UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(XFORM 10-K
)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[X]  
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 25, 2010

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

FOR THE FISCAL YEAR ENDED SEPTEMBER 28, 2013

(   ) 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)

22-1935537

(I.R.S. Employer Identification No.)

6000 Central Highway

08109

Pennsauken, New Jersey

 (Zip Code)

(Address of principal executive offices)

08109
(Zip Code)


Registrant’s

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

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class

Name 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 [  ]  X    No [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 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 

Yes [  ]            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’sRegistrant'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  [  ](X)     

Accelerated filer  [X](  )

Non-accelerated filer  [  ]

Smaller reporting company [  ]
(  )     

(Do not check if a smaller reporting company)

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 [  ]Yes___    No [X]

  X  

As of November 26, 2010,15, 2013, the latest practicable date, 18,511,53718,678,012 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 $634,133,219$1,142,800,154 based on the last sale price on March 26, 201029, 2013 of $44.32$76.89 per share. March 26, 201029, 2013 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 9, 201118, 2014 are incorporated by reference into Part III of this report.


J & J SNACK FOODS CORP.
2010

2013 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

Page

PART I

Item 1

PART I

Business1

 

Item 1A1   

Business

Risk Factors6

 1

 

Item 1B1A    

Risk Factors

Unresolved Staff Comments8

6

 

Item 21B     

Unresolved Staff Comments

Properties

8

 

Item 32     

Properties

Legal Proceedings10

 8

 

Item 43     

Legal Proceedings

Submission Of Matters To A Vote Of Security Holders10

 9

 

Item 4     

Mine Safety Disclosures

9

 
PART II

Item 5

PART II

 

Item 5     

Market For Registrant’s Common Equity, RelatedStockholder Matters And Issuer Purchases Of EquityOfEquity Securities

11

10

 

Item 6

Selected Financial Data

12

11

 

Item 7

Management’s Discussion And Analysis OfFinancial Condition And Results Of Operations

13

12

 

Item 7A

Quantitative And Qualitative DisclosuresAbout Market Risk

23

22

 

Item 8

Financial Statements And Supplementary Data

23

 22

 

Item 9

Changes In And Disagreements With AccountantsOn Accounting And Financial Disclosure

24

22

 

Item 9A

Controls and Procedures

24

 22

 

Item 9B

Other Information

25

23

 

 

PART III

Item 10

 

Item 10    

Directors, Executive Officers and CorporateGovernance

25

24

 

Item 11

Executive Compensation

25

24

 

Item 12

Security Ownership Of Certain BeneficialOwners And Management And Related Stockholder MattersStockholderMatters

25

 

Item 13     

Certain Relationships And Related Transactions,and Director Independence

25

 
26

Item 14     

Principal Accountant Fees and Service 

25

PART IV

 
Item 13Certain Relationships And Related Transactions, and Director Independence26
Item 14Principal Accountant Fees and Services26
PART IV
Item 15     Exhibits, Financial Statement Schedules26 

 i

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.


PART I

Part I

Item 1.1.     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, WHOLE FRUIT, ICEE BARQ’S* and MINUTE MAID*MAID* brand names.names, churros marketed primarily under the TIO PEPE’S and CALIFORNIA CHURROS brand names and bakery products sold primarily under the READI-BAKE, COUNTRY HOME, MARY B’S AND DADDY RAY’S brand names as well as for private label and contract packing. 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 and bakerydough enrobed handheld 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 specialty snack food retail outlets, BAVARIAN PRETZEL BAKERY. At September 25, 2010, two outlets remained open.

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

The Company has made acquisitions in 2010 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 detailed 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; casual dining restaurants; 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.

*Minute Maid is a registered trademark of the Coca-Cola Company

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

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

1


Retail Supermarkets

The primary products sold to the retail supermarket channel 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, ICEE Squeeze-Up Tubes TIO PEPE’S Churros and CALIFORNIA CHURROS.dough enrobed handheld products including PATIO burritos. Within the retail supermarket channel, our frozen and prepackaged products are purchased by the consumer for consumption at home.

The Restaurant Group

We sell direct to the public through our Restaurant Group, which operates BAVARIAN PRETZEL BAKERY. At September 25, 2010, we had two retail stores.

Frozen Beverages

We sell frozen beverages to the food service industry primarily under the names ICEE, SLUSH PUPPIE and 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*KIM & SCOTT’S GOURMET PRETZELS 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 19%21% of the Company’s revenue in fiscal year 2010, 20%2013, 18% in 2009,2012 and 20%18% in 2008.

2011.

The

Certain of 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 displaycases 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 11% of the Company’s revenue in 2013, 13% of the Company’s revenue in 2012 and 14% of the Company’s revenue in 2010, 13% in fiscal year 2009 and 13% in 2008.

2011.

The Company’s school food service MINUTE MAID and WHOLE FRUIT frozen juice fruit bars and cups are manufactured from an apple or pearand pineapple juice baseconcentrate to which water, sweeteners, coloring (in some cases) and flavorings

*CINNAPRETZEL is a registered trademark of Cinnabon, Inc.

2


are added.  The juice bars and cups contain twothree to threefour ounces of apple or pearpineapple juice and 100% of the minimum daily requirementUS FDA value of vitamin C, and qualify as reimbursable items under the USDA school lunch program.C.  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 containcontains pieces of fruit.


Churros

The Company’s churros are sold primarily under the LA CHURROS, TIO PEPE’S and CALIFORNIA CHURROS brand names. Churros are sold to the Food Service and Retail Supermarkets segments. Churro sales were 5%7% of the Company’s sales in fiscal year 2010, 5%2013, 6% of the Company’s sales in 2009the fiscal year 2012 and 4%6% in 2008.fiscal year 2011. 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 6% of the Company’s sales in 2013, 6% in 2012 and 2% 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 COOKIEJANA’S brand names, and under private labels. Bakery products include primarily biscuits, fig and fruit bars, cookies, breads, rolls, crumb, muffins and donuts. Bakery products are sold to the Food Service segment. Bakery products sales amounted to 34%32% of the Company’s sales in fiscal year 2010, 35%2013, 32% in 2009fiscal year 2012 and 35%32% in 2008.

2011.

Frozen Beverages

The Company markets frozen beverages primarily under theunderthe names ICEE, SLUSH PUPPIE and 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 18%15% of revenue in fiscal 2010, 17%year 2013, 16% in 20092012 and 18% in 2008.

2011.

Under the Company’s principal marketing program for frozen carbonated beverages, it installs frozen beverage dispensers for its ICEE and ARCTIC BLAST brandsbrand 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 repair and maintenance service to customers for customers’ owned equipment and sells equipment in its Frozen Beverages segment, revenue from which amounted to 8% of sales in 2010, 8%2013 and 7% of sales in 20092012 and 9% of the Company’s sales in2011 fiscal year 2008.years. The Company sells frozen uncarbonated beverages under the SLUSH PUPPIE and 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 75,00093,000 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)ninestates) as well as internationally.

3


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 channels: food service and retail supermarkets. The primary products sold to the food service channel 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 channel are soft pretzels, and frozen 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. At September 25, 2010, we had two retail stores.

dough enrobed handheld products.

We have several large customers that account for a significant portion of our sales. Our top ten customers accounted for 42%43%, 43%41% and 42%43% of our sales during fiscal years 2010, 20092013, 2012 and 2008,2011, respectively, with our largest customer accounting for 8% of our sales in 2010, 9%2013, 8% of our sales in 20092012 and 9%8% in 2008.2011. 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 and the Frozen Beverages segments sell primarily to food service channels. The Retail Supermarkets segment sells to the retail supermarket 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, casual dining restaurants, 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, 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 200100 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

4



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 130141 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.


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, 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, JANA’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.andCanada. 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

5



regional frozen regionalfrozen beverage competitors throughout the country and one large retail chain which uses its own frozen beverage brand.

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.


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 $14,301,000, $11,658,000$23,161,000, $19,491,000 and $11,078,000$18,025,000 in fiscal years 2010, 20092013, 2012 and 2008,2011, respectively. At September 25, 2010,28, 2013, the total assets of our foreign operations were approximately $10.4$24 million or 2%3.7% of total assets.

At September 29, 2012, the total assets of our foreign operations were approximately $16.3 million or 2.7% of total assets.

Employees

The Company has approximately 2,700about 3,400 full and part time employees as of September 25, 2010. Certain28, 2013.  About 900 production and distribution employees atthroughout the Pennsauken and Bridgeport, New Jersey plantsCompany are covered by a collective bargaining agreement which expires in September 2013.

agreements.

The production employees at our Atlanta, Georgia plant are covered by a collective bargaining agreement which expires in January 2011.

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

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.

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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 localandlocal 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 areis subject to various federal, state and local laws and regulations relating to the protection of the environment. Such 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 42%43%, 43%41% and 42%43% of our sales during fiscal years 2010, 20092013, 2012 and 2008,2011, respectively, with our largest customer accounting for 8% of our sales in 2010, 9%2013, 8% of our sales in 20092012 and 9%8% in 2008.2011. 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.

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 JofJ & 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

7



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 DirectorsremoveDirectors for cause;


—--

limitations on share holdings and voting of certain persons;certainpersons;


—--

special Director voting rights; and


—--

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


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%20% 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 may 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 $14,301,000, $11,658,000,$23,161,000, $19,491,000 and $11,078,000$18,025,000 in fiscal years 2010, 20092013, 2012 and 2008,2011, respectively. At September 25, 2010,28, 2013, the total assets of our foreign operations were approximately $10.4$24 million or 2%3.7% of total assets.

At September 29, 2012, the total assets of our foreign operations were approximately $16.3 million or 2.7% 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

We have no unresolved SEC staff comments to report.

Item  2.2.      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%50% of capacity. The

8



Company owns a 128,000 square foot building adjacent to itsthis manufacturing facility in Pennsauken, New Jersey. The Company has constructedwhich contains a large freezer within this facility for warehousing and distribution purposes. The warehouse has a utilization rate of 80–90%80-90% depending on product demand. The Company also leases, through January 2022, 52,00016,000 square feet of office and warehouse space located next to the Pennsauken, New Jersey plant.
plant and owns a 43,000 square foot office and warehouse building in the same complex.

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.churros. The facility operates at about 85%65% of capacity.

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.purposes. The facility is leased through November 2030. The Company leases an additional 80,000 square feet of office and warehouse space, adjacent to its manufacturing facility, through November 2030. The manufacturing facility operates at approximately 45% of capacity.

The Company leases through June 2015 a 45,000 square foot churros manufacturing facility located in Colton, California which operates at approximately 70%60% 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 40% of capacity.

The Company leases an 85,000 square foot bakery manufacturing facility located in Atlanta, Georgia. The lease runs through December 2020. The facility operates at about 50%55% 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 65% of capacity.

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

The Company leases a 19,20048,000 square foot soft pretzel manufacturing facility located in Carrollton, Texas. The lease runs through April 2016.2019. The facility operates at approximately 60% offull capacity. 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 2010 with options to extend the term.2016. The facility operates at approximately 45%30% of capacity.

The Company’s fresh bakery products manufacturing facility and offices are located in Bridgeport, New Jersey inJerseyin three buildings totaling 133,000 square feet. The buildings are leased through December 2015. The manufacturing facility operates at approximately 45%55% of capacity.

The Company owns a 65,000165,000 square foot fig and fruit bar manufacturing facility located on 9-1/2 acres in Moscow Mills (St. Louis), Missouri. The facility operates at about 80%55% of capacity.

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 2013.2017. 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 40% of capacity.

The Company leases a 70,000 square foot handheld products manufacturing facility in Weston, Oregon, which operates at about 45% of capacity. The facility is leased through May 13, 2021.

The Company also leases approximately 136141 warehouse and distribution facilities in 44 states, Mexico and Canada.

9


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       Mine Safety Disclosures

Not Applicable


PART II

Item 5.Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Matters To A Vote Of Security HoldersEquity

Securities

There were no matters submitted to a vote of the security holders during the quarter ended September 25, 2010.

10


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 26, 200929, 2012 and September 25, 2010.
28, 2013.

Common Stock Market Price

     High
   Low
   Dividend
Declared
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   
 
Fiscal 2010
                                       
First quarter           $44.00       $35.19       $.1075   
Second quarter             44.90         36.80         .1075   
Third quarter             48.51         42.56         .1075   
Fourth quarter             45.22         37.00         .1075   
 

                   Common Stock Market Price      
  

High

  

Low

  

Dividend

Declared

 
             

Fiscal 2012

            

First quarter

 $54.53  $45.12  $0.1300 

Second quarter

  54.17   46.73   0.1300 

Third quarter

  58.15   48.57   0.1300 

Fourth quarter

  59.80   51.91   0.1300 
             

Fiscal 2013

            

First quarter

 $65.60  $55.96  $0.1600 

Second quarter

  77.33   61.52   0.1600 

Third quarter

  80.85   72.80   0.1600 

Fourth quarter

  84.48   74.63   0.1600 

As of November 26, 2010, there were about 7,700October 23, 2013, we had 7,550 beneficial shareholders.

In our fiscal year ended September 25, 2010,28, 2013, we purchased and retired 203,507204,397 shares of our common stock at a cost of $7,768,000 under a million share buyback authorization approved by the Company’s Board of Directors in February 2008. 49,804$14,500,215. In our first quarter, we purchased and retired 48,255 shares were purchased in the fourth quarter of 2010 at a cost of $1,874,000. There remains 210,772$2,762,622. In our third quarter, we purchased and retired 58,840 shares that can beat a cost of $4,435,078. In our fourth quarter, we purchased under the existing authorization.

and retired 97,302 shares at a cost of $7,302,515.

In our fiscal year ended September 26, 2009,29, 2012, we purchased and retired 450,597142,038 shares of our common stock at a cost of $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.

$8,167,125.

In our 2008 fiscal year ended September 27, 2008,24, 2011, we purchaseddid not purchase and retired 135,124retire any shares of our common stock at a coststock.

On November 8, 2012 the Company’s Board of $3,539,000.

directors authorized the purchase and retirement of an additional 500,000 shares of the Company’s common stock; 343,858 shares remain to be purchased under that authorization.  

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

11


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 2008, 20092011, 2012 and 2010.

2013.

   Fiscal year ended in September  
   

(In thousands except per share data)

 
                     
  

2013

  

2012

  

2011

  

2010

  

2009

 
                     

Net Sales

 $867,683  $830,796  $744,071  $696,703  $653,047 

Net Earnings

 $64,381  $54,118  $55,063  $48,409  $41,312 

Total Assets

 $645,661  $603,044  $550,816  $483,994  $439,827 

Long-Term Debt

 $-  $-  $-  $-  $- 

Capital Lease Obligations

 $347  $687  $801  $863  $381 

Stockholders' Equity

 $516,565  $475,487  $432,388  $380,575  $342,844 

Common Share Data

                    

Earnings Per Diluted Share

 $3.41  $2.86  $2.93  $2.59  $2.21 

Earnings Per Basic Share

 $3.43  $2.87  $2.95  $2.61  $2.23 

Book Value Per Share

 $27.66  $25.32  $23.09  $20.58  $18.51 

Common Shares Outstanding At Year End

  18,677   18,780   18,727   18,491   18,526 

Cash Dividends Declared Per Common Share

 $0.64  $0.52  $0.47  $0.43  $0.39 

     Fiscal year ended in September
(In thousands except per share data)
   
     2010
   2009
   2008
   2007
   2006
Net Sales           $696,703       $653,047       $629,359       $568,901       $514,831  
Net Earnings           $48,409       $41,312       $27,908       $32,112       $29,450  
Total Assets           $483,994       $439,827       $408,408       $380,288       $340,808  
Long-Term Debt           $—        $—        $—        $—        $—   
Capital Lease Obligations           $863        $381        $474        $565        $—   
Stockholders’ Equity           $380,575       $342,844       $316,778       $295,582       $263,656  
Common Share Data                                                                  
Earnings Per Diluted Share           $2.59       $2.21       $1.47       $1.69       $1.57  
Earnings Per Basic Share           $2.61       $2.23       $1.49       $1.72       $1.60  
Book Value Per Share           $20.58       $18.51       $16.90       $15.80       $14.28  
Common Shares Outstanding At Year End             18,491         18,526         18,748         18,702         18,468  
Cash Dividends Declared Per Common Share           $.43        $.39        $.37        $.34        $.30   
 

12


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 and intangible 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 customers. Repair and maintenance equipment service revenue is recorded when it is performed provided the customer terms are that the customer is to be charged on a time and material basis or on a straight-line basis over the term of the 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 estimable 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 these estimates requires judgment. We feel that due to constant monitoring of the process, including but not 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 $13 million and $14$10 million at September 25, 201028, 2013 and $12 million at September 26, 2009,29, 2012, 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

13



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 1015 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.


