preferred stock (AMPS).  The FASB defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the FASB has established three levels of inputs that may be used to measure fair value:

Level 1Observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and
Level 3Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

We have concluded that the carrying value of 26 week certificates of deposit placed through the Certificate of Deposit Account Registry Service equals fair market value.  Other marketable securities held to maturity values are derived solely from level 1 inputs. We have no holdings of AMPS at September 26, 2009.

F-15

J & J SNACK FOODS CORP. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C – INVESTMENT SECURITIES (Continued)
The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at September 26, 200924, 2011 are summarized as follows:

     Amortized
Cost
   Gross
Unrealized
Gains
   Fair
Unrealized
Losses
   Market
Value
     (in thousands)   
US Government Agency Debt           $6,009       $22        $1        $6,030  
FDIC Backed Corporate Debt             13,213         198          —          13,411  
Certificates of Deposit             39,425         21          3          39,443  
            $58,647       $241        $4        $58,884  
 

     Gross  Gross  Fair 
  Amortized  Unrealized  Unrealized  Market 
  Cost  Gains  Losses  Value 
  (in thousands) 
US Government Agency Debt $42,000  $52  $62  $41,990 
FDIC Backed Corporate Debt  8,015   18   -   8,033 
Certificates of Deposit  17,491   1   -   17,492 
  $67,506  $71  $62  $67,515 
All of the certificates of deposit are within the FDIC limits for insurance coverage.

F-14


Table of Contents

J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE C — INVESTMENT SECURITIES (Continued)

The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at September 27, 200825, 2010 are summarized as follows:

Certificates of Deposit           $2,470       $ —        $6        $2,464  
            $2,470       $ —        $6        $2,464  
 

     Gross  Gross  Fair 
  Amortized  Unrealized  Unrealized  Market 
  Cost  Gains  Losses  Value 
  (in thousands) 
US Government Agency Debt $8,000  $53  $-  $8,053 
FDIC Backed Corporate Debt  13,107   144   -   13,251 
Certificates of Deposit  20,674   5       20,679 
  $41,781  $202  $-  $41,983 
All of the certificates of deposit are within the FDIC limits for insurance coverage.


The amortized cost and fair value of the Company’s held to maturity securities by contractual maturity at September 26, 200924, 2011 and September 27, 200825, 2010 are summarized as follows:

     September 26, 2009
   September 27, 2008
   
     Amortized
Cost
   Fair
Market
Value
   Amortized
Cost
   Fair
Market
Value
     (in thousands)   
Due in one year or less           $38,653       $38,668       $2,470       $2,464  
Due after one year through five years             19,994         20,216         —          —   
Total held to maturity securities           $58,647       $58,884       $2,470       $2,464  
Less current portion             38,653         38,668         2,470         2,464  
Long term held to maturity securities           $19,994       $20,216       $—        $—   
 

The amortized cost, unrealized gains and losses, and fair market values of our auction market preferred stock at September 27, 2008 are summarized as follows:
   September 24, 2011   September 25, 2010 
     Fair     Fair 
  Amortized  Market  Amortized  Market 
  Cost  Value  Cost  Value 
  (in thousands) 
Due in one year or less $25,506  $25,525  $15,481  $15,501 
Due after one year through five years
  6,000   6,014   26,300   26,482 
Due after five years through ten years
  36,000   35,976   -   - 
Total held to maturity securities
 $67,506  $67,515  $41,781  $41,983 
Less current portion  25,506   25,525   15,481   15,501 
Long term held to maturity securities
 $42,000  $41,990  $26,300  $26,482 

     Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
   Fair
Market
Value
     (in thousands)   
Auction Market Preferred Stock
                                                      
Equity Securities           $35,200       $ —        $ —        $35,200  
            $35,200       $ —        $ —        $35,200  
 

The AMPS we owned at September 27, 2008 are senior equity securities of closed-end funds and have priority over the fund’s common shares as to distribution of assets and dividends, as described in each fund’s prospectus.

On August 21, 2008, Merrill Lynch announced a plan to purchase, at par, AMPS held by J & J and other of its clients. Redemption of our AMPS subsequent to the failure of the auction process in February 2008 was $10,000,000, our carrying value, in the year ended September 27,2008 and $15,400,000, also our carrying value, in the year ended September 26, 2009. In January 2009, we sold $19,800,000 of our AMPS to Merrill Lynch at our carrying value.

Proceeds from the sale and redemption of AMPSmarketable securities were $35,200,000$37,568,000, $67,362,000 and $10,204,000 in the yearyears ended September 24, 2011, September 25, 2010 and September 26, 2009, with no gain or loss recorded. Proceeds from the sale and redemption of AMPS were $16,500,000 in the year ended September 27, 2008,respectively, with no gain or loss recorded.  We use the specific identification method to determine the cost of securities sold.

Proceeds from the sale and redemption of marketable securities were $10,204,000 in the year ended September 26, 2009, and none in the prior year, with no gain or loss recorded. We use the specific identification method to determine the cost of securities sold.