Accounts receivable due from any of our customers is subject to risk. Our total bad debt expense was $493,000, $492,000$276,000 and $502,000$423,000 for the fiscal years 2010, 20092012 and 2008,2011, respectively. We had a credit to expense of $70,000 in fiscal year 2013. At September 25, 201028, 2013 and September 26, 2009,29, 2012, our accounts receivables were $68,183,000$87,545,000 and $59,734,000,$76,414,000 net of an allowance for doubtful accounts of $591,000$854,000 and $623,000.$987,000.

Asset Impairment —– We have three reporting units with goodwill totaling $70,070,000$76,899,000 as of September 25, 2010.28, 2013. Goodwill is evaluated annually by the Company for impairment. We utilize historicalperform impairment tests for our reporting unitunits, which is also the operating segment level, with recorded goodwill utilizing primarily the discounted cash flows (defined as reporting unit operating income plus depreciation and amortization) as a proxy for expected future reporting unit cash flowsflow method. This methodology used to evaluateestimate the fair value of thesethe total Company and its reporting units. If theunits requires inputs and assumptions (i.e. revenue growth, operating profit margins, capital spending requirements and discount rates) that reflect current market conditions. The estimated fair value estimated substantially exceedsof each reporting unit is compared to the carrying value of the reporting unit. If the carrying value of the reporting unit includingexceeds its fair value, the goodwill of the reporting unit is potentially impaired, and the Company then determines the implied fair value of goodwill, which is compared to the carrying value of goodwill to determine if any, associatedimpairment exists.  Our tests at September 28, 2013 show that the fair value of each of our reporting units with that unit, we do not recognize any impairment loss. We generally do not engage a third partygoodwill exceeded its carrying value. Therefore no further analysis was required.  The inputs and assumptions used 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 performance of the reporting units could differ from management’s estimates due to assistchanges in this analysis as we believe that our in-house expertise is adequate to perform the analysis.business conditions, operating performance, economic conditions, competition and consumer preferences. 

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 theofthe 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 1,2001,400 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 25, 201028, 2013 and September 26, 200929, 2012 was $1,106,000$1,516,000 and $1,157,000,$1,332,000, 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 20102013 and 20092012 was $2,200,000$3,200,000 and $2,300,000,$1,800,000, respectively. Our total recorded liability for all years’ claims incurred but not yet paid was $7,300,000$8,500,000 and $7,100,000$6,200,000 at September 25, 201028, 2013 and September 26, 2009,29, 2012, 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 by a loss

14



development factor which is based on insurance industry averages and the age of the incurred claims; our estimated liability is then the differencethedifference 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 25, 201028, 2013 and September 26, 2009,29, 2012, we had outstanding letters of credit totaling $8,175,000 and $8,675,000, respectively.
$8,175,000.


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

RESULTS OF OPERATIONS

Fiscal 20102013 (52 weeks) Compared to Fiscal 2009 (522012 (53 weeks)

Net sales increased $43,656,000,$36,887,000, or 7%4%, to $696,703,000$867,683,000 in fiscal 20102013 from $653,047,000$830,796,000 in fiscal 2009.

2012. Excluding sales from the extra week in 2012, sales increased approximately 6 1/2% from 2012 to 2013.

Excluding sales from the acquisition of Parrot Ice in February 2010 and California ChurrosKim & Scott’s Gourmet Pretzels in June 2010,2012 in the twelve months post acquisition and the extra week in 2012, sales increased approximately 6% for the year.

Approximately $12.7 million, or 29%, 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 detailed 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

FOOD SERVICE

Sales to food service customers increased $19,206,000,$39,497,000 or 5%8%, to $436,959,000$560,759,000 in fiscal 2010.2013. Excluding sales from the extra week in 2012, sales increased approximately 10% from 2012 to 2013. Excluding Kim & Scott’s sales in the twelve months post acquisition of California Churros, food serviceand the extra week in 2012, sales would have increased 4%approximately 9% for the year. Sales of funnel cake fries to one customer accounted for over 66% of the food service sales increase. Soft pretzel sales to the food service market increased 1%23% to $100,694,000$145,026,000 for the year aided by increased sales to restaurant chains, warehouse club stores and throughout our customer base. Increased sales to two customers accounted for approximately 1/3 of the pretzel sales increase. Excluding Kim & Scott’s sales, food service soft pretzel sales increased 20% for the year. Frozen juice bar and ices sales decreased $2,999,000,$4,982,000 or 6%9%, to $47,273,000$48,831,000 for the year primarily as the result of lower sales to one contract packing customerwarehouse club stores due we believe to weather and to school food service accounts.accounts due to changes in USDA school food programs. We believe the impact of the changes in the USDA school food programs on our frozen juice and ices sales has bottomed out. Churro sales to food service customers increased 8%22% to $31,732,000$56,099,000 in 2010. Without2013 with sales from California Churros, churroto one restaurant chain accounting for all of the sales for the year would have been down about 1/2 of one percent.increase. Sales of bakery products excluding biscuit and dumpling sales and fruit and fig bar sales, increased $5,606,000,$8,591,000, or 3%, for the year due primarily to increasedas sales increases and decreases were spread throughout our customer base. Handheld sales to private label customers. Biscuit and dumpling sales increased 1%food service customers were down 5% to $33,326,000. Sales$26,488,000 in 2013 as two customers accounted for all of fig 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 product sales increased by $14,083,000 to $22,804,000 primarily due to sales to one customer.the decrease in sales. Sales of new products in the first twelve months since their

15



introduction were approximately $29$11.2 million in fiscalfor the year. Price increases accounted for approximately $11.6 million of sales for the year 2010. Netand net volume increases, including new product sales as defined above and sales resulting from the acquisition of California Churros,Kim & Scott’s, accounted for all but approximately $1,500,000$27.9 million of the sales increases this year. Price increases accounted for the remaining $1,500,000.year. Operating income in our Food Service segment increased from $45,024,000$49,770,000 in 20092012 to $50,255,000$65,907,000 in 2010 primarily as a result of2013. Operating income benefited from increased sales volume, as discussed aboveprice increases and lower ingredientsingredient and packaging costs of aboutapproximately $2 million.
Operating income was impacted by a product write down of $500,000 and by a $2.1 million increase in liability insurance expense from last year. The increase in insurance expense is due to an increase in claims and estimates for claims incurred but not yet paid.

Retail Supermarkets

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $10,961,000decreased $7,529,000 or 17%7% to $76,119,000$102,339,000 in fiscal year 2010.2013. Excluding sales from the extra week in 2012, sales decreased approximately 5% from 2012 to 2013. Excluding Kim & Scott’s sales in the twelve months post acquisition and the extra week in 2012, sales decreased approximately 5% for the year. Soft pretzel sales to retail supermarkets were $30,463,000$34,597,000 compared to $30,506,000$33,842,000 in 20092012 on a unit volume decreaseincrease of less than 1%2%. This makes the third consecutive year of flat or modestly up or down unit sales. Sales of frozen juices and ices increased $10,469,000decreased $5,596,000 or 28%10% to $48,288,000$48,077,000 on a unit volume increasedecrease of 24%about 9%. Reduced trade spendingFrozen juices and ices sales were impacted by cold weather throughout the second half of $1.5 million for the introduction of new frozen novelty items and a shift in product mix increased sales dollars in relation to the overall unit volume increases.year. Coupon redemption costs, a reduction of sales, decreased 9%increased 14% or about $354,000$459,000 for the year. Handheld sales to retail supermarket customers decreased 8% to $22,528,000 in 2013 as two customers accounted for all of the decrease in sales. Sales of products in the first twelve months since their introduction were approximately $4.2$1.4 million in fiscal year 2010. Net2013. Price increases accounted for approximately $2.9 million of sales for the year and net volume increases,decreases, including new product sales as defined above and Kim & Scott’s sales and net of decreasedincreased coupon costs, and reduced trade spendingsales by approximately $10.4 million for new product introductions, accounted for virtually all of the sales increases in 2010.year. Operating income in our Retail Supermarkets segment increaseddecreased from $7,442,000$13,316,000 in 20092012 to $11,281,000$8,594,000 in 2010 primarily as a result2013 with 84% of volume increasesthe decrease, or $3,982,000, coming in the fourth quarter. The fourth quarter was impacted by sharply lower sales of frozen juices and reducedices, which were down 26%, and by increased trade spending forneeded to generate those sales. We believe that the introductionimpact of newcold weather on frozen novelty items.

novelties’ sales was widespread among manufacturers.

The Restaurant Group

Sales of our Restaurant Group decreased 33% to $847,000 primarily due to the closing of stores in fiscal years 2009 and 2010 and by lower sales in general. Sales of our two stores open for both years were down about 7% from last year. Operating loss in our Restaurant Group segment decreased from $64,000 in 2009 to $35,000 in 2010.
FROZEN BEVERAGES

Frozen Beverages

Frozen beverage and related product sales increased 8%2% to $182,778,000$204,585,000 in fiscal 2010.2013. Excluding sales from the acquisition of Parrot Ice,extra week in 2012, sales would have increased 7% for the year.approximately 4% from 2012 to 2013. Beverage sales alone increased 13%decreased 2% to $128,125,000$132,274,000 for the year with increased sales to two new customersincreases and one existingdecreases throughout our customer sales from Parrot Ice and a 26% increase in sales in Mexico accounting for over 80% of the increase.base. Gallon sales were up 10%down 4% in our base ICEE business with sales to three customers accounting for almost all of the increase.business. Service revenue decreased 4%increased 8% to $40,410,000$52,813,000 for the year with declinesincreases and decreases 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$13,136,000 in 20092012 to $11,964,000$17,376,000 in 2010.2013. The estimated number of Company owned frozen beverage dispensers was 38,60044,700 and 35,70042,500 at September 25, 201028, 2013 and September 26, 2009,29, 2012, respectively. Operating income in our Frozen Beverage segment increased from $14,536,000$21,881,000 in 20092012 to $15,661,000$22,903,000 in 20102013 as a result of increased volumeservice revenue and machine sales as discussed above. Higher gasoline costs of approximately $867,000 impacted the year’s operating income.
above and controlled expenses.

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 percentage of sales increased to 32.69%30.35% in 20102013 from 31.98%30.11% in 2009. Lower2012 primarily due to higher volume in our food service segment, and the margin also benefitted by lower ingredient and packaging costs of about $2.3 million. Gross profit was impacted by about $2.1 million of increased liability insurance expense compared to last year and a product write down of approximately $2.2 million, the benefit of higher volumes leveraging our fixed manufacturing costs and reduced trade spending for$500,000 related to a new product introductions in our Retail Supermarket segment were primarily responsible for the increased gross profit percentage.that was not successful. 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 flour and other commodities over the past six months which we

forward.

16



anticipate will result in higher costs over some portions of our fiscal year 2011. The impact of these higher costs and increased costs in operational areas may result in lower net earnings in 2011 than in 2010.

Total operating expenses increased $8,712,000$680,000 to $150,618,000$165,898,000 in fiscal 2010 and2013 but as a percentage of sales decreased .11 of a.77 percentage point and remained at 22%points to 19% of sales. Marketing expenses decreased .29.65 percentage points to 10%and remained at 9% of sales.sales as a result of higher sales and lower expenses of which about $800,000 resulted from a management and sales meeting held in 2012 which did not reoccur in 2013. Distribution expenses decreased .13 percentage points to 7%as a percent of sales.sales were 7.49% in both years. Administrative expenses were about 3-1/2%3.16% and 3.15% of sales in both years.2013 and 2012, respectively. Other general expenseincome of $2,087,000$651,000 this year compared to other general expense of $458,000 in 2012. Included in other general income in 2013 is $805,000 of $5,000 in 2009.settlement income related to prior acquisitions. Included in other general expense this yearin 2012 is $1.6 million for an unclaimed property assessment and $577,000$404,000 of acquisition costs.
costs and costs of relocating Kim & Scott’s operations.

Operating income increased $10,224,000$12,437,000 or 15% to $77,162,000$97,404,000 in fiscal year 20102013 as a result of the aforementioned items.


Investment income decreasedincreased by $272,000$2,100,000 to $1,114,000$3,492,000 due to the general declineincreased investments in marketable securities. We invested $80 million in the levelfirst quarter and $30 million in the third quarter in mutual funds that seek current income with an emphasis on maintaining low volatility and overall moderate duration. We estimate the annual yield from these funds to approximate 3.5 – 3.75%. US Government Agency debt of interest rates.$23.0 million held at September 29, 2012 which was yielding 2.0% was called in the year ended September 28, 2013.

The effective income tax rate decreased 1.42 percentage points to 38%36% from 39%37% last year. About 2/3 ofyear because actual liability for last year’s taxes was less than estimated and the estimate for this decrease was from the reduction of $750,000 of unrecognized tax benefits.

year’s taxes has been lowered accordingly.

Net earnings increased $7,097,000,$10,263,000 or 17%19%, in fiscal 20102013 to $48,409,000,$64,381,000, or $2.59$3.41 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.

RESULTS OF OPERATIONS

Fiscal 2009 (522012  (53  weeks)  Compared to Fiscal 20082011  (52  weeks)

Net sales increased $23,688,000,$86,725,000, or 4%12%, to $653,047,000$830,796,000 in fiscal 20092012 from $629,359,000$744,071,000 in fiscal 2008.

2011. Excluding sales from the extra week in 2012, sales increased approximately 10% from 2011 to 2012.

Excluding sales from the acquisitions of the frozen handheld business of ConAgra Foods in May 2011 and Kim & Scott’s Gourmet Pretzels in June 2012 in the twelve months post acquisitions and the extra week in 2012, sales increased approximately 5% 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 detailed 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

FOOD SERVICE

Sales to food service customers increased $17,559,000,$57,700,000 or 4%12%, to $417,753,000$521,262,000 in fiscal 2009.2012. Excluding sales from the extra week in 2012, sales increased approximately 10% from 2011 to 2012. Excluding handhelds and Kim & Scott’s sales in the twelve months post acquisitions and the extra week in 2012, sales increased approximately 6% for the year. Soft pretzel sales to the food service market decreased $313,000, or about 1/3 of one percent,increased 14% to $99,471,000 for the year. Unit sales of soft pretzels were down 3%$118,014,000 for the year which is a continuation of a multi-year trend of flat or modestly up or down sales. Sales of bakery products excluding biscuitaided by increased sales to restaurant chains, warehouse club stores and dumpling sales and fruit and fig bar sales, increased $6,607,000, or 4%, for the year. Biscuit and dumpling sales were up 8% to $32,845,000 due to increased distribution and new product offerings. Sales of fig and fruit bars increased 11% to $29,497,000 due to strong volume growth spread acrossthroughout 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 coming fromIncreased sales to one customer who previously had not been a purchaseraccounted for approximately 25% of churros.the pretzel sales increase. Excluding Kim & Scott’s sales, food service soft pretzel sales increased 12% for the year. Frozen juice bar and ices sales decreased $934,000increased $4,073,000 or 2%8%, to $50,272,000$53,813,000 for the year. Ouryear primarily as the result of higher sales of frozen juice barto warehouse club stores and ices to school food service have been impacted and we expect them to continue to be impacted by nutritional concerns. Sales ofthroughout our funnel cake products were up $2,872,000, or 49%, withcustomer base. Increased sales to one customer who previously had not been a purchaseraccounted for about 85% of funnel cake productsthe frozen juices and ices sales increase. Churro sales to food service customers increased 11% to $45,974,000 in 2012 with sales increasing generally throughout our customer base, with sales to international customers accounting for about one-half1/3 of the increase

17



sales increase. Sales of bakery products increased $24,904,000, or 10%, for the year as sales were spread throughout our customer base. Handheld sales to food service customers were $27,818,000 in 2012. Funnel cake and sales ofrelated funnel cake fries, a product introduced in the fourth quarter of fiscal 2008,sales decreased by $8,564,000 to $8,033,000 with lower sales to three customers accounting for all of the balance.decrease. Sales of new products in the first twelve months since their introduction were approximately $12,600,000 in fiscal year 2009.$15.2 million for the year. Price increases accounted for estimatedapproximately $16.1 million of sales of $13,700,000 in fiscalfor the year 2009 and net volume increases, including new product sales as defined above and sales resulting from the acquisitions of Kim & Scott’s and the handheld business, accounted for approximately $3,900,000$41.6 million of sales in fiscal 2009.for the year. Operating Incomeincome in our Food Service segment increased from $24,784,000$46,171,000 in 20082011 to $45,024,000$49,770,000 in 20092012 primarily as a result of increased sales volume and price increases which offset higher ingredient and increased volume as discussed abovepackaging cost increases of about $9 million and lower commodity coststhe negative impact of approximately $10,000,000.
the sharp decline in funnel cake sales.

Retail Supermarkets

RETAIL SUPERMARKETS

Sales of products to retail supermarkets increased $8,046,000$18,769,000 or 14%21% to $65,158,000$109,868,000 in fiscal 2009. Total softyear 2012. Excluding sales from the extra week in 2012, sales increased approximately 18% from 2011 to 2012. Excluding handheld sales and Kim & Scott’s sales in the twelve months post acquisitions and the extra week in 2012, sales increased approximately 2% for the year. Soft pretzel sales to retail supermarkets were $30,506,000, an increase of 11% from fiscal 2008,$33,842,000 compared to $32,044,000 in 2011 on a unit volume decreaseincrease of 2%. Sales of frozen juice barsjuices and ices increased 19%$1,733,000 or 3% to $37,819,000 in 2009$53,673,000 on a case volume increase of 25%. 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.flat volume. Coupon redemption costs, a reduction of sales, increased 38%decreased 16% or about $1,029,000$635,000 for the year as we increased couponingyear. Handheld sales to retail supermarket customers were $24,358,000 in light of a trend toward increased use of coupons by shoppers.2012. Sales of products in the first twelve months since their introduction were approximately $6,300,000$7.0 million in fiscal year 2009.2012. Price increases accounted for estimatedapproximately $3.7 million of sales of $2,400,000 in fiscalfor the year 2009 and net volume increases, including new product sales as defined above and handheld sales and Kim & Scott’s sales and net of increaseddecreased coupon costs, accounted for approximately $5,600,000$15.0 million of sales in fiscal 2009.for the year. Operating Incomeincome in our Retail Supermarkets segment increased from $4,665,000$11,830,000 in 20082011 to $7,442,000$13,316,000 in 2009 primarily as a result of price and volume increases.

The Restaurant Group

Sales of our Restaurant Group, which operates BAVARIAN PRETZEL BAKERY and PRETZEL GOURMET retail stores in the Mid-Atlantic region, declined by 23%2012 primarily due to closings or licensings of stores in the past year. At September 26, 2009, we had 4 stores open. Sales of stores open for both years were down 7% for the year. Operating Loss in our Restaurant Group segment decreased from $140,000 in 2008 to $64,000 in 2009 primarily resulting from a decline in store closing costs.
operating income generated by handheld sales and lower coupon expense.

Frozen Beverages

FROZEN BEVERAGES

Frozen beverage and related product sales decreased $1,539,000 or 1%increased 5% to $168,879,000$199,666,000 in fiscal 2009.2012. Excluding sales from the extra week in 2012, sales increased approximately 4% from 2011 to 2012. Beverage sales alone were down 1%increased 2% to $135,436,000 for the year. Gallonyear with increases and decreases throughout our customer base. Domestic gallon sales were down 2% for the yearflat in our base ICEE business which is a continuation of a multi-year trend.business. Service revenue increased $3,210,000, or 8%,15% to $42,013,000$49,115,000 for the year as we continue to grow this part ofwith increases and decreases spread across our business to new and existing customers.customer base. Sales of beverage machines, which tend to fluctuate from year to year while following no specific trend, decreased $3,065,000increased from $11,362,000 in 2011 to $11,729,000 for the year.$13,136,000 in 2012. The estimated number of companyCompany owned frozen beverage dispensers was 35,70042,500 and 33,40040,800 at September 26, 200929, 2012 and September 27, 2008,24, 2011, respectively. Operating Incomeincome in our Frozen BeveragesBeverage segment increased from $14,027,000$18,582,000 in 20082011 to $14,536,000$21,881,000 in 2009.

2012 as a result of increased sales as discussed above and controlled expenses. Higher gasoline costs of approximately $900,000 impacted the 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 increased 2.28 percentage pointsdecreased to 30.11% in 20092012 from 200830.88% in 2011. Higher ingredient and packaging costs compared to 32%.

Lower commodity costs in excesslast year of $11,000,000, higher pricingapproximately $10 million and increased efficiencies due to volume in some of our product lines partially offset by higher workers’ compensation and group health benefit expense were the primary drivers causing thelower gross profit margin of handheld sales were primarily responsible for the decreased gross profit percentage. Without this handhelds impact, gross profit as a percentage increase. We presently expect commodity costs to be lower on a year to year comparison basis overof sales would have been roughly the next several quarters; however, commoditysame for 2011 and 2012. Ingredient and packaging costs can be extremely volatile and may be significantly different from what we are presently expecting. Asexpecting and therefore we are self incurred for mostcannot 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 flour and packaging as well as other lesser used ingredients over the past six months which we anticipate will result in higher costs over some portions of our workers compensation costs and group health benefit costs, they may go up or down without notice.
fiscal year 2013.

18


Total operating expenses decreased $1,665,000increased $12,027,000 to $141,906,000$165,218,000 in fiscal 2009 and2012 but as a percentage of sales decreased 1.08.70 percentage points to 22%20% of sales in 2009. Other general income was $5,000 this year. Other general income of $375,000 last year primarily consisted 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.sales. Marketing expenses decreased .45.30 percentage points and remained at 11%9% of sales. Controlled spending in our Food Service and Frozen Beverages segments accounted for the overall decline. Distribution expenses decreased .75.23 percentage points to 7% of a percentage point and remained at 8% of sales due to lower freight and fuel costs.sales. Administrative expenses decreased .15 percentage points and were about 3-1/2%3% of sales in both years.
The drops in percentages were generally because of increased sales. Other general expense of $458,000 this year compared to other general expense of $524,000 in 2011. Included in other general expense in 2012 is $404,000 of acquisition costs and costs of relocating Kim & Scott’s operations. Included in other general expense in 2011 is $546,000 of acquisition costs.

Operating income for the year was impacted by approximately $800,000 of costs of a management and sales meeting held in October 2011, which has historically been held every five years.

Operating income increased $23,602,000,$8,384,000 or 54%,11% to $66,938,000$84,967,000 in fiscal 2009year 2012 as a result of the aforementioned items.


Gain on the bargain purchase of a business of $6,580,000 in 2011 resulted from the fair value of the identifiable assets acquired in the handhelds acquisition exceeding the purchase price.

Investment income decreasedincreased by $1,279,000$351,000 to $1,386,000$1,392,000 due to the general declineincreased investments in the level of interest rates.marketable securities.

The effective income tax rate increased 2.78 percentage points to 37% from 35% last year. Adjusting out the effect of the gain on bargain purchase of a business, the effective tax rate in 2011 was 39% in both fiscal years.

37%.

Net earnings increased $13,404,000,decreased $945,000 or 48%2%, in fiscal 20092012 to $41,312,000,$54,118,000, or $2.21$2.86 per diluted share as a result of the aforementioned items.

Without the benefit of the gain on bargain purchase of a business in 2011, net earnings were $48,483,000 in 2011 compared to $54,118,000 this 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.

ACQUISITIONS

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 predominantly 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.

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

19



manufacturing facility in Colton, CA, California Churros had sales of approximately $2.5 million in our 2010 fiscal year.

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.

In June 2012, we acquired the assets of Kim & Scott’s Gourmet Pretzels, Inc., a manufacturer and seller of a premium brand soft pretzel. This business had sales of approximately $8 million over the prior twelve months to food service and retail supermarket customers, and had sales of approximately $1.8 million in our 2012 fiscal year from the acquisition date.

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 a decreasean increase of $577,000$571,000 in accumulated other comprehensive loss in 20102013, a decrease of $782,000 in accumulated other comprehensive loss in 2012 and an increase of $1,428,000$1,060,000 in 2009 and a decrease of $3,000 in 2008.2011. In 2010,2013, sales of the two subsidiaries were $14,301,000$23,161,000 as compared to $11,658,000$19,491,000 in 20092012 and $11,078,000$18,025,000 in 2008.

2011.

In our fiscal year ended September 25, 2010,28, 2013, we purchased and retired 203,507204,397 shares of our common stock at a cost of $7,768,000 under a million share buyback authorization approved by the Company’s Board of Directors in February 2008. 49,804$14,500,215. In our first quarter, we purchased and retired 48,255 shares were purchased in the fourth quarter of 2010 at a cost of $1,874,000. There remains 210,772$2,762,622. In our third quarter, we purchased and retired 58,840 shares that can beat a cost of $4,435,078. In our fourth quarter, we purchased under the existing authorization.

and retired 97,302 shares at a cost of $7,302,515.

In our fiscal year ended September 26, 2009,29, 2012, we purchased and retired 450,597142,038 shares of our common stock at a cost of $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.

$8,167,125.

In our 2008 fiscal year ended September 27, 2008,24, 2011, we purchaseddid not purchase and retired 135,124retire any shares of our common stock at a cost of $3,539,000.

stock.


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 facility at September 25, 2010 and28, 2013 or at September 26, 2009.29, 2012. 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 $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.

.

Tangible net worth must initially be more than $294million.

.

Total funded indebtedness divided by earnings beforeinterest expense, income taxes, depreciation andamortization shall not be greater than 2.25 to 1. 

We were in compliance with the financial covenants described above at September 25, 2010.

28, 2013.

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 20102013 and 20092012 was $2,200,000$3,200,000 and $2,300,000,$1,800,000, respectively. In connection with certain self-insurance agreements, we customarily enter into letters of credit arrangements with our insurers. At each of September 25, 201028, 2013 and September 26, 2009,29, 2012, we had outstanding letters of credit totaling $8,175,000 and $8,675,000, respectively.

$8,175,000.

20


The following table presents our contractual cash flow commitments on long-term debt, operating leases 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             863          244          491          128          —   
Purchase commitments             44,000         44,000         —          —          —   
Operating leases             52,272         8,913         12,892         8,134         22,333  
Total           $97,135       $53,157       $13,383       $8,262       $22,333  
 

  Payments Due by Period 
  (in thousands) 
  

Total

  

Less

Than

1 Year

  

1-3

Years

  

4-5

Years

  

After

5 Years

 
                     

Long-term debt, includingcurrent maturities

 $-  $-  $-  $-  $- 

Capital lease obligations

  347   211   100   36   - 

Purchase commitments

  40,000   40,000   -   -   - 

Operating leases

  45,420   8,556   13,365   7,877   15,622 

Total

 $85,767  $48,767  $13,465  $7,913  $15,622 

The purchase commitments do not exceed our projected requirements over the related terms and are in the normal course of business.

Fiscal 20102013 Compared to Fiscal 20092012

Cash and cash equivalents and marketable securities held to maturity decreased $2,544,000,and available for sale increased $26,855,000, or 2%15%, to $116,446,000$207,265,000 from a year ago.

ago for reasons described below.

Trade

Accounts receivables, net increased $8,449,000,$11,131,000, or 14%15%, to $68,183,000$87,545,000 in 20102013. On a days’ outstanding basis, the balance a year ago was at an unusually low level; the increase this year is partly due primarily to increased sales levels in our fourth quarter.a bounceback and partly due to the composition of the receivables. Inventories increased $4,626,000$2,024,000 or 10%3% to $50,630,000$71,785,000 in 20102013 primarily due to increased sales levels and an increase in equipment parts needed to support our frozen beverage business.

higher unit costs of inventory.

Prepaid expenses and other increased to $6,067,000$3,284,000 from $1,910,000$2,220,000 last year because of estimated federal income tax payments made prior to the enactment of the law extending bonus depreciation.

requirements for prepayments by various vendors.

Net property, plant and equipment increased $12,919,000$5,620,000 to $110,092,000$147,164,000 because purchases of fixed assetsproperty, plant and equipment for the improvement and expansion of our manufacturing capabilities and frozen carbonated beverage business exceeded depreciation on existing assets,assets. Included in purchases of property, plant and becauseequipment in 2013 is approximately $5.4 million for equipment additions at our manufacturing facility in Moscow Mills, MO which essentially completes the multi-year expansion of that facility.


Goodwill remained the addition of $3,508,000 in fixed 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.

same at $76,899,000.

Other intangible assets, less accumulated amortization decreased $4,452,000 to $44,012,000 due entirely to amortization expense of $4,452,000.

Marketable securities available for sale and held to maturity increased $6,159,000by $83,708,000 to $55,284,000$109,920,000 as we invested $110 million into mutual funds designed to generate current income while maintaining a low volatility and overall moderate duration.

Accrued insurance liability increased $2,130,000 due to intangible assets of $10,846,000 acquiredincreases in acquisitions net of amortization of $4,687,000.

insurance company estimates for incurred but not yet paid claims under our insurance liability programs for prior years and higher claims levels during 2013.

Goodwill increased $9,756,000 to $70,070,000 from September 26, 2009 to September 25, 2010 as a result of the acquisition of California Churros.

Accounts payable and accrued liabilities increased $2,484,000 due to increased levels of business.

Accrued compensation expense increased 5%4% to $12,244,000$13,671,000 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 $3,368,000$309,000 to $30,401,000$45,183,000 which related primarily to amortization of goodwill and other intangible assets and depreciation of property, plant and equipment.

assets.

Other long-term liabilities at September 25, 201028, 2013 include $1,249,000$438,000 of gross unrecognized tax benefits which decreased from $1,895,000$541,000 a year ago due to reductions for tax positions of prior years.

Common stock decreased $3,324,000$8,495,000 to $38,453,000$34,516,000 in 20102013 because repurchases of our common stock of $14,500,000 exceeded increases totalling $4,444,000totaling $6,005,000 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 $7,768,000 by $3,324,000.

expense.