F-15

J & J SNACK FOODS CORP. AND SUBSIDIARIES
SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE D —– INVENTORIES


Inventories consist of the following:


     September 26,
2009
   September 27,
2008
     (in thousands)   
Finished goods           $19,913       $23,512  
Raw materials             8,060         7,658  
Packaging materials             5,141         5,405  
Equipment parts and other             12,890         12,520  
            $46,004       $49,095  
 

  September 24,  September 25, 
  2011  2010 
   (in thousands) 
Finished goods $28,770  $22,171 
Raw materials  13,160   8,702 
Packaging materials  5,791   4,727 
Equipment parts and other  15,740   15,030 
  $63,461  $50,630 
Inventory is presented net of an allowance for obsolescence of $4,209,000$4,615,000 and $3,817,000$4,189,000 as of fiscal year ends 20092011 and 2008,2010, respectively.


NOTE E —– PROPERTY, PLANT AND EQUIPMENT


Property, plant and equipment consist of the following:


     September 26,
2009
   September 27,
2008
   Estimated
Useful Lives
     (in thousands)   
Land           $1,416       $1,416         —   
Buildings             8,672         8,672         15–39.5 years   
Plant machinery and equipment             133,758         124,591         5–20 years   
Marketing equipment             202,708         195,878         5–7 years   
Transportation equipment             2,733         2,878         5 years  
Office equipment             11,461         10,820         3–5 years   
Improvements             18,454         17,694         5–20 years   
Construction in progress             3,954         2,215         —   
            $383,156       $364,164              
 

  September 24,  September 25,  Estimated 
  2011  2010  Useful Lives 
  
(in thousands)
    
          
Land $2,496  $2,016   - 
Buildings  15,766   13,266  15-39.5 years 
Plant machinery and equipment
  158,408   144,697  5-20 years 
Marketing equipment  223,490   214,545  5-7 years 
Transportation equipment
  4,264   3,785  5 years 
Office equipment  13,650   12,690  3-5 years 
Improvements  21,054   19,590  5-20 years 
Construction in Progress
  7,728   3,814   - 
  $446,856  $414,403     
Depreciation expense was $25,046,000, $24,498,000 and $22,663,000 for fiscal years 2011, 2010 and 2009, respectively.

F-17
J & J SNACK FOODS CORP. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE F —– GOODWILL AND INTANGIBLE ASSETS


Our fourthree reporting units, which are also reportable segments, are Food Service, Retail Supermarket The Restaurant Group and Frozen Beverages.


The carrying amount of acquired intangible assets for the reportable segments are as follows:

     September 26, 2009
   September 27, 2008
   
     Gross
Carrying
Amount
   Accumulated
Amortization
   Gross
Carrying
Amount
   Accumulated
Amortization
     (in thousands)   
Food Service
                                                      
 
Indefinite lived intangible assets
                                                      
Trade Names           $8,180       $—        $8,180       $—   
 
Amortized intangible assets
                                                      
Non compete agreements             435          282          435          215   
Customer relationships             33,287         11,526         33,287         8,087  
Licenses and rights             3,606         2,061         3,606         1,835  
            $45,508       $13,869       $45,508       $10,137  

F-16
  September 24, 2011  September 25, 2010 
  Gross     Gross    
  Carrying  Accumulated  Carrying  Accumulated 
  Amount  Amortization  Amount  Amortization 
  (in thousands) 
FOOD SERVICE            
             
Indefinite lived intangible assets
            
Trade Names $12,880  $-  $12,204  $- 
                 
Amortized intangible assets                
Non compete agreements  470   425   470   351 
Customer relationships  40,024   18,993   40,024   15,160 
License and rights  3,606   2,425   3,606   2,287 
  $56,980  $21,843  $56,304  $17,798 
                 
RETAIL SUPERMARKETS                
                 
Indefinite lived intangible assets
                
Trade Names $3,380  $-  $2,731  $- 
                 
Amortized Intangible Assets                
Customer relationships  207   8   -   - 
  $3,587  $8  $2,731  $- 
                 
                 
FROZEN BEVERAGES                
                 
Indefinite lived intangible assets
                
Trade Names $9,315  $-  $9,315  $- 
                 
Amortized intangible assets                
Non compete agreements  198   189   198   165 
Customer relationships  6,478   3,540   6,478   2,876 
Licenses and rights  1,601   574   1,601   504 
  $17,592  $4,303  $17,592  $3,545 
                 
CONSOLIDATED $78,159  $26,154  $76,627  $21,343 


Table of Contents

J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE F — GOODWILL AND INTANGIBLE ASSETS (Continued)

     September 26, 2009
   September 27, 2008
   
     Gross
Carrying
Amount
   Accumulated
Amortization
   Gross
Carrying
Amount
   Accumulated
Amortization
     (in thousands)   
Retail Supermarket
                                                      
 
Indefinite lived intangible assets
                                                      
Trade Names           $2,731       $—        $2,731       $—   
 
The Restaurant Group
                                                      
 
Amortized intangible assets
                                                      
Licenses and rights           $—        $—        $—        $—   
 
Frozen Beverages
                                                      
 
Indefinite lived intangible assets
                                                      
Trade Names           $9,315       $—        $9,315       $—   
 
Amortized intangible assets
                                                      
Non compete agreements             148          141          148          99   
Customer relationships             6,478         2,212         6,478         1,548  
Licenses and rights             1,601         434          1,601         364   
            $17,542       $2,787       $17,542       $2,011  
 

The gross carrying amount of intangible assets is determined by applying a discounted cash flow model to the future sales and earnings associated with each intangible asset or is set by contract cost.  The amortization period used for definite lived intangible assets is set by contract period or by the period over which the bulk of the discounted cash flow is expected to be generated.  We currently believe that we will receive the benefit from the use of the trade names classified as indefinite lived intangible assets indefinitely and they are therefore not amortized.

F-18
J & J SNACK FOODS CORP. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE F – GOODWILL AND INTANGIBLE ASSETS (Continued)

Licenses and rights, customer relationships and non compete agreements are being amortized by the straight-line method over periods ranging from 3 to 20 years and amortization expense is reflected throughout operating expenses.


Amortizing intangibles are reviewed for impairment as events or changes in circumstances occur indicating that the carrying amount of the asset may not be recoverable.  Indefinite lived intangibles are reviewed annually for impairment. Cash flow and sales analyses are used to assess impairment. The estimates of future cash flows and sales involve considerable management judgment and are based upon assumptions about expected future operating performance.  Assumptions used in these forecasts are consistent with internal planning. The actual cash flows and sales could differ from management’s estimates due to changes in business conditions, operating performance, economic conditions, competition and consumer preferences.

Intangible assets of $10,796,000 were acquired in the food service segment in the California Churros acquisition in fiscal year 2010.

Intangible assets of $676,000 and $856,000 were acquired in the food service and retail supermarket segments, respectively, in the handhelds acquisition in fiscal year 2011.

Aggregate amortization expense of intangible assets for the fiscal years 2011, 2010 and 2009 2008was $4,811,000, $4,687,000 and 2007 was $4,508,000, $4,700,000 and $3,974,000.respectively.


Estimated amortization expense for the next five fiscal years is approximately $4,500,000 in 2010, $4,100,000 in 2011, $3,800,000 in 2012, and $3,700,000$4,400,000 in 2013 and 2014.2014, $4,300,000 in 2015 and $4,100,000 in 2016.  The weighted average amortization period of the intangible assets is 10.310.1 years.

Goodwill


The carrying amounts of goodwill for the reportable segments are as follows:

     Food
Service
   Retail
Supermarkets
   Restaurant
Group
   Frozen
Beverages
   Total
     (in thousands)   
Balance at
September 26, 2009		           $23,988       $ —        $386        $35,940       $60,314  
Balance at
September 27, 2008		           $23,988       $ —        $386        $35,940       $60,314  
 

F-17
  Food  Retail  Frozen    
  Service  Supermarkets  Beverages  Total 
  (in thousands) 
             
Balance at September 24, 2011
 $34,130  $-  $35,940  $70,070 
                 
Balance at September 25, 2010
 $34,130  $-  $35,940  $70,070 


Table of Contents

J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE F — GOODWILL AND INTANGIBLE ASSETS (Continued)

The carrying value of goodwill is determined based on the excess of the purchase price of acquisitions over the estimated fair value of tangible and intangible net assets.  Goodwill is not amortized but is evaluated annually by management for impairment.  Our impairment analysis for 2011 is a qualitative assessment in which we have considered historical net cash provided by operating activities and  purchases of property , plant and equipment, their relationship to the carrying value of goodwill, recent fair value calculations of our reporting units and our assessment of the likelihood, based on an assessment of what we know about our Company’s products and markets, costs and general economic conditions, that the relationship of cash flow to the carrying value of goodwill will change significantly in the foreseeable future. Our impairment analysis for 2010 and 2009 was based on a combination of the income approach, which estimates the fair value discounted cash flows, and the market approach, which estimates the fair value based on comparable market prices.  Under the income approach the Company used a discounted cash flow which requires Level 3 inputs such as:  annual growth rates, discount rates based upon the weighted average cost of capital and terminal values based upon our stock market multiples.  There were no impairment charges in 2009, 20082011, 2010 or 2007.2009.

Goodwill of $9,756,000 was acquired in the food service segment in the California Churros acquisition in fiscal year 2010.
F-19
J & J SNACK FOODS CORP. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G —– LONG-TERM DEBT


In December 2006,November 2011, we entered into an amended and restated loan agreement with our existing banks which provides for up to a $50,000,000 revolving credit facility repayable in December 2011,November 2016, with the availability of repayments without penalty.  The agreement contains restrictive covenants and requires commitment fees in accordance with standard banking practice.  As of September 26, 200924, 2011 and September 27, 2008,25, 2010, there were no outstanding balances under the prior facility.


NOTE H —– OBLIGATIONS UNDER CAPITAL LEASES


Obligations under capital leases consist of the following:


     September 26,
2009
   September 27,
2008
     (in thousands)   
Capital lease obligations, with interest at 2.6%, payable in monthly installments of $8,700, through August 2013           $381        $474   
Less current portion             96          93   
            $285        $381   
 

  September 24,  September 25, 
  2011  2010 
  (in thousands) 
Capital lease obligations, with interest at 7.6%, payable in monthly installments of $3,162, through November 2017
 $182  $- 
         
Capital lease obligations, with interest at 5.8%, payable in monthly installments of $14,625, through May 2014
  432   578 
         
Capital lease obligations, with interest at 2.6%, payable in monthly installments in $8,700, through August 2013
  187   285 
   801   863 
Less current portion  278   244 
  $523  $619 
NOTE I —– INCOME TAXES


Income tax expense (benefit) is as follows:

     Fiscal year ended
   
     September 26,
2009
   September 27,
2008
   September 29,
2007
     (in thousands)   
Current
                                          
U.S. Federal           $18,574       $11,417       $15,485  
Foreign             706          844          423   
State             3,744         2,270         2,581  
              23,024         14,531         18,489  
Deferred
                                          