Net cash provided by operating activities decreased $12,625,000$2,877,000 to $68,008,000$86,548,000 in 20102013 primarily because of increasesan increase of accounts receivables in 2013 of $11,148,000 compared to an increase of $605,000 in 2012 and an increase in accounts receivable, inventoriespayable and prepaid expenses and otheraccrued liabilities of $8,629,000, $4,422,000 and

21


$4,101,000, respectively,$578,000 in 2013 compared to decreasesan increase of $5,248,000 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 partially2012 which more than offset by higherincreased net earnings of $7,097,000$10,263,000 and higher depreciation and amortization of fixed assets of $1,835,000.other positive factors.

Net cash used in investing activities decreased $6,370,000increased $111,519,000 to $41,455,000$120,837,000 in 20102013 from $47,825,000$9,318,000 in 20092012 primarily because of increased proceeds from marketable securities, net of purchases, which netted $16,866,000 compared to net purchases of marketable securities of $20,976,000$85,934,000 in 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 20102013 compared to 2009.

net proceeds from marketable securities of $41,294,000 in 2012.

Net cash used in financing activities of $12,609,000$22,360,000 in 20102013 compared to net cash used by financing activities of $15,740,000$13,800,000 in 2009.2012. The decreaseincrease was caused primarily by increased payments of $6,333,000 to repurchase common stock and increased dividend payments of $1,919,000.

In 2013, 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, increase in accounts receivable, purchases of property, plant and equipment, 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 proceeds from borrowings and payments of long-term debt and purchases of companies. 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 decreasesignificant acquisition. Purchases of $4,742,000property, 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 we have no long-term debt at September 28, 2013, we may borrow in the future depending on our needs.


Fiscal 2012 Compared to Fiscal 2011

Cash and cash equivalents and marketable securities held to maturity increased $25,425,000, or 16%, to $180,410,000 from a year ago for reasons described below.

Accounts receivables, net increased $1,414,000, or 2%, to $76,414,000 in 2012 due to increased sales levels in our fourth quarter which was offset by improved collections. Inventories increased $6,300,000 or 10% to $69,761,000 in 2012 due to higher unit costs of inventory and increased inventory requirements due to increased sales.

Prepaid expenses and other decreased to $2,220,000 from $4,196,000 last year because of higher estimated federal income tax payments made in 2011 prior to the enactment of the law extending bonus depreciation which resulted in prepaid income taxes of $1,814,000 at September 2011.

Net property, plant and equipment increased $16,894,000 to $141,544,000 because purchases of property, plant and equipment for the improvement and expansion of our manufacturing capabilities and frozen carbonated beverage business exceeded depreciation on existing assets, and because of the addition of $724,000 in fixed assets acquired in the Kim & Scott’s acquisition. Included in purchases of property, plant and equipment in 2012 is approximately $6.5 million for a building addition at our manufacturing facility in Moscow Mills, MO and $7.5 million for pretzel lines added at our facilities in Bellmawr, NJ and Carrollton, TX.

Goodwill increased to $76,899,000 because of $6,829,000 acquired in the Kim & Scott’s acquisition.

Other intangible assets, less accumulated amortization decreased $3,541,000 to $48,464,000 due to intangible assets of $436,000 acquired in the Kim & Scott’s acquisition and a separate purchase of a $500,000 intangible asset, net of amortization expense of $4,477,000.

Accounts payable and accrued liabilities increased $5,057,000 due to increased levels of business and higher purchase costs of ingredients and packaging, and because of an accrued liability of $962,000 for income taxes that existed on September 2012 compared to none at September 2011.

Accrued compensation expense increased 2% to $13,151,000 due to an increase in our employee base and a general increase in the level of pay rates.

Deferred income tax liabilities increased by $3,824,000 to $44,874,000 which related primarily to amortization of goodwill and other intangible assets and depreciation of property, plant and equipment.

Other long-term liabilities at September 29, 2012 include $825,000 of gross unrecognized tax benefits which decreased from $973,000 a year ago due to reductions for tax positions of prior years.

Common stock decreased $2,006,000 to $43,011,000 in 2012 because repurchases of our common stock of $8,167,000 exceeded increases totaling $6,161,000 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.

Net cash provided by operating activities increased $8,969,000 to $89,425,000 in 2012 primarily because of an increase of accounts receivable of $605,000 in 2012 compared to an increase of $5,231,000 in 2011 and an increase in deferred income taxes of $3,108,000 in 2012 compared to an increase of $6,108,000 in 2011. Additionally, net earnings in 2011 included a gain on bargain purchase of a business of $6,580,000 which did not contribute to cash provided by operating activities.

Net cash used in investing activities decreased $54,587,000 to $9,318,000 in 2012 from $63,905,000 in 2011 primarily because net proceeds from redemption and sales of marketable securities of $41,294,000 in 2012 compared to net purchases of marketable securities of $25,725,000 in 2011. This change of $67,019,000 was partially offset by higher spending of $13,676,000 on purchases of property, plant and equipment.

Net cash used in financing activities of $13,800,000 in 2012 compared to net cash used by financing activities of $3,407,000 in 2011. The increase was caused primarily by $8,167,000 of payments to repurchase common stock.

stock and increased dividend payments of $1,009,000.


In 2010,2012, 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 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 ourwe have no long-term debt is $0 at September 25, 2010,29, 2012, we may borrow in the future depending on our needs.

Fiscal 2009 Compared to Fiscal 2008

Cash and cash equivalents and marketable securities held to maturity net of a decline in auction market preferred stock increased $37,055,000, or 45%, to $118,990,000 from a year ago primarily because 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, or 2%, to $59,734,000 in 2009 due primarily to better management of receivables. Inventories decreased $3,091,000 or 6% to $46,004,000 in 2009 due to lower unit costs of inventories, improved management and timing.

Net property, plant and equipment increased $4,109,000 to $97,173,000 because purchases of fixed assets for the improvement and expansion of our manufacturing capabilities and frozen carbonated beverage business exceeded depreciation on existing assets.

Other intangible assets, less accumulated amortization decreased $4,508,000 to $49,125,000 due completely to amortization.

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

Accounts payable and accrued liabilities decreased $14,000.

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

Deferred income tax liabilities increased by $3,977,000 to $27,033,000 which related primarily to amortization of goodwill and other intangible assets and depreciation of property, plant and equipment.

Other long-term liabilities at September 26, 2009 include $1,895,000 of gross unrecognized tax benefits.

22


Common stock decreased $6,638,000 to $41,777,000 in 2009 because increases totalling $4,923,000 from the exercise of incentive and nonqualified stock options, stock issued under our stock purchase plan for employees and share-based compensation expense were less than the repurchase of common stock of $12,510,000 by $6,638,000.

Net cash provided by operating activities increased $25,736,000 to $80,633,000 in 2009 primarily because of the increase to net earnings of $13,404,000 and decreases in accounts receivable, inventories and prepaid expenses totalling $4,174,000 compared to increases in those assets totalling $7,686,000 last year.

Net cash used in investing activities increased $28,971,000 to $47,825,000 in 2009 from $18,854,000 in 2008 primarily because of increased purchases of marketable securities, net of proceeds.

Net cash used in financing activities of $15,740,000 in 2009 compared to net cash used by financing activities of $7,600,000 in 2008. The increase was caused primarily by an increase of $8,971,000 in payments to repurchase common stock.

In 2009, 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 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, we may borrow in the future depending on our needs.

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 25, 2010,28, 2013, the Company had no interest rate swap contracts.

Interest Rate Risk

At September 25, 2010,28, 2013, the Company had no long-term debt obligations.

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. Future 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 25, 201028, 2013, because it does not believe its foreign exchange exposure is significant.

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.

23


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

None.

None.

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 25, 2010.28, 2013. 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 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;

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.

●

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

●  Provide reasonable assurance that transactions arerecorded 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 25, 2010.28, 2013. 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.

Framework (1992).

Based on our assessment, our management believes that, as of September 25, 2010,28, 2013, 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.

24


Our independent registered public accounting firm, Grant Thornton LLP, audited our internal control over financial reporting as of September 25, 2010.28, 2013.  Their report, dated December 7, 2010,November 26, 2013, expressed an unqualified opinion on our internal control over financial reporting.  That report appears in Item 15 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 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 “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 9, 201118, 2014 (“20102013 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 20102013 Proxy Statement filed with the Securities and Exchange Commission in connection with the Annual Meeting of Shareholders to be held on February 9, 2011,18, 2014 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 officers.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. 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 websitewww.jjsnack.com for a period of 12 months.

Item 11.Executive Compensation

Information concerning executive compensation appearing in the Company’s 20102013 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 9, 201118, 2014 or until their successors are duly elected.

Name
Age
Position
Gerald B. Shreiber   

 Gerald B. Shreiber     

69

 71

Chairman of the Board,President, Chief Executive OfficerExecutiveOfficer and Director

Dennis G. Moore   

 Dennis G. Moore   

55

 57

Senior Vice President, ChiefFinancial Officer, Secretary,Treasurer and Director

Robert M. Radano   

 Robert M. Radano  

61

 64

Senior Vice President,Sales and Chief Operating OfficerOperatingOfficer

Dan Fachner   

 Dan Fachner    

50

 53

President of The ICEE CompanySubsidiary

Gerard G. Law   

 Gerard G. Law   

36

 39

Senior Vice President Western OperationsandAssistant to the President

Robert J. Pape   

 Robert J. Pape 

53

 56

Senior Vice President Sales and Marketing

 

25


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 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.

2017.

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.

Gerard G. Law joined the Company in 1992.  He served in various manufacturing and sales management capacities prior to becoming 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 in 1998. He served in various sales and sales management capacities prior to becoming Senior Vice President Sales and Marketing in 2010.

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

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

Information concerning the security ownership of certain beneficial owners and management appearing in the Company’s 20102013 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management” is incorporated herein by reference.

The following table details information regarding the Company’s existing equity compensation plans as of September 25, 2010.

28, 2013.

     (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		             672,000       $28.22         1,207,000  
Equity compensation plans not approved
by security holders		             —          —          —   
Total             672,000       $28.22         1,207,000  
 

 
  

( a )

  

( b )

  

( c )

 

Plan Category

 

Number of

securities to

be issued upon

exercise of

outstanding

options,

warrants and

rights

  

Weighted-

average

exercise

price of

outstandng

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 approvedby security holders

  499,023  $48.46   1,161,000 
             

Equity compensation plans notapproved by security holders

  -   -   - 
             

Total

  499,023  $48.46   1,161,000 

Item 13.Certain Relationships And Related Transactions, andDirector Independence

Information concerning the Certain Relationships and Related Transactions, and Director Independence in the Company’s 20102013 Proxy Statement is incorporated herein by reference.

Item 14.Principal Accounting Fees And Services

Information concerning the Principal Accountant Fees and Services in the Company’s 20102013 Proxy Statement is incorporated herein by reference.


PART IV

Item 15.Exhibits, Financial Statement Schedules

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

(1)Financial Statements

26


   (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

(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.

   (b)        Exhibits

(b)

3.1

Exhibits

3.1

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


3.2 
3.2**

Revised Bylaws adopted May 17,November 19, 2013.

4.3

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


4.3

4.4

Amended

First Amendment and Modification to Amendment 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 (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006)7, 2011).


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

10.2* 10.2*

J & J Snack Foods Corp. Stock Option Plan (IncorporatedPlan(Incorporated by reference from the Company’s Definitive Proxy Statement dated December 19, 2002)21, 2011).


10.3* Adoption Agreement for MFS Retirement Services, Inc. Non-Standardized 401(K) Profit Sharing Plan and Trust, effective September 1, 2004 (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006).

10.4* J & J Snack Foods Corp. Directors’ and Consultants’ Deferred Compensation Plan adopted November 21, 2005 (Incorporated by reference from the Company’s Form 10-K dated December 6, 2006).

10.7

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 21,  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).


10.11 
10.11

Amendment No. 1 to Lease dated August 29, 1995 between1995between 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 18, 2002).


10.14 
10.14

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


10.15** 
10.15

Amendment No. 2 to Lease dated August 29, 1995 between1995between 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 6, 2010).


10.16** 
10.16

Amendment to Lease dated January 1, 1996 between Country Home Bakers, LLC and Borck Associates Limited Partnership for the lease of the Atlanta, GA facility.facility (Incorporated by reference from the Company's Form 10-k dated December 6, 2011).


14.1

14.1

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


21.1** 
21.1**

Subsidiaries of J & J Snack Foods Corp.


27


23.1** 
23.1**

Consent of Independent Registered Public Accounting Firm.


31.1** 
31.1**

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


31.2** 
31.2**

Certification Pursuant to Section 302 of the Sarbanes-OxleytheSarbanes-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.


 * Compensatory Plan
101***

The following financial information from J&J Snack Foods Corp.'s Form 10-K for the year ended September 28, 2013, formatted in XBRL (eXtensible Business Reporting Language):

(i)

Consolidated Balance Sheets,

(ii)

Consolidated Statements of Earnings,

(iii)

Consolidated Statements of Comprehensive Income,     

(iv) Filed Herewith

Consolidated Statements of Cash  Flows,          

(v)

Consolidated Statement of Changes in Stockholders' Equity and

(vi)

The Notes to the Consolidated Financial Statements


_____________

*Compensatory Plan

**Filed Herewith

28


SIGNATURES

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 7, 2010

November 26, 2013

By

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 7, 2010

November 26, 2013

/s/ Gerald B. Shreiber

Gerald B. Shreiber,

Chairman of the Board,

President, Chief Executive

Officer and Director

(Principal Executive Officer)

November 26, 2013

/s/ Dennis G. Moore

Dennis G. Moore, Senior Vice

President, Chief Financial

Officer and Director

(Principal Financial Officer)

(Principal Accounting Officer)

    

November 26, 2013

/s/ Sidney R. Brown

  Gerald B. Shreiber,
Chairman of the Board,
President, Chief Executive
Officer and

Sidney R. Brown, Director
(Principal Executive Officer)

December 7, 2010

 
/s/ Dennis G. Moore
    
November 26, 2013/s/ Peter G. Stanley
  Dennis

Peter G. Moore, Senior Vice
President, Chief Financial
Officer andStanley, Director
(Principal Financial Officer)
(Principal Accounting Officer)

December 7, 2010

 
/s/ Sidney R. Brown
    
November 26, 2013 Sidney R. Brown, Director
December 7, 2010/s/ Vincent A. Melchiorre 
/s/ Peter G. Stanley
  

Vincent A. Melchiorre, Director

 Peter G. Stanley, Director
December 7, 2010
/s/ Leonard M. Lodish
Leonard M. Lodish, Director

29


J & J SNACK FOODS CORP.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULE

Financial

Financial Statements:

  

Report of Independent Registered Public Accounting FirmAccountingFirm   

F-2

 F-2 

Consolidated Balance Sheets as of September 25, 2010 and28, 2013and September 26, 200929, 2012  

F-3

 F-3 

Consolidated Statements of Earnings for the fiscal yearsended September 28, 2013, September 29, 2012 andSeptember 24, 2011

F-4

Consolidated Statements of Comprehensive Incomefor the fiscal years ended September 25, 2010, 28, 2013,September 26, 200929, 2012 and September 27, 200824, 2011   

F-5

 F-4 

Consolidated Statement of Changes in Stockholders’ EquityEquityfor the fiscal years ended September 28, 2013,September 29, 2012 and September 24, 2011 

F-6

Consolidated Statements of Cash Flows for the fiscal years ended September 25, 2010,28, 2013, September 26, 200929, 2012 and September 27, 200824, 2011   

F-7

 F-5 
Consolidated Statements of Cash Flows for fiscal years ended September 25, 2010, September 26, 2009 and September 27, 2008F-6

Notes to Consolidated Financial Statements

F-7

F-8

Financial Statement Schedule:
  

Financial Statement Schedule:

Schedule II —– Valuation and Qualifying Accounts

S-1


F-1


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 25, 201028, 2013 and September 26, 2009,29, 2012, and the related consolidated statements of earnings, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three fiscal years in the period ended September 25, 201028, 2013 (52 weeks, 5253 weeks, and 52 weeks, respectively).  Our audits of the basic consolidated financial statements included the consolidated financial statement schedule, listed in the index appearing under Item 15. We have also audited J & J&J Snack Foods Corp. and Subsidiaries’ internal control over financial reporting as of September 25, 2010,28, 2013, based on criteria established inInternal Control-Integrated Framework (1992), 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, 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 consolidated 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 25, 201028, 2013 and September 26, 2009,29, 2012, and the consolidated results of itstheir operations and itstheir consolidated cash flows for each of the three fiscal years in the period ended September 25, 201028, 2013 (52 weeks, 5253 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 consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. In our opinion, J & J&J Snack Foods Corp. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of September 25, 2010,28, 2013, based on criteria established inInternal Control-Integrated Framework (1992) issued by COSO.