U.S. Federal             3,106         2,983         474   
Foreign             109          (168)         —   
State             658          631          83   
              3,873         3,446         557   
            $26,897       $17,977       $19,046  
 

F-18
  
Fiscal year ended
 
  September 24,  September 25,  September 26, 
  2011  2010  2009 
                                     (in thousands) 
Current         
U.S. Federal $17,065  $21,020  $18,574 
Foreign  950   970   706 
State  4,871   4,484   3,744 
   22,886   26,474   23,024 
             
Deferred            
U.S. Federal $3,988  $2,692  $3,106 
Foreign  409   (48)  109 
State  1,720   570   658 
   6,117   3,214   3,873 
  $29,003  $29,688  $26,897 

J & J SNACK FOODS CORP. AND SUBSIDIARIES
SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE I —– INCOME TAXES (Continued)

The provisions for income taxes differ from the amounts computed by applying the statutory federal income tax rate of approximately 35% to earnings before income taxes for the following reasons:


     Fiscal year ended
   
     September 26,
2009
   September 27,
2008
   September 29,
2007
     (in thousands)   
Income taxes at statutory rates           $23,873       $16,059       $17,905  
Increase (decrease) in taxes resulting from:
                                          
State income taxes, net of federal income tax benefit             2,958         1,918         1,819  
Other, net             66          —          (678)  
            $26,897       $17,977       $19,046  
 

  Fiscal year ended 
  September 24,  September 25,  September 26, 
  2011  2010  2009 
  (in thousands) 
Income taxes at statutory rates
 $29,423  $27,334  $23,873 
Increase (decrease) in taxes resulting from:
            
State income taxes, net of federal income tax benefit
  3,279   3,403   2,958 
Domestic production activities deduction
  (1,500)  (850)  (400)
Gain on bargain purchase  (2,303)  -   - 
Other, net  104   (199)  466 
  $29,003  $29,688  $26,897 
Deferred tax assets and liabilities consist of the following:


     September 26,
2009
   September 27,
2008
     (in thousands)   
Deferred tax assets
                              
Vacation accrual           $1,233       $1,117  
Insurance accrual             2,943         2,634  
Deferred income             67          105   
Allowances             1,902         1,865  
Inventory capitalization             499          519   
Share-based compensation             1,113         896   
Other, net             65          104   
              7,822         7,240  
Deferred tax liabilities
                              
Amortization of goodwill and other intangible assets             13,388         11,899  
Depreciation of property and equipment             17,793         14,818  
Other, net             15          24   
              31,196         26,741  
            $23,374       $19,501  
 

  September 24,  September 25, 
  2011  2010 
  (in thousands) 
Deferred tax assets      
Vacation accrual $1,390  $1,334 
Insurance accrual  2,591   3,098 
Deferred income  34   60 
Allowances  2,074   1,881 
Inventory capitalization  653   573 
Share-based compensation  1,301   1,209 
Unclaimed Property  632   - 
Other, net  19   56 
   8,694   8,211 
Deferred tax liabilities        
Amortization of goodwill and other intangible assets
  17,418   14,885 
Depreciation of property and equipment
  28,090   19,907 
Other, net  28   7 
   45,536   34,799 
  $36,842  $26,588 
F-21
J & J SNACK FOODS CORP. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE J —- COMMITMENTS

1.  Lease Commitments

The following is a summary of approximate future minimum rental commitments for non-cancelable operating leases with terms of more than one year as of September 26, 2009:24, 2011:


     Plants and
Offices
   Equipment
   Total
     (in thousands)   
2010           $5,008       $4,159       $9,167  
2011             4,263         3,543         7,806  
2012             3,868         2,219         6,087  
2013             3,516         724          4,240  
2014             3,357         29          3,386  
2015 and thereafter             12,490         —          12,490  
            $32,502       $10,674       $43,176  
 

  Plants and       
  Offices  Equipment  Total 
   (in thousands) 
2012 $5,390  $3,419  $8,809 
2013  4,811   2,010   6,821 
2014  4,407   1,223   5,630 
2015  3,971   415   4,386 
2016  2,911   80   2,991 
2017 and thereafter  20,626   35   20,661 
  $42,116  $7,182  $49,298 
Total rent expense was $12,856,000, $12,907,000$14,816,000, $13,099,000 and $13,803,000$12,856,000 for fiscal years 2011, 2010 and 2009, 2008 and 2007, respectively.

F-19


Table of Contents

J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE J — COMMITMENTS (Continued)

2.  Other Commitments


We are a party to litigation which has arisen in the normal course of business which management currently believes will not have a material adverse effect on our financial condition or results of operations.


We self-insure, up to loss limits, certain insurable risks such as worker’s compensation and automobile liability claims.  Accruals for claims under our self-insurance program are recorded on a claims incurred basis.  Our total recorded liability for all years’ claims incurred but not yet paid was $7,100,000$5,700,000 and $6,400,000$7,300,000 at September 26, 200924, 2011 and September 27, 2008,25, 2010, respectively.  In connection with certain self-insurance agreements, we customarily enter into letters of credit arrangements with our insurers.  At each of September 26, 200924, 2011 and September 27, 2008,25, 2010, we had outstanding letters of credit totaling $8,675,000 and $9,475,000, respectively.$8,175,000.