/s/  Grant Thornton  LLP

Philadelphia,  Pennsylvania

December 7, 2010
November  26,  2013

F-2


J & J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

     September 25,
2010
   September 26,
2009
     (in thousands, except share amounts)   
Assets
                            
Current Assets
                            
Cash and cash equivalents           $74,665       $60,343  
Marketable securities held to maturity             15,481         38,653  
Receivables
                              
Trade, less allowances of $591 and $623, respectively             68,183         59,734  
Other             1,692         808   
Inventories             50,630         46,004  
Prepaid expenses and other             6,067         1,910  
Deferred income taxes             3,813         3,659  
Total current assets             220,531         211,111  
 
Property, Plant and Equipment, at cost             414,403         383,156  
Less accumulated depreciation and amortization             304,311         285,983  
              110,092         97,173  
 
Other Assets
                              
Goodwill             70,070         60,314  
Other intangible assets, net             55,284         49,125  
Marketable securities held to maturity             26,300         19,994  
Other             1,717         2,110  
              153,371         131,543  
            $483,994       $439,827  
 
Liabilities and Stockholders’ Equity
                              
Current Liabilities
                              
Current obligations under capital leases           $244        $96   
Accounts payable             52,338         48,204  
Accrued liabilities             4,269         5,919  
Accrued compensation expense             12,244         11,656  
Dividends payable             1,986         1,804  
Total current liabilities             71,081         67,679  
 
Long-term obligations under capital leases             619          285   
Deferred income taxes             30,401         27,033  
Other long-term liabilities             1,318         1,986  
 
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
18,491,000 and 18,526,000 respectively		             38,453         41,777  
Accumulated other comprehensive loss             (2,854)         (3,431)  
Retained earnings             344,976         304,498  
              380,575         342,844  
            $483,994       $439,827  
 

  

September 28,

2013

  

September 29,

2012

 

Assets

        

Current assets

        

Cash and cash equivalents

 $97,345  $154,198 

Marketable securitiesheld to maturity

  256   1,214 

Accounts receivable, net

  87,545   76,414 

Inventories, net

  71,785   69,761 

Prepaid expenses and other

  3,284   2,220 

Deferred income taxes

  4,502   4,261 

Total current assets

  264,717   308,068 
         

Property, plant and equipment, at cost

  510,442   483,873 

Less accumulated depreciationand amortization

  363,278   342,329 
   147,164   141,544 
         

Other assets

        

Goodwill

  76,899   76,899 

Other intangible assets, net

  44,012   48,464 

Marketable securities held to maturity

  2,000   24,998 

Marketable securities available for sale

  107,664   - 

Other

  3,205   3,071 
   233,780   153,432 
  $645,661  $603,044 
         

Liability and Stockholder's Equity

        

Current Liabilities

        

Current obligations under capital leases

 $211  $340 

Accounts payable

  50,906   52,755 

Accrued insurance liability

  9,954   7,824 

Accrued income taxes

  1,740   962 

Accrued liabilities

  3,769   4,027 

Accrued compensation expense

  13,671   13,151 

Dividends payable

  2,988   2,446 

Total current liabilities

  83,239   81,505 
         

Long-term obligations under capital leases

  136   347 

Deferred income taxes

  45,183   44,874 

Other long-term liabilities

  538   831 
         

Stockholders' Equity

        

Preferred stock, $1 par value; authorized10,000,000 shares; none issued

  -   - 

Common stock, no par value; authorized,50,000,000 shares; issued and outstanding18,677,000 and 18,780,000 respectively

  34,516   43,011 

Accumulated other comprehensive loss

  (5,930)  (3,132)

Retained Earnings

  487,979   435,608 
   516,565   475,487 
  $645,661  $603,044 

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 25,
2010
(52 weeks)
   September 26,
2009
(52 weeks)
   September 27,
2008
(52 weeks)
Net Sales           $696,703       $653,047       $629,359  
Cost of goods sold(1)             468,923         444,203         442,452  
Gross profit             227,780         208,844         186,907  
Operating expenses
                                          
Marketing(2)             72,103         69,493         69,792  
Distribution(3)             52,146         49,705         52,609  
Administrative(4)             24,282         22,713         21,545  
Other general expense (income)             2,087         (5)         (375)  
              150,618         141,906         143,571  
Operating income             77,162         66,938         43,336  
 
Other income (expenses)
                                          
Investment income             1,114         1,386         2,665  
Interest expense and other             (179)         (115)         (116)  
              935          1,271         2,549  
 
Earnings before income taxes             78,097         68,209         45,885  
 
Income taxes             29,688         26,897         17,977  
 
NET EARNINGS           $48,409       $41,312       $27,908  
 
Earnings per diluted share           $2.59       $2.21       $1.47  
 
Weighted average number of diluted shares             18,703         18,713         19,008  
 
Earnings per basic share           $2.61       $2.23       $1.49  
 
Weighted average number of basic shares             18,528         18,516         18,770  
 

  Fiscal Year Ended 
          
  

September 28,

2013

(52 weeks)

  

September 29,

2012

(53 weeks)

  

September 24,

2011

(52 weeks)

 
             

Net Sales

 $867,683  $830,796  $744,071 

Cost of goods sold(1)

  604,381   580,611   514,297 

Gross Profit

  263,302   250,185   229,774 
             

Operating expenses

            

Marketing (2)

  74,076   76,318   70,637 

Distribution(3)

  65,025   62,250   57,462 

Administrative(4)

  27,448   26,192   24,568 

Other general (income) expense

  (651)  458   524 
   165,898   165,218   153,191 

Operating Income

  97,404   84,967   76,583 
             

Other income (expenses)

            

Gain on bargain purchaseof a business

  -   -   6,580 

Investment income

  3,492   1,392   1,041 

Interest expense & other

  (106)  (73)  (138)
             

Earnings beforeincome taxes

  100,790   86,286   84,066 
             

Income taxes

  36,409   32,168   29,003 
             

NET EARNINGS

 $64,381  $54,118  $55,063 
             

Earnings per diluted share

 $3.41  $2.86  $2.93 
             

Weighted average numberof diluted shares

  18,878   18,917   18,789 
             

Earnings per basic share

 $3.43  $2.87  $2.95 
             

Weighted average number ofbasic shares

  18,785   18,854   18,672 

(1)

Includes share-based compensation expense of $182$463 for the year ended September 25, 2010, $21128, 2013, $270 for the year ended September 26, 200929, 2012 and $229$157 for the year ended September 27, 2008.24, 2011.


(2)

Includes share-based compensation expense of $448$635 for the year ended September 25, 2010, $72928, 2013, $403 for the year ended September 26, 200929, 2012 and $799$347 for the year ended September 27, 2008.24, 2011.


(3)

Includes share-based compensation expense of $21$30 for the year ended September 25, 2010, $2128, 2013, $27 for the year ended September 26, 200929, 2012 and $23$18 for the year ended September 27, 2008.24, 2011.


(4)

Includes share-based compensation expense of $597$742 for the year ended September 25, 2010, $75528, 2013, $546 for the year ended September 26, 200929, 2012 and $800$396 for the year ended September 27, 2008.24, 2011.


The accompanying notes are an integral part of these statements.


J&J SNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 (in thousands)

  

September 28,

2013

(52 weeks)

  

Sepember 29,

2012

(53 weeks)

  

September 24,

2011

(52 weeks)

 
             

Net Earnings

 $64,381  $54,118  $55,063 
             

Foreign currency translation adjustments

  (571)  782   (1,060)

Unrealized holding loss on marketable securities

  (2,227)  -   - 
             

Total Other Comprehensive (Loss) Income, net of tax

  (2,798)  782   (1,060)
             

Comprehensive Income

 $61,583  $54,900  $54,003 

F-4


J & J Snack Foods Corp. and Subsidiaries
Consolidated StatementSNACK FOODS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

 (in thousands)

  

Common Stock

  

Accumulated

Other

Comprehensive

  

Retained

     
  

Shares

  

Amount

  

Loss

  

Earnings

  

Total

 

Balance at September 25, 2010

  18,491  $38,453  $(2,854) $344,976  $380,575 

Issuance of common stock uponexercise of stock options

  214   4,608   -   -   4,608 

Issuance of common stock foremployee stock purchase plan

  20   769   -   -   769 

Foreign currency translationadjustment

  -   -   (1,060)  -   (1,060)

Issuance of common stock todirectors

  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 
                     

Balance at September 24, 2011

  18,727  $45,017  $(3,914) $391,285  $432,388 

Issuance of common stock uponexercise of stock options

  105   3,332   -   -   3,332 

Issuance of common stock foremployee stock purchase plan

  20   896   -   -   896 

Foreign currency translationadjustment

  -   -   782   -   782 

Issuance of common stock underdeferred stock plan

  70   687   -   -   687 

Dividends declared

  -   -   -   (9,795)  (9,795)

Share-based compensation

  -   1,246   -   -   1,246 

Repurchase of common stock

  (142)  (8,167)  -   -   (8,167)

Net earnings

  -   -   -   54,118   54,118 
                     

Balance at September 29, 2012

  18,780  $43,011  $(3,132) $435,608  $475,487 

Issuance of common stock uponexercise of stock options

  80   2,905   -   -   2,905 

Issuance of common stock foremployee stock purchase plan

  20   1,043   -   -   1,043 

Foreign currency translationadjustment

  -   -   (571)  -   (571)

Unrealized holding loss onmarketable securities

  -   -   (2,227)  -   (2,227)

Issuance of common stock underdeferred stock plan

  1   103   -   -   103 

Dividends declared

  -   -   -   (12,010)  (12,010)

Share-based compensation

  -   1,954   -   -   1,954 

Repurchase of common stock

  (204)  (14,500)  -   -   (14,500)

Net earnings

  -   -   -   64,381   64,381 
                     

Balance at September 28, 2013

  18,677  $34,516  $(5,930) $487,979  $516,565 

The accompanying notes are an integral part of Changes in Stockholders’ Equitythis statement


 J & J SNACK FOODS CORP. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

     Common Stock
   
     Shares
   Amount
   Accumulated
Other
Comprehensive
Loss
   Retained
Earnings
   Total
   Comprehensive
Income
Balance at September 30, 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              
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              
 

  

Fiscal Year Ended

 
    
  

September 28,

2013

(52 weeks)

  

September 29,

2012

(53 weeks)

  

September 24,

2011

(52 weeks)

 
             

Operating activities:

            

Net earnings

 $64,381  $54,118  $55,063 

Adjustments to reconcile net earnings to net cash provided byoperating activities:

            

Depreciation of fixed assets

  28,801   26,175   25,046 

Amortization of intangibles and deferred costs

  4,751   4,762   5,188 

Losses (gains) from disposals and impairment of property & equipment

  126   (146)  52 

Share-based compensation

  1,870   1,246   918 

Gain on bargain purchase of a business

  -   -   (6,580)

Deferred income taxes

  74   3,108   6,108 

Changes in assets and liabilities, net of effects from purchaseof companies:

            

Increase in accounts receivable, net

  (11,148)  (605)  (5,231)

Increase in inventories

  (1,819)  (6,463)  (6,262)

(Increase) decrease in prepaid expenses and other

  (1,067)  1,982   1,870 

Increase in accounts payable and accrued liabilities

  579   5,248   4,284 

Net cash provided by operating activities

  86,548   89,425   80,456 

Investing activities:

            

Payments for purchases of companies, net of cash acquired

  -   (7,900)  (8,806)

Purchases of property, plant and equipment

  (35,821)  (42,800)  (29,124)

Purchases of marketable securities

  (111,241)  (68,450)  (63,293)

Proceeds from redemption and sales of marketable securities

  25,307   109,744   37,568 

Proceeds from disposal of property and equipment

  1,199   1,038   394 

Other

  (281)  (950)  (644)

Net cash used in investing activities

  (120,837)  (9,318)  (63,905)

Financing activities:

            

Payments to repurchase common stock

  (14,500)  (8,167)  - 

Proceeds from issuance of common stock

  3,948   4,228   5,377 

Payments on capitalized lease obligations

  (340)  (312)  (244)

Payment of cash dividend

  (11,468)  (9,549)  (8,540)

Net cash used in financing activities

  (22,360)  (13,800)  (3,407)

Effect of exchange rates on cash and cash equivalents

  (204)  412   (330)

Net (decrease) increase in cash and cash equivalents

  (56,853)  66,719   12,814 

Cash and cash equivalents at beginning of year

  154,198   87,479   74,665 

Cash and cash equivalents at end of year

 $97,345  $154,198  $87,479 

The accompanying notes are an integral part of these statements.


F-5


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

     Fiscal year ended
   
     September 25,
2010
(52 weeks)
   September 26,
2009
(52 weeks)
   September 27,
2008
(52 weeks)
Operating activities:
                                          
Net earnings           $48,409       $41,312       $27,908  
Adjustments to reconcile net earnings to net cash provided by operating activities:
                                          
Depreciation and amortization of fixed assets             24,498         22,663         22,181  
Amortization of intangibles and deferred costs             5,354         5,090         5,289  
Gains from disposals and impairment of property & equipment             (14)         (31)         (174)  
Share-based compensation             1,248         1,716         1,851  
Deferred income taxes             3,219         3,839         3,446  
Changes in assets and liabilities, net of effects from purchase of companies:
                                          
(Increase) decrease in accounts receivable             (8,629)         1,144         (4,701)      
(Increase) decrease in inventories             (4,422)         2,993         (2,448)  
(Increase) decrease in prepaid expenses and other             (4,101)         37          (537)  
Increase in accounts payable and accrued liabilities             2,446         1,870         2,082  
Net cash provided by operating activities             68,008         80,633         54,897  
 
Investing activities:
                                          
Purchases of property, plant and equipment             (33,531)         (27,190)         (22,781)  
Payments for purchases of companies, net of cash acquired             (25,185)         —          —   
Purchase of marketable securities             (50,496)         (66,380)         (2,470)  
Proceeds from redemption and sales of marketable securities             67,362         10,204         —   
Purchase of auction market preferred stock             —          —          (10,500)  
Proceeds from redemption and sales of auction market preferred stock             —          35,200         16,500  
Proceeds from disposal of property and equipment             407    ��     326          932   
Other             (12)         15          (535)  
Net cash used in investing activities             (41,455)         (47,825)         (18,854)  
 
Financing activities:
                                          
Payments to repurchase common stock             (7,768)         (12,510)         (3,539)  
Proceeds from issuance of common stock             3,051         3,971         2,811  
Payments of cash dividend             (7,749)         (7,108)         (6,781)  
Payments on capitalized lease obligations             (143)         (93)         (91)  
Net cash used in financing activities             (12,609)         (15,740)         (7,600)  
Effect of exchange rate on cash and cash equivalents             378          (990)         3   
Net increase in cash and cash equivalents             14,322         16,078         28,446  
Cash and cash equivalents at beginning of year             60,343         44,265         15,819  
Cash and cash equivalents at end of year           $74,665       $60,343       $44,265  
 

The accompanying notes are an integral part of these statements.