NOTE K —- CAPITAL STOCK


In our fiscal year ended September 24, 2011, we did not purchase and retire any shares of our common stock. There remains 210,772 shares that can be purchased under a million share buyback authorization approved by the Company's Board of Directors in February 2008.
In our fiscal year ended September 25, 2010, we purchased and retired 203,507 shares of our common stock at a cost of $7,768,000.

In our fiscal year ended September 26, 2009, we purchased and retired 450,597 shares of our common stock at a cost of $12,510,000 under a million share buyback authorization approved by the Company’s Board of Directors in February 2008.$12,510,000.  Of the shares purchased and retired in 2009, 400,000 shares were purchased at the purchase price of $27.90 per share from Gerald B. Shreiber, Chairman of the Board, Chief Executive Officer and Director of the Company.

In our 2008 fiscal year ended September 27, 2008, we purchased and retired 135,124 shares of our common stock at a cost of $3,539,000. The Company did not repurchase any of its common stock in fiscal year 2007.

F-22
J & J SNACK FOODS CORP. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L —– STOCK OPTIONS


We have, subject to shareholder approval in February 2012, a Stock Option Plan (the “Plan”).  Pursuant to the Plan, stock options may be granted to officers and our key employees which qualify as incentive stock options as well as stock options which are nonqualified.  The exercise price of incentive stock options is at least the fair market value of the common stock on the date of grant.  The exercise price for nonqualified options is determined by a committee of the Board of Directors. The options are generally exercisable after three years and expire no later than ten years from date of grant.  There were 1,400,000are 800,000 shares reserved under the Plan;Plan under which no options for 702,000 shares remain unissued as of September 26, 2009.have yet to been issued. There are options that were issued under an option plan that has since expired that are still outstanding.

We have an Employee Stock Purchase Plan (“ESPP”) whereby employees purchase stock by making contributions through payroll deductions for six month periods.  The purchase price of the stock is 85% of the lower of the market price of the stock at the beginning of the six-month period or the end of the six-month period.  In fiscal years 2009, 20082011, 2010 and 20072009 employees purchased 25,803, 31,36619,708, 22,143 and 23,14025,803 shares at average purchase prices of $26.63, $24.93$39.04, $32.70 and $30.22,$26.63, respectively.  ESPP expense of $237,000, $137,000$203,000, $184,000 and, $146,000$237,000 was recognized for fiscal years 2011, 2010 and 2009, 2008 and 2007, respectively.

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Table of Contents

J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE L — STOCK OPTIONS (Continued)

A summary of the status of our stock option plans as of fiscal years 2009, 20082011, 2010 and 20072009 and the changes during the years ended on those dates is represented below:

     Incentive Stock Options
   Nonqualified Stock Options
   
     Stock
Options
Outstanding
   Weighted-
Average
Exercise
Price
   Stock
Options
Outstanding
   Weighted-
Average
Exercise
Price
Balance, October 1, 2007             729,935         17.93         492,354         13.30  
Granted             114,700         41.45         35,000         36.49  
Exercised             (151,130)         17.45         (68,000)         6.19  
Cancelled             (20,100)         23.70         —               
 
Balance, September 29, 2007             673,405         21.87         459,354         16.12  
Granted             96,345         33.22         20,000         34.17  
Exercised             (111,768)         16.57         (77,000)         9.66  
Cancelled             (44,150)         26.36         (5,000)         38.54  
 
Balance, September 27, 2008             613,832         24.29         397,354         18.00  
Granted             4,500         32.13         —          —   
Exercised             (169,388)         18.73         (71,000)         10.70  
Cancelled             (20,000)         26.79         (20,000)         20.02  
 
Balance, September 26, 2009             428,944       $26.45         306,354       $19.55  
Exercisable Options,
September 26, 2009		             238,149                    236,354              
 

  Incentive Stock Options  Nonqualified Stock Options 
     Weighted-     Weighted- 
  Stock  Average  Stock  Average 
  Options  Exercise  Options  Exercise 
  Outstanding  Price  Outstanding  Price 
             
Balance, September 28, 2008  613,832  $24.29   397,354  $18.00 
Granted  4,500   32.13   -   - 
Exercised  (169,388)  18.73   (71,000)  10.70 
Cancelled  (20,000)  26.79   (20,000)  20.02 
                 
Balance, September 26, 2009  428,944   26.45   306,354   19.55 
Granted  101,330   36.77   20,000   41.75 
Exercised  (92,760)  16.40   (72,354)  10.12 
Cancelled  (19,505)  33.47   (10,000)  38.81 
                 
Balance, September 25, 2010  418,009   30.86   244,000   23.38 
Granted  101,200   50.93   45,315   49.57 
Exercised  (186,039)  23.52   (62,000)  10.30 
Cancelled
  (10,050)  36.77   -   - 
                 
Balance, September 24, 2011  323,120  $41.18   227,315  $32.17 
Exercisable Options                
September 24, 2011  126,436       142,000     
The weighted-average fair value of incentive options granted during fiscal years ended September 24, 2011, September 25, 2010 and September 26, 2009 September 27, 2008was $12.52, $9.12 and September 29, 2007 was $7.13, $7.99 and $11.98, respectively. The weighted-average fair value of non-qualified stock options granted during the fiscal years ended September 27, 200824, 2011 and September 29, 200725, 2010 was $15.21$14.95 and $14.29,$17.33, respectively.  There were no non-qualified options granted during the fiscal year ended September 26, 2009.  The total instrinsicintrinsic value of stock options exercised was $5.4$7.0 million, $3.2$5.1 million and $5.4 million in fiscal years 2011, 2010 and 2009, 2008 and 2007, respectively.

The following table summarizes information about incentive stock options outstanding at September 26, 2009:

     Options Outstanding
   Options Exercisable
   
Range of
Exercise Prices
     Number
Outstanding
at
September 26,
2009
   Weighted-
Average
Remaining
Contractual
Life
   Weighted-
Average
Exercise
Price
   Number
Exercisable
at
September 26,
2009
   Weighted-
Average
Exercise
Price
$ 6.38 – $ 7.94             47,000          .9 years       $6.57         47,000       $6.57  
$10.60 – $10.60             92,632         1.9 years       $10.60         92,632       $10.60  
$27.42 – $38.28             194,612         2.2 years       $31.43         98,517       $29.70  
$41.50 – $41.60             94,700         2.2 years       $41.60         —        $—   
              428,944                               238,149              
 

J & J SNACK FOODS CORP. AND SUBSIDIARIES
SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE L —– STOCK OPTIONS (Continued)

The following table summarizes information about nonqualified stock options outstanding at September 26, 2009:total cash received from these option exercises was $3.4 million, $1.2 million and $2.3 million in fiscal years 2011, 2010 and 2009, respectively; and the actual tax benefit realized from the tax deductions from these option exercises was $1.2 million, $1.2 million and $ 1.0 million in fiscal years 2011, 2010 and 2009, respectively.

     Options Outstanding
   Options Exercisable
   
Range of
Exercise Prices
     Number
Outstanding
at
September 26,
2009
   Weighted-
Average
Remaining
Contractual
Life
   Weighted-
Average
Exercise
Price
   Number
Exercisable
at
September 26,
2009
   Weighted-
Average
Exercise
Price
$ 7.97 – $10.30             124,000         1.1 years       $9.13         124,000       $9.13  
$19.77 – $27.42             92,354         3.0 years       $20.27         92,354       $20.27  
$29.78 – $38.81             90,000         7.0 years       $33.17         20,000       $29.78  
              306,354                               236,354              
 

The following table summarizes information about incentive stock options outstanding at September 24, 2011:
              
  Options Outstanding  Options Exercisable 
  Number Weighted-    Number    
  Outstanding  Average Weighted-  Exercisable  Weighted- 
  at  Remaining Average  at  Average 
 Range of September 24,  Contractual Exercise  September 24,  Exercise 
 Exercise Prices 2011  Life Price  2011  Price 
 $27.45-$41.16  166,170  2.3 years $35.15   69,936  $33.25 
 $41.50-$51.14  156,950  3.2 years $47.57   56,500  $41.60 
                  
   323,120        126,436     
                  
The following table summarizes information about nonqualified stock options outstanding at September 24, 2011:
 
  Options Outstanding  Options Exercisable 
  Number Weighted-   �� Number     
  Outstanding  Average Weighted-  Exercisable  Weighted- 
  at  Remaining Average  at  Average 
 Range of September 24,  Contractual Exercise  September 24,  Exercise 
 Exercise Prices 2011  Life Price  2011  Price 
 $19.77-$20.43  82,000  1.2 years $19.93   82,000  $19.93 
 $29.78-$41.75  100,000  6.2 years $34.32   60,000  $31.90 
 $47.59-$51.14  45,315  7.1 years $49.57   -  $- 
   227,315        142,000     
NOTE M —– 401(k) PROFIT-SHARING PLAN


We maintain a 401(k) profit-sharing plan for our employees.  Under this plan, we may make discretionary profit-sharing and matching 401(k) contributions.  Contributions of $1,354,000, $1,411,000$1,480,000,    $1,436,000 and $1,333,000$1,354,000 were made in fiscal years 2011, 2010 and 2009, 2008 and 2007, respectively.


NOTE N —– CASH FLOW INFORMATION


The following is supplemental cash flow information:

     Fiscal Year Ended
   
     September 26,
2009
   September 27,
2008
   September 29,
2007
     (in thousands)   
Cash paid for:
                                          
Interest           $14        $21        $6   
Income taxes             21,345         13,896         17,753  
 
Non cash items:
                                          
Capital leases           $—        $—        $580   
 

  Fiscal Year Ended 
  September 24,  September 25,  September 26, 
  2011  2010  2009 
  (in thousands) 
Cash paid for:         
  Interest $36  $76  $14 
  Income taxes  19,594   31,379   21,345 
             
Non cash items:            
  Capital leases $182  $625  $- 
F-24
J & J SNACK FOODS CORP. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE O —– SEGMENT REPORTING


We principally sell our products to the food service and retail supermarket industries. We also distribute our products directly to the consumer through our chain of retail stores referred to as The Restaurant Group.  Sales and results of our frozen beverages business are monitored separately from the balance of our food service business and restaurant group because of different distribution and capital requirements.  We maintain separate and discrete financial information for the fourthree operating segments mentioned above which is available to our Chief Operating Decision Makers.  We have applied no aggregate criteria to any of these operating segments in order to determine reportable segments.

Our fourthree reportable segments are Food Service, Retail Supermarkets and Frozen Beverages.  The Restaurant Group, and Frozen Beverages.operator of two BAVARIAN PRETZEL BAKERY retail stores with sales of $633,000 in the year ended September 24, 2011, has been included in Food Service because it no longer meets the quantitative thresholds under the guidance for reportable segments to be shown separately. All inter-segment net sales and expenses have been eliminated in computing net sales and operating income (loss).income. These segments are described below.