F-6


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 customers. Repair and maintenance equipment service revenue is recorded when it is performed provided the customer terms are that the customer is to be charged on a time and material basis or on a straight-line basis over the term of the 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 estimable 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.

Our recorded liability for allowances, end-user pricing adjustments and trade spending was approximately $10 million at September 28, 2013 and $12 million at September 29, 2012.

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 $52,146,000, $49,705,000$65,025,000, $62,250,000 and $52,609,000$57,462,000 for the fiscal years ended 2010, 20092013, 2012 and 2008,2011, respectively.

During the years ended September 25, 2010,28, 2013, September 26, 200929, 2012 and September 27, 2008,24, 2011, we sold $16,185,000, $16,745,000$22,836,000, $20,324,000 and $11,881,000,$18,711,000, respectively, of repair and maintenance service contracts related toin our frozen beverage machines.business. At September 25, 201028, 2013 and September 26, 2009,29, 2012, deferred income on repair and maintenanceandmaintenance service contracts was $1,416,000$1,454,000 and $1,424,000,$1,398,000, respectively, of which $67,000$45,000 and $90,000$6,000 is included in other long-term liabilities as of September 25, 201028, 2013 and September 26, 2009,29, 2012, respectively and the balance is reflected as short-term and included in accrued liabilities on the consolidated balance sheet. Repair and maintenance service contract income of $16,192,000, $16,451,000$22,780,000, $20,309,000 and $11,911,000$18,744,000 was recognized for the fiscal years ended 2010, 20092013, 2012 and 2008,2011, 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.

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 SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE A  —–  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 maintainhave cash balances at two banks totalling approximately $55 million that is in excess of theseFDIC insurance limits. Some of our cash is in bank accounts which are insured by the Federal Deposit Insurance Corporation with no limit.

$250,000 per bank.

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 1015 customers with accounts receivable balances of between $1 million and $7$10 million.

We have several large customers that account for a significant portion of our sales. Our top ten customers accounted for 42%43%, 43%41% and 42%43% of our sales during fiscal years 2010, 20092013, 2012 and 2008,2011, respectively, with our largest customer accounting for 8% of our sales in 2010, 9%2013, 8% of our sales in 20092012 and 9%8% in 2008.2011. 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. At September 28, 2013 and September 29, 2012, our accounts receivables were $87,545,000 and $76,414,000 net of an allowance for doubtful accounts of $854,000 and $987,000. Accounts receivable 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 overheadsoverhead 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 25, 201028, 2013 and September 26, 2009,29, 2012, our reserve for inventory was $4,189,000$4,449,000 and $4,209,000,$3,883,000, 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 in our statement of cash flows because of the failure of the auction market beginning in February 2008. The balance of oursale. Our investment portfolio at September 28, 2013, consists solely of investments classified as held to maturity.maturity and available for sale. The mutual funds in our available for sale portfolio do not have contractual maturities; however, we classify them as long term assets as it is our intent to hold them for a period of over one year, although we may sell some or all of them depending on presently unanticipated needs for liquidity or market conditions. See Note C for further information on our holdings of investment securities.

F-8


J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

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

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.

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.

years and amortization expense is reflected throughout operating expenses.

We use market value tests

Long-lived assets, including fixed assets and discounted cash flow models to test goodwill 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 ofthe 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 25, 201028, 2013 and September 26, 2009,29, 2012, the total amount of gross unrecognized tax benefits is $1,249,000$438,000 and $1,895,000,$541,000, 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 $429,000$224,000 and $742,000$284,000 of accrued interest and penalties as of September 25, 201028, 2013 and September 26, 2009,29, 2012, respectively. We recognized $7,000$11,000, $10,000 and $3,000$8,000 of penalties and interest in the years ended September 25, 201028, 2013, September 29, 2012 and September 26, 2009,24, 2011 respectively.  A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

  

(in thousands)

 
     

Balance at September 29, 2012

 $541 

Additions based on tax positionsrelated to the current year

  42 

Reductions for tax positions of prior years

  (88)

Settlements

  (57)

Balance at September 28, 2013

 $438 


(in thousands)
Balance at September 26, 2009  $1,895
Additions based on tax positions related to the current year158
Reductions for tax positions of prior years(750)  
Settlements(54)  
Balance at September 25, 2010  $1,249

J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE A  –  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- (continued)

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.

F-9


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

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 28, 2013 
  

Income

(Numerator)

  

Shares

(Denominator)

  

Per Share

Amount

 
  

(in thousands, except per share amounts)

 
             

Earnings Per Basic Share

            

Net Income availableto common stockholders

 $64,381   18,785  $3.43 
             

Effect of Dilutive Securities

            

Options

  -   93   (0.02)
             

Earnings Per Diluted Share

            

Net Income available tocommon stockholders plusassumed conversions

 $64,381   18,878  $3.41 

     Fiscal Year Ended September 25, 2010
   
     Income
(Numerator)
   Shares
(Denominator)
   Per Share
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          (.02)  
Earnings Per Diluted Share
                                          
Net Income available to common stockholders plus assumed conversions           $48,409         18,703       $2.59  
 

110,900

No anti-dilutive shares have been excluded in the computation of 2010of2013 diluted EPS because the options’ exercise price is greater than the average market price of the common stock.

EPS.

  Fiscal Year Ended September 29, 2012 
  

Income

(Numerator)

  

Shares

(Denominator)

  

Per Share

Amount

 
  

(in thousands, except per share amounts)

 
             

Earnings Per Basic Share

            

Net Income availableto common stockholders

 $54,118   18,854  $2.87 
             

Effect of Dilutive Securities

            

Options

  -   63   (0.01)
             

Earnings Per Diluted Share

            

Net Income available tocommon stockholders plusassumed conversions

 $54,118   18,917  $2.86 


     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  
 

114,236J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE A  –  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- (continued)

162,142 anti-dilutive shares have been excluded in the computation of 20092012 diluted EPS because the options’options' exercise price is greater than theaverage 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

  Fiscal Year Ended September 24, 2011 
  

Income

(Numerator)

  

Shares

(Denominator)

  

Per Share

Amount

 
  

(in thousands, except per share amounts)

 
             

Earnings Per Basic Share

            

Net Income availableto common stockholders

 $55,063   18,672  $2.95 
             

Effect of Dilutive Securities

            

Options

  -   117   (0.02)
             

Earnings Per Diluted Share

            

Net Income available tocommon stockholders plusassumed conversions

 $55,063   18,789  $2.93 

143,515 anti-dilutive shares have been excluded in the computation of 2008of2011 diluted EPS because the options’options' exercise price is greater than the averagetheaverage market price of the common stock.

F-10


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

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

13.     Accounting for Stock-Based Compensation

At September 25, 2010,28, 2013, the Company has three stock-based employee compensation plans. Share-based compensation was recognized as follows:

 
  

Fiscal year ended

 
  

September 28,

2013

  

September 29,

2012

  

September 24,

2011

 
  

(in thousands, except per share amounts)

 
             

Stock options

 $795  $684  $288 

Stock purchase plan

  363   256   203 

Deferred stock issued to outside directors

  47   -   46 

Restricted stock issued to an employee

  18   1   - 
  $1,223  $941  $537 
             

Per diluted share

 $0.06  $0.05  $0.03 
             

The above compensation is net of tax benefits

 $647  $305  $381 

     Fiscal year ended
   
     September 25,
2010
   September 26,
2009
   September 27,
2008
     (in thousands, except per share amounts)   
Stock options           $592        $508        $1,019  
Stock purchase plan             184          237          137   
Deferred stock issued to outside directors             138          138          138   
Restricted stock issued to an employee             28          87          100   
            $942        $970        $1,394  
 
Per diluted share           $.05       $.05       $.07  
 
The above compensation is net of tax benefits           $306       $746       $457  
 

At September 25, 2010,28, 2013, the Company has unrecognized compensation expense of approximately $960,000$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 2010, 20092013, 2012 and 2008:2011: expected volatility of 29.0%25.7% for fiscal year 2010, 23.3%2013, 28.3% for fiscal year 20092012 and 25.2%28.6% for fiscal year 2008;2011: weighted average risk-free interest rates of 2.21%2.64%, 2.70%.81% and 3.60%1.56%;dividend rate of 1.2%.8%, 1.2%.9% and 1.1%.9% and expected lives ranging betweenrangingbetween 5 and 10 years for all years. An expected forfeiture rate of 20% was used for 2013, 18% was used for 2012 and 13% was used for fiscal year 2010, and 15% was used for 2009 and 2008.

2011.


J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 5052 to 5455 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 $2,751,000, $2,267,000,$3,069,000, $2,571,000 and $1,666,000$1,919,000 for the fiscal years 2010, 20092013, 2012 and 2008,2011, respectively.

15.     Commodity Price Risk Management

Our most significant raw material requirements include flour, packaging, 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 25, 2010,28, 2013, we have approximately $44$40 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.

F-11


J & J SNACK FOODS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16.

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 $866,000, $761,000$478,000, $501,000 and $571,000$941,000 for the fiscal years 2010, 20092013, 2012 and 2008,2011, respectively.

17.     Recent Accounting Pronouncements

In December 2007,June 2011, the FASB issued guidance expandingwhich gives us the definitionoption to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a business combinationsingle 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 requiringa total amount for comprehensive income. This guidance eliminates the fair valueoption to present the components of other comprehensive income as part of the purchase pricestatement 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 adoptedstockholders' equity. The amendments in this guidance fordo not change the acquisitions we madeitems that must be reported in our fiscal year 2010.

other comprehensive income or when an item of other comprehensive income must be reclassified to net income. In August 2008,December 2011, the FASB issued guidance that revisesan update deferring the factors that a company should consider to develop renewal or extension assumptions used 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 disclosuresdate for all intangible assets recognized as of, and subsequentamendments to the effective date. The underlying purposepresentation of the guidance is to improve the consistency between the periodreclassifications of expected cash flows used to measure the fair valueitems out of a recognized intangible asset and the useful life of an intangible asset.accumulated other comprehensive income.  This guidance was effective for our 2010fiscal year 2013, and its adoption did not have a material impact on our financial statements.

In July 2012, the FASB issued guidance which allows us the option to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that an indefinite-lived intangible asset is impaired.  If, after assessing the totality of events and circumstances, we conclude that it is not more likely than not that the indefinite-lived intangible asset is impaired, then we are not required to take further action.  We also have the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test.  We would be able to resume performing the qualitative assessment in any subsequent period.  The amendments are effective for annual and interim impairment tests performed for our 2013 fiscal year.  Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if our financial statements for the most recent annual or interim period had not yet been issued.  We adopted this guidance in our fiscal year 2013.  The adoption of this guidance had nodid not have a significant impact on our consolidated financial statements.


J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE A  –  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- (continued)

In April 2009,February 2013, the FASB issued guidance that amendswhich requires us to provide information about the provisionsamounts reclassified out of accumulated other comprehensive income by component.  In addition, we are required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its guidance issued in December 2007 for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. This revised guidance eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria, includedentirety in the December 2007 guidance and carries forward most of the provisions relatedsame reporting period.  For other amounts not required under U.S. GAAP to acquired contingenciesbe reclassified in its June 2001 guidance.their entirety to net income, we are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts.  This guidance wasis effective for contingent assets and contingent liabilities acquired in business combinations for which the acquisition date was on or after the beginning of our fiscal year 2010. The effect of this guidance on our consolidated financial statements will depend upon the nature, terms and size of any acquired contingencies consummated in fiscal year 2010 or later. For the acquisitions we made in fiscal year 2010,2014.  We do not believe that the adoption of this guidance had nowill have a significant effect on our consolidated financial statements.

18.     Reclassifications

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

NOTE B —– ACQUISITIONS

On January 31, 2006,

In May 2011, we acquired the stockfrozen handheld business of ICEEConAgra Foods.  This business had sales of Hawaii. ICEEapproximately $50 million over the prior twelve months to food service and retail supermarket customers and sales 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$18.3 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 locationsour 2011 fiscal year from the acquisition date.    

The purchase price allocation resulted in the United States and Canada as well as to certain international markets.

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 identifiable net assets acquired exceeding the purchase price.

On January 9, 2007

Acquisition costs of $546,000 for the handhelds acquisition are included in other general expense in the consolidated statements of earnings for the year ended September 24, 2011.

In June 2012, 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-12


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

NOTE B — ACQUISITIONS (Continued)

On January 31, 2007 we acquired the assets of RadarScott’s Gourmet Pretzels, 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. sells 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.

In February 2010, we acquired the assets of Parrot Ice, a manufacturer and distributor of a premium brand frozen beverage sold primarilysoft pretzel.  This business had sales of approximately $8 million over the prior twelve months to food service and retail supermarket customers, and had sales of approximately $1.8 million in convenience stores. Revenuesour 2012 fiscal year from Parrot Ice were approximately $1.5 million for our 2010 fiscal year.
the acquisition date.

In June 2010, we acquired the assets

Acquisition costs 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 purchase price allocation$155,000 for the California ChurrosKim & Scott’s acquisition andare included in other acquisitions, including Parrot Ice, which were made duringgeneral expense in the 2010 fiscalconsolidated statements of earnings for the year is as follows:
ended September 29, 2012.

     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  
 

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).

Acquisition costs of $184,000 for these acquisitions is included in administrative and other general expense.

NOTE C —– INVESTMENT SECURITIES

We have classified our investment securities as marketable securities held to maturity and auction market preferred stock (AMPS).available for sale. 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:


J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE C – INVESTMENT SECURITIES- (continued)

Level 1

Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2

Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and

Level 3

Unobservable 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 certificates of deposit placed through the Certificate of Deposit Account Registry Service equals fair market value. Other

Our marketable securities held to maturity and available for sale values are derived solely from level 1 inputs.

F-13


J & J SNACK FOODS CORP. AND SUBSIDIARIES
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 25, 201028, 2013 are summarized as follows:

  
  

Amortized

Cost

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

  

Fair

Market

Value

 
  (in thousands) 

US Government Agency Debt

 $2,000  $-  $50  $1,950 

Certificates of Deposit

  256   -   -   256 
  $2,256  $-  $50  $2,206 

     Amortized
Cost
   Gross
Unrealized
Gains
   Fair
Unrealized
Losses
   Market
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, unrealized gains and losses, and fair market values of our investment securities available for sale at September 28, 2013 are summarized as follows:

  
  

Amortized

Cost

  

Gross

Unrealized

Gains

  

 Gross

Unrealized

Losses

  

 Fair

Market

Value

 
  

(in thousands)

 
                 

Mutual Funds

 $109,891  $254  $2,481  $107,664 
                 
  $109,891  $254  $2,481  $107,664 

The mutual funds are primarily fixed income funds that seek current income with an emphasis on maintaining low volatility and overall moderate duration. The funds do not have contractual maturities; however, we classify them as long term assets as it is our intent to hold them for a period of over one year, although we may sell some or all of them depending on presently unanticipated needs for liquidity or market conditions.