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Table of Contents

J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE O — SEGMENT REPORTING (Continued)

Food Service


The primary products sold by the food service segment are soft pretzels, frozen juice treats and desserts, churros, dough enrobed handheld products and baked goods.  Our customers in the food service segment include snack bars and food stands in chain, department and discount stores; malls and shopping centers; fast food outlets; stadiums and sports arenas; leisure and theme parks; convenience stores; movie theatres; warehouse club stores; schools, colleges and other institutions.  Within the food service industry, our products are purchased by the consumer primarily for consumption at the point-of-sale.

Retail Supermarkets

The primary products sold to the retail supermarket industrychannel are soft pretzel products —– including SUPERPRETZEL, frozen juice treats and desserts including LUIGI’S Real Italian Ice, MINUTE MAID Juice Bars and Soft Frozen Lemonade, WHOLE FRUIT frozen fruit bars WHOLE FRUIT Sorbet, BARQ’S FLOATZ and sorbet, ICEE Squeeze-Up Tubes, anddough enrobed handheld products including PATIO burritos, TIO PEPE’S Churros.Churros and CALIFORNIA CHURROS.  Within the retail supermarket industry,channel, our frozen and prepackaged products are purchased by the consumer for consumption at home.


The Restaurant Group

We sell direct to the consumer through our Restaurant Group, which operates BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET, our chain of specialty snack food retail outlets.

Frozen Beverages

We sell frozen beverages to the food service industry including our restaurant group, primarily under the names ICEE, SLUSH PUPPIE, PARROT ICE and ARCTIC BLAST in the United States, Mexico and Canada.  We also provide repair and maintenance service to customers for customers’ owned equipment.


The Chief Operating Decision Maker for Food Service and Retail Supermarkets and The Restaurant Group and the Chief Operating Decision Maker for Frozen Beverages monthly review and evaluatedetailed operating income statements and sales reports in order to assess performance and allocate resources to each individual segment.  Sales is considered to be the one and only key variable monitored by the Chief Operating Decision Makers and management when determining each segment’s and the company’s financial condition and operating performance.  In addition, the Chief Operating Decision Makers review and evaluate depreciation, capital spending and assets of each segment on a quarterly basis to monitor cash flow and asset needs of each segment.  Information regarding the operations in these fourthree reportable segments is as follows:

     Fiscal year ended
   
     September 26,
2009
   September 27,
2008
   September 29,
2007
     (in thousands)   
Sales to external customers:
                                          
Food Service           $417,753       $400,194       $355,764  
Retail Supermarket             65,158         57,112         52,131  
The Restaurant Group             1,257         1,635         2,766  
Frozen Beverages             168,879         170,418         158,240  
            $653,047       $629,359       $568,901  
Depreciation and Amortization:
                                          
Food Service           $16,530       $16,655       $16,176  
Retail Supermarket             —          —          —   
The Restaurant Group             33          54          60   
Frozen Beverages             11,190         10,761         10,772  
            $27,753       $27,470       $27,008  

F-23
F-25


Table of Contents

J & J SNACK FOODS CORP. AND SUBSIDIARIES
SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE O —- SEGMENT REPORTING (Continued)
  Fiscal year ended 
  September 24,  September 25,  September 26, 
  2011  2010  2009 
     (in thousands)    
Sales to External Customers:         
Food Service         
Soft pretzels $103,943  $100,694  $99,471 
Frozen juices and ices  49,740   47,273   50,272 
Churros  41,583   31,732   29,404 
Handhelds  8,865   -   - 
Bakery  241,288   234,032   229,371 
Other  18,143   24,075   10,492 
  $463,562  $437,806  $419,010 
             
Retail Supermarket            
Soft pretzels $32,044  $30,463  $30,506 
Frozen juices and ices  51,940   48,288   37,819 
Handhelds  9,424   -   - 
Coupon redemption  (3,857)  (3,399)  (3,753)
Other  1,548   767   586 
  $91,099  $76,119  $65,158 
             
Frozen Beverages            
Beverages $133,372  $128,125  $112,983 
Repair and maintenance service
  42,608   40,410   42,013 
Machines sales  11,362   11,964   11,729 
Other  2,068   2,279   2,154 
  $189,410  $182,778  $168,879 
             
Consolidated Sales $744,071  $696,703  $653,047 
             
Depreciation and Amortization:            
Food Service $16,994  $17,252  $16,563 
Retail Supermarket  -   -   - 
Frozen Beverages  13,240   12,600   11,190 
  $30,234  $29,852  $27,753 
             
Operating Income:            
Food Service $46,171  $50,220  $44,960 
Retail Supermarket  11,830   11,281   7,442 
Frozen Beverages  18,582   15,661   14,536 
  $76,583  $77,162  $66,938 
             
Capital Expenditures:            
Food Service $14,905  $18,392  $14,979 
Retail Supermarket  -   -   - 
Frozen Beverages  14,219   15,139   12,211 
  $29,124  $33,531  $27,190 
             
Assets:            
Food Service $405,927  $341,285  $307,814 
Retail Supermarket  3,579   2,731   2,731 
Frozen Beverages  141,310   139,978   129,282 
  $550,816  $483,994  $439,827 
F-26
J & J SNACK FOODS CORP. AND SUBSIDIARES