The amortized cost, unrealized gains and losses, and fair market values of our investment securities held to maturity at September 26, 200929, 2012 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  
 

  

Amortized

Cost

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

  

Fair

Market

Value

 
  (in thousands) 

US Government Agency Debt

 $24,998  $126  $-  $25,124 

Certificates of Deposit

  1,214   -   -   1,214 
  $26,212  $126  $-  $26,338 

All of the certificates of deposit are within the FDIC limits for insurance coverage.coverage


J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE C – INVESTMENT SECURITIES- (continued)

The amortized cost and fair value of the Company’s held to maturity securities by contractual maturity at September 25, 201028, 2013 and September 26, 200929, 2012 are summarized as follows:

  
  

September 28, 2013

  

September 29, 2012

 
                 
  

Amortized

Cost

  

Fair

Market

Value

  

Amortized

Cost

  

Fair

Market

Value

 
  

(in thousands)

 

Due in one year or less

 $256  $256  $1,214  $1,214 

Due after one year throughfive years

  -   -   -   - 

Due after five years throughten years

  2,000   1,950   24,998   25,124 

Total held to maturitysecurities

 $2,256  $2,206  $26,212  $26,338 

Less current portion

  256   256   1,214   1,214 

Long term held to maturitysecurities

 $2,000  $1,950  $24,998  $25,124 

     September 25, 2010
   September 26, 2009
   
     Amortized
Cost
   Fair
Market
Value
   Amortized
Cost
   Fair
Market
Value
     (in thousands)   
Due in one year or less           $15,481       $15,501       $38,653       $38,668  
Due after one year through five years             26,300         26,482         19,994         20,216  
Total held to maturity securities           $41,781       $41,983       $58,647       $58,884  
Less current portion             15,481         15,501         38,653         38,668  
Long term held to maturity securities           $26,300       $26,482       $19,994       $20,216  
 

Proceeds from the sale and redemption of marketable securities were $67,362,000$25,307,000, $109,744,000 and $10,204,000$37,568,000 in the years ended September 25, 201028, 2013, September 29, 2012 and September 26, 2009, respectively,24, 2011, respectively; with a loss of $108,000 recorded in 2013 and none in the year ended September 27, 2008, with no gain or loss recorded.recorded in 2012 and 2011. We use the specific identification method to determine the cost of securities sold.

F-14


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

NOTE D —– INVENTORIES

Inventories consist of the following:

     September 25,
2010
   September 26,
2009
     (in thousands)   
Finished goods           $22,171       $19,913  
Raw materials             8,702         8,060  
Packaging materials             4,727         5,141  
Equipment parts and other             15,030         12,890  
            $50,630       $46,004  
 

  

September 28,

2013

  

September 29,

2012

 
  

(in thousands)

 

Finished goods

 $33,013  $32,439 

Raw materials

  14,489   14,584 

Packaging materials

  5,937   5,985 

Equipment parts and other

  18,346   16,753 
  $71,785  $69,761 

Inventory is presented net of an allowance for obsolescence of $4,189,000$4,449,000 and $4,209,000$3,883,000 as of fiscal year ends 20102013 and 2009,2012, respectively.


J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE E —– PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

  

September 28,

2013

  

September 29,

2012

  

Estimated

Useful Lives (in years)

 
  

(in thousands)

      
              

Land

 $2,496  $2,496   -  

Buildings

  26,741   26,741  

15

-39.5 

Plant machineryand equipment

  179,331   172,529  

5

-20 

Marketing equipment

  244,770   233,612  

5

-7 

Transportationequipment

  5,953   4,879  

 

5  

Office equipment

  16,282   14,987  

3

-5 

Improvements

  24,917   22,889  

5

-20 

Construction inProgress

  9,952   5,740   -  
  $510,442  $483,873      

Depreciation expense was $28,801,000, $26,175,000 and $25,046,000 for fiscal years 2013, 2012 and 2011, respectively.


     September 25,
2010
   September 26,
2009
   Estimated
Useful Lives
     (in thousands)   
Land           $2,016       $1,416                —  
Buildings             13,266         8,672         15–39.5 years  
Plant machinery and equipment             144,697         133,758         5–20 years  
Marketing equipment             214,545         202,708         5–7 years  
Transportation equipment             3,785         2,733         5 years  
Office equipment             12,690         11,461         3–5 years  
Improvements             19,590         18,454         5–20 years  
Construction in progress             3,814         3,954                —  
            $414,403       $383,156              
 

J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 25, 2010
   September 26, 2009
   
     Gross
Carrying
Amount
   Accumulated
Amortization
   Gross
Carrying
Amount
   Accumulated
Amortization
     (in thousands)   
Food Service
                                                      
Indefinite lived intangible assets
                                                      
Trade Names           $12,204       $—        $8,180       $—   
 
Amortized intangible assets
                                                      
Non compete agreements             470          351          435          282   
Customer relationships             40,024         15,160         33,287         11,526  
Licenses and rights             3,606         2,287         3,606         2,061  
            $56,304       $17,798       $45,508       $13,869  

F-15


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

NOTE F — GOODWILL AND INTANGIBLE ASSETS (Continued)
  

September 28, 2013

  

September 29, 2012

 
  

Gross

Carrying

Amount

  

Accumulated

Amortization

  

Gross

Carrying

Amount

  

Accumulated

Amortization

 
  

(in thousands)

 
                 

FOOD SERVICE

                

Indefinite lived intangibleassets

                

Trade Names

 $12,880  $-  $12,880  $- 
                 

Amortized intangible assets

                

Non compete agreements

  545   478   545   456 

Customer relationships

  40,187   26,187   40,187   22,582 

License and rights

  3,606   2,614   3,606   2,519 
  $57,218  $29,279  $57,218  $25,557 
                 

RETAIL SUPERMARKETS

                
                 

Indefinite lived intangibleassets

                

Trade Names

 $4,006  $-  $4,006  $- 
                 

Amortized Intangible Assets

                

Customer relationships

  279   62   279   31 
  $4,285  $62  $4,285  $31 
                 
                 

FROZEN BEVERAGES

                
                 

Indefinite lived intangibleassets

                

Trade Names

 $9,315  $-  $9,315  $- 
                 

Amortized intangible assets

                

Non compete agreements

  198   198   198   198 

Customer relationships

  6,478   4,830   6,478   4,201 

Licenses and rights

  1,601   714   1,601   644 
  $17,592  $5,742  $17,592  $5,043 
                 

CONSOLIDATED

 $79,095  $35,083  $79,095  $30,631 

     September 25, 2010
   September 26, 2009
   
     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             198          165          148          141   
Customer relationships             6,478         2,876         6,478         2,212  
Licenses and rights           $1,601       $504        $1,601       $434   
            $17,592       $3,545       $17,542       $2,787  
 

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.


J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 ofthe 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 which include Level 3 inputs such as annual growth rates and discount rates.  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$198,000 and $238,000 were acquired in the food service segmentand retail supermarket segments, respectively, in the California ChurrosKim and Scott’s acquisition in fiscal year 2010.

2012.

Separately, an intangible asset of $500,000 was purchased in the retail supermarket segment in fiscal year 2012.

There were no intangible assets acquired in fiscal year 2013.

Aggregate amortization expense of intangible assets for the fiscal years 2010, 20092013, 2012 and 20082011 was $4,687,000, $4,508,000$4,452,000, $4,477,000 and $4,700,000.

$4,811,000, respectively.

Estimated amortization expense for the next five fiscal years is approximately $4,800,000 in 2011, $4,400,000 in 2012, 2013 and 2014 and $4,300,0002015, $4,200,000 in 2015.2016, $1,700,000 in 2017 and $900,000 in 2018. The weighted average amortization period of the intangible assets is 10.1 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 25, 2010		           $33,744       $—        $386        $35,940       $70,070  
Balance at
September 26, 2009		           $23,988       $—        $386        $35,940       $60,314  
 

F-16


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

NOTE F — GOODWILL AND INTANGIBLE ASSETS (Continued)
  

Food

Service

  

Retail

Supermarkets

  

Frozen

Beverages

  

Total

 
                 
                 
                 

Balance atSeptember 28, 2013

 $39,115  $1,844  $35,940  $76,899 

Balance atSeptember 29, 2012

 $39,115  $1,844  $35,940  $76,899 

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 isfor 2013 and 2012 was based on a combination of the income approach, which estimates the fair value based on futureof 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. Our impairment analysis for 2011 was 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.   There were no impairment charges in 2010, 20092013, 2012 or 2008.

2011.


J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE F – GOODWILL AND INTANGIBLE ASSETS- (continued)

Goodwill of $9,756,000$6,829,000 was acquired in the food service segment in the California ChurrosKim and Scott’s acquisition in fiscal year 2010.2012 which was allocated $4,985,000 to the food service segment and $1,844,000 to the retail supermarkets segment. No goodwill was acquired in fiscal year 2013.

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 25, 201028, 2013 and September 26, 2009,29, 2012, there were no outstanding balances under the facility.

NOTE H —– OBLIGATIONS UNDER CAPITAL LEASES

Obligations under capital leases consist of the following:

     September 25,
2010
   September 26,
2009
     (in thousands)   
Capital lease obligations, with interest at 5.8%, payable in monthly
installments of $14,625, through May 2014		           $578        $—   
Capital lease obligations, with interest at 2.6%, payable in monthly
installments of $8,700, through August 2013		             285          381   
              863          381   
Less current portion             244          96   
            $619        $285   
 

NOTE I — INCOME TAXES
  
  

September 28,

2013

  

September 29,

2012

 
  (in thousands) 

Capital lease obligations, withinterest at 6.25%, payable inmonthly installments of $6,030,through March 2015

 $103  $167 
         

Capital lease obligations, withinterest at 7.6%, payable inmonthly installments of $3,162,through November 2017

  130   157 
         

Capital lease obligations, withinterest at 5.8%, payable inmonthly installments of $14,625,through May 2014

  114   277 
         

Capital lease obligations, withinterest at 2.6%, payable inmonthly installments of $8,700,through August 2013

  -   86 
   347   687 

Less current portion

  211   340 
  $136  $347 

Income tax expense (benefit) is as follows:

     Fiscal year ended
   
     September 25,
2010
   September 26,
2009
   September 27,
2008
     (in thousands)   
Current
                                          
U.S. Federal           $21,020       $18,574       $11,417  
Foreign             970          706          844   
State             4,484         3,744         2,270  
              26,474         23,024         14,531  

F-17


J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE I —– INCOME TAXES (Continued)

     Fiscal year ended
   
     September 25,
2010
   September 26,
2009
   September 27,
2008
     (in thousands)   
 
Deferred
                                          
U.S. Federal           $2,692       $3,106       $2,983  
Foreign             (48)         109          (168)  
State             570          658          631   
              3,214         3,873         3,446  
            $29,688       $26,897       $17,977  
 

Income tax expense (benefit) is as follows:

  
  Fiscal year ended 
  

September 28,

2013

  

September 29,

2012

  

September 24,

2011

 
  

(in thousands)

 

Current

            

U.S. Federal

 $26,492  $21,573  $17,065 

Foreign

  2,289   1,408   950 

State

  7,560   5,416   4,871 
   36,341   28,397   22,886 
             

Deferred

            

U.S. Federal

 $64  $3,124  $3,988 

Foreign

  (10)  (14)  409 

State

  14   661   1,720 
   68   3,771   6,117 
  $36,409  $32,168  $29,003 

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 25,
2010
   September 26,
2009
   September 27,
2008
     (in thousands)   
Income taxes at statutory rates           $27,334       $23,873       $16,059  
Increase (decrease) in taxes resulting from:
                                          
State income taxes, net of federal income tax benefit             3,403         2,958         1,918  
Domestic production activities deduction             (850)         (400)         (450)  
Other, net             (199)         466          450   
            $29,688       $26,897       $17,977  
 

  

Fiscal year ended

 
  

September 28,

2013

  

September 29,

2012

  

September 24,

2011

 
  (in thousands) 
             

Income taxes at statutory rates

 $35,277  $30,200  $29,423 

Increase (decrease)in taxes resulting from:

            

State income taxes, net of federal income tax benefit

  4,346   3,777   3,279 

Domestic production activities deduction

  (1,540)  (1,553)  (1,500)

Gain on bargain purchase

  -   -   (2,303)

Reduction of gross unrecognized tax benefits

  (346)  (307)  (310)

Other, net

  (1,328)  51   414 
  $36,409  $32,168  $29,003 

Deferred tax assets and liabilities consist of the following:

     September 25,
2010
   September 26,
2009
     (in thousands)   
Deferred tax assets
                              
Vacation accrual           $1,334       $1,233  
Insurance accrual             3,098         2,943  
Deferred income             60          67   
Allowances             1,881         1,902  
Inventory capitalization             573          499   
Share-based compensation             1,209         1,113  
Other, net             56          65   
              8,211         7,822  
Deferred tax liabilities
                              
Amortization of goodwill and other intangible assets             14,885         13,388  
Depreciation of property and equipment             19,907         17,793  
Other, net             7          15   
              34,799         31,196  
            $26,588       $23,374  
 

F-18


J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE I – INCOME TAXES- (continued)

  

September 28,

2013

  

September 29,

2012

 
  

(in thousands)

 

Deferred tax assets

        

Vacation accrual

 $1,445  $1,422 

Insurance accrual

  3,306   2,722 

Deferred income

  32   13 

Allowances

  2,348   2,130 

Inventory capitalization

  709   709 

Share-based compensation

  1,023   794 

Other, net

  -   11 
   8,863   7,801 

Deferred tax liabilities

        

Amortization of goodwilland other intangibleassets

  20,283   19,030 

Depreciation of propertyand equipment

  29,261   29,360 

Other, net

  -   24 
   49,544   48,414 
  $40,681  $40,613 

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 25, 2010:

28, 2013:

     Plants and
Offices
   Equipment
   Total
     (in thousands)   
2011           $4,900       $4,013       $8,913  
2012             4,603         2,732         7,335  
2013             4,270         1,287         5,557  
2014             3,919         495          4,414  
2015             3,586         134          3,720  
2016 and thereafter             22,327         6          22,333  
            $43,605       $8,667       $52,272  
 

  

Plants and

Offices

  

Equipment

  

Total

 
  (in thousands) 

2014

 $5,194  $3,362  $8,556 

2015

  4,943   2,602   7,545 

2016

  3,564   2,256   5,820 

2017

  3,013   1,792   4,805 

2018

  2,428   644   3,072 

2019 and thereafter

  15,573   49   15,622 
  $34,715  $10,705  $45,420 

Total rent expense was $13,099,000, $12,856,000$13,575,000, $13,215,000 and $12,907,000$14,076,000 for fiscal years 2010, 20092013, 2012 and 2008,2011, respectively.

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 $7,300,000$8,500,000 and $7,100,000$6,200,000 at September 25, 201028, 2013 and September 26, 2009,29, 2012, respectively. In connection with certain self-insurance agreements, we customarily enter into letters of credit arrangements with our insurers. At each of September 25, 201028, 2013 and September 26, 2009,29, 2012, we had outstanding letters of credit totaling $8,175,000$8,175,000.


J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE J - COMMITMENTS- (continued) 

We have a self-insured medical plan which covers approximately 1,400 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 $8,675,000,a calculated lag time period. Our recorded liability at September 28, 2013 and September 29, 2012 was $1,516,000 and $1,332,000, respectively.

NOTE K —- CAPITAL STOCK

In our fiscal year ended September 25, 2010,28, 2013, we purchased and retired 203,507204,397 shares of our common stock at a cost of $7,768,000 under a million share buyback authorization approved by the Company’s Board of Directors in February 2008. 49,804$14,500,215. In our first quarter, we purchased and retired 48,255 shares were purchased in the fourth quarter of 2010 at a cost of $1,874,000. There remains 210,772$2,762,622. In our third quarter, we purchased and retired 58,840 shares that can beat a cost of $4,435,078. In our fourth quarter, we purchased under the existing authorization.

and retired 97,302 shares at a cost of $7,302,515.

In our fiscal year ended September 26, 2009,29, 2012, we purchased and retired 450,597142,038 shares of our common stock at a cost of $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.

$8,167,125.

In our 2008 fiscal year ended September 27, 2008,24, 2011, we purchaseddid not purchase and retired 135,124retire any shares of our common stock at a cost of $3,539,000.

stock.

NOTE L —– STOCK OPTIONS

We have 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 1,400,000

F-19


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

NOTE L — STOCK OPTIONS (Continued)


800,000 shares reserved under the Plan; options for 610,000620,000 shares remain unissued as of September 25, 2010.28, 2013. 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 2010, 20092013, 2012 and 20082011 employees purchased 22,143, 25,80319,804, 20,318 and 31,36619,708 shares at average purchase prices of $32.70, $26.63$52.61, $44.11 and $24.93,$39.04, respectively. ESPP expense of $184,000, $237,000$363,000, $256,000 and $137,000$203,000 was recognized for fiscal years 2010, 20002013, 2012 and 2008,2011, respectively.


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 2010, 20092013, 2012 and 20082011 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, September 30, 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  
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  
Exercisable Options, September 25, 2010             235,089                    184,000             
 

  

Incentive Stock Options

  

Nonqualified Stock Options

 
  

Stock

Options

Outstanding

  

Weighted-

Average

Exercise

Price

  

Stock

Options

Outstanding

  

Weighted-

Average

Exercise

Price

 
                 

Balance, September 26, 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 

Canceled

  (10,050)  36.77   -   - 
                 

Balance, September 24, 2011

  323,120   41.18   227,315   32.17 

Granted

  118,210   57.87   45,932   57.70 

Exercised

  (71,350)  39.03   (62,000)  19.77 

Canceled

  (14,300)  41.13   -   - 
                 

Balance, September 29, 2012

  355,680   47.16   211,247   41.36 

Granted

  1,600   63.13   20,000   80.79 

Exercised

  (84,628)  34.58   -   - 

Canceled

  (12,800)  51.01   -   - 
                 

Balance, September 28, 2013

  259,852  $51.17   231,247  $44.77 

Exercisable OptionsSeptember 28, 2013

  51,892       120,000     

The weighted-average fair value of incentive options granted during fiscal years ended September 25, 2010,28, 2013, September 26, 200929, 2012 and September 27, 200824, 2011 was $9.12, $7.13$13.76, $13.43 and $7.99,$12.52, respectively. The weighted-average fair value of non-qualified stock options granted during the fiscal years ended September 25, 201028, 2013, September 29, 2012 and September 27, 200824, 2011 was $17.33$28.30, $16.32 and $15.21,$14.95, respectively. There were no non-qualified options granted during the fiscal year ended September 26, 2009. The total intrinsic value of stock options exercised was $5.1$2.7 million, $5.4$3.2 million and $3.2$7.0 million in fiscal years 2010, 20092013, 2012 and 2008,2011, respectively.

F-20


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

NOTE L — STOCK OPTIONS (Continued)
The total cash received from these option exercises was $2.6 million, $2.4 million and $3.4 million in fiscal years 2013, 2012 and 2011, respectively; and the actual tax benefit realized from the tax deductions from these option exercises was $666,000, $1.0 million and $1.4 million in fiscal years 2013, 2012 and 2011, respectively.

The following table summarizes information about incentive stock options outstanding atSeptember 25, 2010:

28, 2013:

     

Options Outstanding

  

Options Exercisable

 

Range ofExercise Prices

  

Number

Outstanding

at

September 28,

2013

  

Weighted-

Average

Remaining

Contractual

Life (in years)

  

Weighted-

Average

Exercise

Price

  

Number

Exercisable

at

September 28,

2013

  

Weighted-

Average

Exercise

Price

 
$36.71-$51.14   147,542  

2.2

  $45.86   51,892  $36.73 
$57.15-$76.27   112,310  

3.9

  $58.06   -  $- 
      259,852          51,892     


     Options Outstanding
   Options Exercisable
   
Range of
Exercise Prices
     Number
Outstanding
at
September 25,
2010
   Weighted-
Average
Remaining
Contractual
Life
   Weighted
Average
Exercise
Price
   Number
Exercisable
at
September 25,
2010
   Weighted-
Average
Exercise
Price
$10.60 – $10.60             82,632          .9 years       $10.60         82,632       $10.60  
$27.45 – $41.06             245,477         2.5 years       $33.74         62,557       $29.94  
$41.50 – $41.60             89,900         1.2 years       $41.60         89,900       $41.60  
              418,009                               235,089             
 

J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE L – STOCK OPTIONS- (continued)

The following table summarizes information about nonqualified stock options outstanding atSeptember 25, 2010:

28, 2013:

     Options Outstanding
   Options Exercisable
   
Range of
Exercise Prices
     Number
Outstanding
at
September 25,
2010
   Weighted-
Average
Remaining
Contractual
Life
   Weighted
Average
Exercise
Price
   Number
Exercisable
at
September 25,
2010
   Weighted-
Average
Exercise
Price
$10.30 – $10.30             62,000          .6 years       $10.30         62,000       $10.30  
$19.77 – $20.43             82,000         2.2 years       $19.93         82,000       $19.93  
$29.78 – $41.75             100,000         7.2 years       $34.32         40,000       $30.44  
              244,000                               184,000             
 

     

Options Outstanding

  

Options Exercisable

 

Range ofExercise Prices

  

Number

Outstanding

at

September 28,

2013

  

Weighted-

Average

Remaining

Contractual

Life (in years)

  

Weighted-

Average

Exercise

Price

  

Number

Exercisable

at

September 28,

2013

  

Weighted-

Average

Exercise

Price

 
$20.43-$29.78   40,000  

1.6

  $25.10   40,000  $25.10 
$31.10-$41.75   80,000  

4.7

  $35.46   80,000  $35.46 
$47.59-$57.99   91,247  

5.6

  $53.67   -  $- 
$80.79-$80.79   20,000  

10.0

  $80.79   -  $- 
      231,247          120,000     

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 $1,436,000, $1,354,000$1,624,000, $1,662,000 and $1,411,000$1,480,000 were made in fiscal years 2010, 20092013, 2012 and 2008,2011, respectively.

NOTE N —– CASH FLOW INFORMATION

The following is supplemental cash flow information:

  
  Fiscal Year Ended 
  

September 28,

2013

  

September 29,

2012

  

September 24,

2011

 
   (in thousands) 

Cash paid for:

            

Interest

 $50  $70  $36 

Income taxes

  35,496   23,864   19,594 
             

Non cash items:

            

Capital leases

 $-  $198  $182 

     Fiscal Year Ended
   
     September 25,
2010
   September 26,
2009
   September 27,
2008
     (in thousands)   
Cash paid for:
                                          
Interest           $76        $14        $21   
Income taxes             31,379         21,345         13,896  
 
Non cash items:
                                          
Capital leases           $625        $—        $—   
 

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

F-21


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

NOTE O — SEGMENT REPORTING (Continued)

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 The Restaurant Group and Frozen Beverages. All inter-segment net sales and expenses have been eliminated in computing net sales and operating income (loss).income. These segments are described below.


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; casual dining restaurants; 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 channel,industry, our products are purchased by the consumer primarily for consumption at the point-of-sale.

Retail Supermarkets

The primary products sold byto the retail supermarket segmentchannel 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,and sorbet, ICEE Squeeze-Up Tubes and TIO PEPE’S Churros.dough enrobed handheld products including PATIO burritos. Within the retail supermarket 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 two BAVARIAN PRETZEL BAKERY retail stores.

Frozen Beverages

We sell frozen beverages and related products and beverage machines to the food service channel, and our Restaurant Group,industry primarily under the names ICEE, SLUSH PUPPIE and 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 RetailandRetail Supermarkets and The Restaurant Group and the Chief Operating Decision Maker for Frozen Beverages monthly review detailed 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 25,
2010
   September 26,
2009
   September 27,
2008
     (in thousands)   
Sales to External Customers:
                                          
Food Service
                                          
Soft pretzels           $100,694       $99,471       $99,784  
Frozen juices and ices             47,273         50,272         51,206  
Churros             31,732         29,404         25,286  
Bakery             234,032         229,371         217,398  
Other             23,228         9,235         6,520  
            $436,959       $417,753       $400,194  
 

F-22


J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE O —– SEGMENT REPORTING (Continued)REPORTING- (continued)

  

Fiscal year ended

 
             
  

September 28,

2013

  

September 29,

2012

  

September 24,

2011

 
      

(in thousands)

     
             

Sales to External Customers:

            

Food Service

            

Soft pretzels

 $145,026  $118,014  $103,943 

Frozen juices and ices

  48,831   53,813   49,740 

Churros

  56,099   45,974   41,583 

Handhelds

  26,488   27,818   8,865 

Bakery

  274,783   266,192   241,288 

Other

  9,532   9,451   18,143 
  $560,759  $521,262  $463,562 
             

Retail Supermarket

            

Soft pretzels

 $34,597  $33,842  $32,044 

Frozen juices and ices

  48,077   53,673   51,940 

Handhelds

  22,528   24,358   9,424 

Coupon redemption

  (3,681)  (3,222)  (3,857)

Other

  818   1,217   1,548 
  $102,339  $109,868  $91,099 
             

Frozen Beverages

            

Beverages

 $132,274  $135,436  $133,372 

Repair andmaintenance service

  52,813   49,115   42,608 

Machines sales

  17,376   13,136   11,362 

Other

  2,122   1,979   2,068 
  $204,585  $199,666  $189,410 
             

Consolidated Sales

 $867,683  $830,796  $744,071 
             

Depreciation and Amortization:

            

Food Service

 $18,999  $17,287  $16,986 

Retail Supermarket

  31   23   8 

Frozen Beverages

  14,522   13,627   13,240 
  $33,552  $30,937  $30,234 
             

Operating Income:

            

Food Service

 $65,907  $49,770  $46,171 

Retail Supermarket

  8,594   13,316   11,830 

Frozen Beverages

  22,903   21,881   18,582 
  $97,404  $84,967  $76,583 
             

Capital Expenditures:

            

Food Service

 $19,097  $28,504  $14,905 

Retail Supermarket

  -   -   - 

Frozen Beverages

  16,724   14,296   14,219 
  $35,821  $42,800  $29,124 
             

Assets:

            

Food Service

 $486,015  $453,509  $405,927 

Retail Supermarket

  6,067   6,098   3,579 

Frozen Beverages

  153,579   143,437   141,310 
  $645,661  $603,044  $550,816 

     Fiscal year ended
   
     September 25,
2010
   September 26,
2009
   September 27,
2008
     (in thousands)   
Retail Supermarket
                                          
Soft pretzels           $30,463       $30,506       $27,559  
Frozen juices and ices             48,288         37,819         31,742  
Coupon redemption             (3,399)         (3,753)         (2,722)  
Other             767          586          533   
            $76,119       $65,158       $57,112  
 
The Restaurant Group           $847        $1,257       $1,635  
 
Frozen Beverages
                                          
Beverages           $128,125       $112,983       $113,903  
Repair and maintenance service             40,410         42,013         38,803  
Machine sales             11,964         11,729         14,794  
Other             2,279         2,154         2,918  
            $182,778       $168,879       $170,418  
 
Consolidated Sales           $696,703       $653,047       $629,359  
 
Depreciation and Amortization:
                                          
Food Service           $17,221       $16,530       $16,655  
Retail Supermarket             —          —          —   
The Restaurant Group             31          33          54   
Frozen Beverages             12,600         11,190         10,761  
            $29,852       $27,753       $27,470  
Operating Income(Loss):
                                          
Food Service           $50,255       $45,024       $24,784  
Retail Supermarket             11,281         7,442         4,665  
The Restaurant Group             (35)         (64)         (140)  
Frozen Beverages             15,661         14,536         14,027  
            $77,162       $66,938       $43,336  
Capital Expenditures:
                                          
Food Service           $18,392       $14,979       $11,898  
Retail Supermarket             —          —          —   
The Restaurant Group             —          —          —   
Frozen Beverages             15,139         12,211         10,883  
            $33,531       $27,190       $22,781  
Assets:
                                          
Food Service           $343,513       $309,988       $277,481  
Retail Supermarket             —          —          —   
The Restaurant Group             503          557          629   
Frozen Beverages             139,978         129,282         130,298  
            $483,994       $439,827       $408,408  
 

F-23


J & J SNACK FOODS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE P —- QUARTERLY FINANCIAL DATA (UNAUDITED)

     Fiscal Year Ended September 25, 2010
   
     Net Sales
   Gross
Profit
   Net
Earnings
   Net Earnings
Per
Diluted
Share(1)
     (in thousands, except per share information)   
1st Quarter
           $149,102       $46,019       $7,091       $.38   
2nd Quarter
             157,361         49,797         9,000         .48   
3rd Quarter
             189,729         65,031         15,861         .85   
4th Quarter
             200,511         66,933         16,457         .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  
 

(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


  

Fiscal Year Ended September 28, 2013

 
                 
  

Net Sales

  

Gross

Profit

  

Net

Earnings

  

Net Earnings

Per

Diluted

Share(1)

 
  

(in thousands, except per share information)

 
                 

1st Quarter

 $191,408  $54,135  $10,226  $0.54 

2nd Quarter

  201,326   58,151   12,660   0.67 

3rd Quarter

  237,036   75,322   21,172   1.12 

4th Quarter

  237,913   75,694   20,323   1.08 

Total

 $867,683  $263,302  $64,381  $3.41 

  

Fiscal Year Ended September 29, 2012

 
                 
  

Net Sales

  

Gross

Profit

  

Net

Earnings

  

Net Earnings

Per

Diluted

Share(1)

 
  

(in thousands, except per share information)

 
                 

1st Quarter

 $172,686  $46,406  $5,485  $0.29 

2nd Quarter

  189,554   53,987   10,423   0.55 

3rd Quarter

  226,335   72,507   18,672   0.99 

4th Quarter

  242,221   77,285   19,538   1.03 

Total

 $830,796  $250,185  $54,118  $2.86 

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

NOTE Q – SUBSEQUENT EVENT

On October 14, 2013, we acquired certain assets and assumed certain liabilities of New York Pretzel, a manufacturer and distributor of soft pretzels selling primarily in the northeast to food service and retail locations. The acquisition is not material to our financial statements.


J & J SNACK FOODS CORP. AND SUBSIDIARIES

SCHEDULE II —- VALUATION AND QUALIFYING ACCOUNTS

Year

  

Description

  

Opening

Balance

  

Charged to

Expense

  

Deductions

  

Closing

Balance

 
                     

2013

  

Allowance for doubtful accounts

  $987,000  $(70,000) $63,000(1) $854,000 
                     

2012

  

Allowance for doubtful accounts

  $955,000  $276,000  $244,000(1) $987,000 
                     

2011

  

Allowance for doubtful accounts

  $893,000  $423,000  $361,000(1) $955,000 
                     
                     
                     

2013

  

Inventory Reserve

  $3,883,000  $2,768,000  $2,202,000(2) $4,449,000 
                     

2012

  

Inventory Reserve

  $4,615,000  $1,291,000  $2,023,000(2) $3,883,000 
                     

2011

  

Inventory Reserve

  $4,189,000  $1,931,000  $1,505,000(2) $4,615,000 

(1) Write-offs of uncollectible accounts receivable.

(2) Disposals of obsolete inventory. 

Year
     Description
   Opening
Balance
   Charged to
Expense
   Deductions
   Closing
Balance
2010         Allowance for doubtful accounts     $623,000       $493,000       $525,000(1)       $591,000  
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  
 
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  
2008         Inventory Reserve     $2,864,000       $3,149,000       $2,196,000(2)       $3,817,000  
 

(1)Write-off of uncollectible accounts receivable.

(2)Disposals of obsolete inventory.

S-1