     Fiscal year ended
   
     September 26,
2009
   September 27,
2008
   September 29,
2007
     (in thousands)   
Operating Income (Loss):
                                          
Food Service           $45,024       $24,784       $33,417  
Retail Supermarket             7,442         4,665         (2)  
The Restaurant Group             (64)         (140)         31   
Frozen Beverages             14,536         14,027         15,134  
 ��          $66,938       $43,336       $48,580  
Capital Expenditures:
                                          
Food Service           $14,979       $11,898       $12,755  
Retail Supermarket             —          —          —   
The Restaurant Group             —          —          102   
Frozen Beverages             12,211         10,883         9,908  
            $27,190       $22,781       $22,765  
Assets:
                                          
Food Service           $309,988       $277,481       $252,843  
Retail Supermarket             —          —          —   
The Restaurant Group             557          629          690   
Frozen Beverages             129,282         130,298         126,755  
            $439,827       $408,408       $380,288  
 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE P —- QUARTERLY FINANCIAL DATA (UNAUDITED)

             
  Fiscal Year Ended September 24, 2011 
           Net Earnings 
           Per 
     Gross  Net  Diluted 
  Net Sales  Profit  Earnings  Share(1) 
  (in thousands, except per share information) 
             
1st Quarter $155,632  $46,101  $7,094  $0.38 
2nd Quarter  162,731   49,022   8,659   0.46 
3rd Quarter  206,328   67,541   23,326   1.24 
4th Quarter  219,380   67,110   15,984   0.85 
Total $744,071  $229,774  $55,063  $2.93 
  Fiscal Year Ended September 25, 2010 
              Net Earnings 
              Per 
      Gross  Net  Diluted 
  Net Sales  Profit  Earnings  Share(1) 
  (in thousands, except per share information) 
                 
1st Quarter $149,102  $46,019  $7,091  $0.38 
2nd Quarter  157,361   49,797   9,000   0.48 
3rd Quarter  189,729   65,031   15,861   0.85 
4th Quarter  200,511   66,933   16,457   0.88 
Total $696,703  $227,780  $48,409  $2.59 

     Fiscal Year Ended September 26, 2009
   
     Net
Sales
   Gross
Profit
   Net
Earnings
   Net Earnings
Per Diluted
Share (1)
     (in thousands, except per share information)   
1st Quarter
           $141,142       $40,682       $4,319       $.23   
2nd Quarter
             149,352         45,377         7,244         .39   
3rd Quarter
             179,761         61,034         14,929         .80   
4th Quarter
             182,792         61,751         14,820         .79   
Total           $653,047       $208,844       $41,312       $2.21  
 

     Fiscal Year Ended September 27, 2008
   
     Net
Sales
   Gross
Profit
   Net
Earnings
   Net Earnings
Per Diluted
Share (1)
     (in thousands, except per share information)   
1st Quarter
           $130,898       $35,387       $1,897       $.10   
2nd Quarter
             144,229         40,400         3,998         .21   
3rd Quarter
             176,839         55,752         10,820         .57   
4th Quarter
             177,393         55,368         11,193         .59   
Total           $629,359       $186,907       $27,908       $1.47  
 

(1)Total of quarterly amounts do not necessarily agree to the annual report amounts due to separate quarterly calculations of weighted average shares outstanding

F-24

J & J SNACK FOODS CORP. AND SUBSIDIARIES
SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE Q — SUBSEQUENT EVENT

Subsequent events through December 8, 2009 have been evaluated for disclosure and recognition. We have no subsequent events to disclose.

F-25


Table of Contents

SCHEDULE II —- VALUATION AND QUALIFYING ACCOUNTS

Year
     Description
   Opening
Balance
   Charged to
Expense
   Deductions
   Closing
Balance
2009         Allowance for doubtful account     $926,000       $492,000       $795,000 (1)       $623,000  
2008         Allowance for doubtful accounts     $1,052,000       $502,000       $628,000 (1)       $926,000  
2007         Allowance for doubtful accounts     $963,000       $189,000       $100,000 (1)       $1,052,000  
2009         Inventory Reserve     $3,817,000       $2,036,000       $1,644,000 (2)       $4,209,000  
2008         Inventory Reserve     $2,864,000       $3,149,000       $2,196,000 (2)       $3,817,000  
2007         Inventory Reserve     $2,330,000       $1,911,000       $1,377,000 (2)       $2,864,000  
 

    Opening  Charged to      Closing 
Year Description Balance  Expense  Deductions   Balance 
                
2011 Allowance for doubtful accounts $591,000  $423,000  $361,000(1) $653,000 
                    
2010 Allowance for doubtful accounts $623,000  $493,000  $525,000(1) $591,000 
                    
2009 Allowance for doubtful accounts $926,000  $492,000  $795,000(1) $623,000 
                    
2011 Inventory Reserve $4,189,000  $1,931,000  $1,505,000(2) $4,615,000 
                    
2010 Inventory Reserve $4,209,000  $1,509,000  $1,529,000(2) $4,189,000 
                    
2009 Inventory Reserve $3,817,000  $2,036,000  $1,644,000(2) $4,209,000 
                    
(1) Write-off of uncollectible accounts receivable.              
(2) Disposals of obsolete inventory.                 
S-1

(1)Write-off of uncollectible accounts receivable.

(2)Disposals of obsolete inventory.

S-1